The Income Tax (Exemption) Order 2024 [P.U.(A) 37/2024] (‘Exemption Order’) was gazetted on 2 February 2024 and is deemed to have come into operation on 24 October 2013 save and except for the following items of the Schedule to the Exemption Order (‘Schedule’): 

The exemption
 
The Exemption Order exempts an IDR status company in the basis period for a year of assessment from the payment of income tax in respect of statutory income derived from a qualifying activity which is equivalent to the amount of allowance of 100% of the qualifying capital expenditure incurred by the IDR status company in the basis period for that year of assessment.
 
A ‘qualifying activity’ is an activity specified in column (3) of the Schedule in relation to the sector specified in column (2) of the Schedule which is approved by the Minister of Finance (‘Minister’) and carried out in an approved node on or after 24 October 2013 but no later than 31 December 2024. A transcript of the Schedule can be accessed here.
 
The exemption under the Exemption Order is for a period of five consecutive years commencing from the date of the first qualifying expenditure incurred by the IDR status company as determined by the Iskandar Regional Development Authority, provided that the date of the first qualifying expenditure incurred shall not be earlier than three years before the application for exemption under the Exemption Order is received by the Minister and shall not be earlier than 24 October 2013.
 
Key definitions
 
The key definitions for the Exemption Order are set out below:
 
‘approved node’ is an area within the Iskandar Development Region as approved by the Iskandar Regional Development Authority;
 
‘IDR status company’ is a company which: 

‘Iskandar Development Region’ means the area or areas from time to time determined as such by the Prime Minister with the concurrence of the State Authority of Johor in accordance with section 15 of the Iskandar Regional Development Authority Act 2007;
 
‘Iskandar Regional Development Authority’ refers to the body corporate established under section 3 of the Iskandar Regional Development Authority Act 2007; and
 
‘qualifying capital expenditure’ refers to the expenditure specified in column (4) of the Schedule incurred by an IDR status company in relation to a building, machinery or plant used in an approved node solely for the purpose of carrying on a qualifying activity, but unless otherwise stated in the Schedule, does not include capital expenditure incurred on: 

Application for exemption
 
An IDR status company may apply for an exemption under the Exemption Order by: 

Statutory income
 
The statutory income of an IDR status company which has been granted an exemption under the Exemption Order in the basis period for each year of assessment shall be determined after deducting the allowance which fall to be made under Schedule 3 to the Income Tax Act 1967 (‘ITA’) notwithstanding that no claim for such allowance has been made.
 
Where an exemption is granted to an IDR status company under the Exemption Order for a year of assessment, an amount equal to the amount of allowance of 100% of the qualifying capital expenditure incurred by the IDR status company in the basis period for that year of assessment shall be exempted from tax for that year of assessment.
 
Where a building, machinery or plant is used for the purposes of a qualifying activity is also used for the purposes of an activity other than the qualifying activity, then the amount of the allowance which fall to be made under Schedule 3 to the ITA shall be deducted as is reasonable having regard to the extent to which the building, machinery or plant is used for the purposes of the qualifying activity.
 
Carrying forward qualifying capital expenditure
 
Where by reason of the absence or insufficiency of statutory income, the exemption cannot be granted or cannot be granted in full for that year of assessment, then the amount that cannot be exempted for that year of assessment shall be deemed to be a qualifying capital expenditure incurred for the subsequent year or years of assessment until such amount to which the IDR status company is so entitled is exempted in full.
 
Effect of disposal
 
Where a qualifying capital expenditure is incurred by an IDR status company on a building, machinery or plant used for the purposes of a qualifying activity, and such building, machinery or plant is disposed of within two years from the date of the acquisition of such building, machinery or plant, the exemption granted under the Exemption Order which is equal to the amount of the allowance for such qualifying capital expenditure shall be withdrawn in the basis period for the year of assessment in which such building, machinery or plant is disposed of.
 
If an IDR status company disposes to its related company (as defined in section 2(1) of the Promotion of Investment Act 1986 (‘PIA’)) any building, machinery or plant in respect of which an exemption is applied by the IDR status company under the Exemption Order, the qualifying capital expenditure incurred by the related company shall be deemed to be a sum equal to zero.
 
Withdrawal of exemption
 
The Minister may withdraw the exemption granted under the Exemption Order if the IDR status company fails to comply with any condition imposed in the approval letter relating to the exemption. Upon withdrawal of the exemption, the exemption granted under the Exemption Order in respect of any statutory income shall be deemed to have not been granted to the IDR status company from the date the exemption came into effect or from a date after the date the exemption came into effect as determined by the Minister.
 
Separate source and account
 
Where an IDR status company carries on a qualifying activity and an activity other than the qualifying activity, each activity is to be treated as a separate and distinct source of activity for the IDR status company.
 
An IDR status company which is granted an exemption under the Exemption Order is required to maintain a separate account for income derived from each activity carried on by the IDR status company.
 
Non-application
 
The Exemption Order shall not apply to an IDR status company which in the basis period for a year of assessment: