Rules for Tax Incentive for Global Trading Centre Scheme Gazetted
11 March 2022
The
Income Tax (Global Trading Centre Incentive Scheme) Rules 2022 [P.U.(A) 48/2022] (‘
Rules’) were gazetted on 3 March 2022 and are deemed to have effect from the year of assessment (‘
YA’) 2021.
The Tax Incentive
The chargeable income of a qualifying company that carries on the business in respect of a qualifying activity under the Global Trading Centre Incentive Scheme is subject to income tax at the rate of 10% for the specified YAs (i.e. five consecutive YAs commencing from a date to be determined by the MOF of Finance (‘
MOF’)).
This incentive may be extended for another five YAs
provided that an application for extension is made within 30 days after the expiry of the specified YAs and the prescribed conditions are fulfilled.
Key definitions
The key definitions under the Rules are as follows:
- ‘Global Trading Centre Incentive Scheme’ is an incentive scheme for the qualifying company to undertake a qualifying activity and approved by the MOF;
- a ‘qualifying company’ is a company incorporated under the Companies Act 2016 which is resident in Malaysia, has not carried on any activity in Malaysia and fulfils the eligibility conditions imposed by the MOF under the Income Tax Act 1967 (‘ITA’) and the Rules, and uses Malaysia as its international trading base; and
- a ‘qualifying activity’ under the Rules and the Global Trading Centre Incentive Scheme is an activity undertaken by a qualifying company in respect of strategic sourcing, procurement and distribution of raw materials, components and finished products to other companies within or outside Malaysia.
Conditions for Global Trading Centre Incentive Scheme
A qualifying company must comply with all the conditions imposed by the MOF as specified in the approval letter and the
Guidelines for Incentive for Setting Up A Global Trading Centre issued or as revised by the Malaysian Investment Development Authority (‘
MIDA’) and approved by the MOF, which includes the following conditions:
- apply for the Global Trading Centre Incentive Scheme to the MOF through MIDA and such application is received on or after 1 January 2021 but not later than 31 December 2022;
- employ at least 15 full-time Malaysian employees with a minimum salary of RM5,000.00 per month in the basis period throughout the specified YAs to carry on the qualifying activity, and at least 50% of those employees must be Malaysians;
- have a paid-up capital of at least RM 1.0 million to carry on the qualifying activity;
- incur an annual operating expenditure of at least RM 1.5 million to carry on the qualifying activity; and
- achieve an annual sales value from the qualifying activity of at least RM 300.0 million.
Surrender of the Global Trading Centre Incentive Scheme
The MOF may allow a qualifying company to surrender the Global Trading Centre Incentive Scheme by giving notice in writing to the MOF through MIDA, save for a qualifying company which fails to comply with the prescribed conditions.
A surrender of the Global Trading Centre Incentive Scheme shall have effect on the first day in the basis period for the YA in which the application for surrender is received by the MOF through MIDA.
Non-application
The Rules shall not apply to a qualifying company which in the specified YAs –
- has made a claim for reinvestment allowance under Schedule 7A to the ITA or investment allowance for service sector under Schedule 7B to the ITA;
- has been granted any incentive under the Promotion of Investments Act 1986 in respect of the similar qualifying activity;
- has been granted an exemption under paragraph 127(3)(b) or subsection 127(3A) of the ITA in respect of the similar qualifying activity; or
- has made a claim for deduction under any rules made under section 154 of the ITA except—
- the rules in relation to allowance under Schedule 3 to the ITA;
- the Income Tax (Deduction for Audit Expenditure) Rules 2006 [P.U. (A) 129/2006]; or
- the Income Tax (Deduction for Expenses in relation to Secretarial Fee and Tax Filing Fee) Rules 2020 [P.U. (A) 162/2020].
Alert by Sheba Gumis (Partner) of the Corporate Practice and Desmond Liew (Senior Associate) of the Tax Practice of Skrine.
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.