Income Tax (Exemption)(No. 8) Order 2017 amended

The Income Tax (Exemption) (No. 8) Order 2017 (‘the Principal Order’) which exempts a qualifying company from payment of income tax in respect of statutory income derived from a qualifying project to modernise or automate its existing manufacturing activity of a product, has been amended by the Income Tax (Exemption) (No. 8) 2017 Order 2020 (‘the Amending Order’).
The Amending Order was gazetted on 28 May 2020 and is deemed to have come into operation from year of assessment 2018.
The amendments made to the Principal Order under the Amending Order are as follows -
  1. The duration for which exemption may be granted under the Principal Order has been extended from year of assessment 2017/2020[1] to year of assessment 2023;
  1. The qualifying criterion set out in paragraph 3(a)(iv) of the Principal Order that the qualifying project must have been carried on for at least 36 months has been replaced by a requirement that the qualifying company must have been in operation for at least 36 months;
  1. The qualifying capital expenditure in respect of a qualifying project may be incurred until year of assessment 2023;
  1. The deadline for the application to be made to the Malaysian Investment Development Authority for income tax exemption has been extended to year of assessment 2023;
  1. The condition specified in paragraph 4(2) of the Principal Order that the exemption granted is subject to the qualifying company complying with all conditions imposed in relation to the exemption has been clarified to state that the conditions are those imposed by the Minister of Finance; and
  1. The disqualifying event set out in paragraph 9(c) of the Principal Order, namely that the qualifying company has been granted any exemption under section 127 of the Income Tax Act (‘ITA’) has been clarified by replacing the reference to the section 127 of the ITA with a reference to an exemption granted under section 127(3)(b) or section 127(3A) of the ITA.
The extension of the time frame of the Principal Order is one of the initiatives undertaken by the Malaysian Government to encourage companies to modernise or automate their manufacturing activities to reduce the dependence on labour.

[1] See paragraphs 3(a)(v)(A) and 3(a)(v)(B) of the Principal Order.