Rules for Tax Deduction for Issuance Expenses of Sustainable and Responsible Investment Linked Sukuk Gazetted

The Income Tax (Sustainable and Responsible Investment Linked Sukuk) Rules 2024 (“Rules”)1 that permit deduction of expenditure incurred by a company2 in issuing or offering Sustainable and Responsible Investments Linked Sukuk (“SRI-linked Sukuk”) for ascertaining the company’s adjusted income were gazetted on 19 December 2024.
 
The Rules have effect for five years from the year of assessment 2023 until the year of assessment 2027. As announced during the 2023 Malaysian Budget (Appendix 7), the Rules seeks to provide an innovative Shahriah-compliant financing and to establish Malaysia as a regional hub for the issuance of SRI-linked Sukuk.
 
The Rules provide that for the purpose of ascertaining the adjusted income of a company from its business in the basis period for a year of assessment, a deduction shall be allowed for the expenditure incurred by a company on the issuance or offering of a SRI-linked Sukuk that is: 
  1. approved or authorised by, or lodged with, the Securities Commission Malaysia under the Capital Markets and Services Act 2007; and 

  2. issued or offered to an investor in compliance with guidelines relating to sukuk issued by the Securities Commission Malaysia under the Capital Markets and Services Act 2007. 
The deduction excludes any amount exempted under section 127(3A) of the Income Tax Act 1967 in respect of grants provided to finance external review expenditure3 for the issuance or offering of the SRI-linked Sukuk.
 
A company is not eligible for the deduction if it has claimed a similar deduction under other rules made under section 154 of the Income Tax Act 1967 in the same year of assessment.
 
Comment
 
The Rules continue the government’s efforts to encourage sustainable financing through tax incentives for the issuance of SRI-linked Sukuk.
 
Alert by Victoria Low (Associate) of the Tax Practice of Skrine.
 
 

1 P.U(A) 415/2024.
2 A “company” means a company resident in Malaysia which is incorporated under the Companies Act 2016 or the Labuan Companies Act 1990.
3 For the purposes of the Rules, external review expenditure includes costs incurred: (i) to appoint an external reviewer for assessing and providing a compliance report before the issuance of the SRI-linked Sukuk; and (ii) to appoint an independent verifier to monitor the performance levels and provide a verification report after the issuance of the SRI-linked Sukuk.

This alert contains general information only. It does not constitute legal advice nor an expression of legal opinion and should not be relied upon as such. For further information, kindly contact skrine@skrine.com.