Income Tax Exemption Order for Qualifying Activity in Iskandar Development Region Amended

The Income Tax (Exemption) (No. 20) Order 2007 [P.U.(A) 418/2007] (“the Principal Order”) which sets out the conditions1 to be satisfied by a company (“IDR-status company”) to be eligible for a 10-year exemption from payment of income tax on its statutory income derived from a qualifying activity in the Iskandar Development Region has been amended under the Income Tax (Exemption) (No. 20) Order 2007 (Amendment) Order 20232 [P.U.(A) 304/2023] (“the Amendment Order”).
The main amendments introduced under the Amendment Order are as follows:
Qualifying activities
The Schedule to the Principal Order which sets out the activities that are “qualifying activities” for the purposes of the Principal Order has been amended as follows: 
  1. item 3 of the Schedule which sets out the qualifying activities under the “Health care and related services sector” has been amended to include “wellness and assisted living” as a new qualifying activity; and 

  2. a new sector “Digital business and services” with “Emerging digital technologies” as a qualifying activity has been added to the Schedule. 
The amendments to the Schedule are deemed to have come into operation on 1 January 2021.
Cut-Off Date
Paragraph 7 of the Principal Order has been amended to state that the Principal Order will not apply to an IDR-status company which commences its qualifying activity in an approved node after 31 December 2024. Prior to the amendment, the cut-off date was 31 December 2020. This amendment is deemed to have come into operation from the year of assessment 2021.
Alert by Sheba Gumis (Partner) of the Corporate Practice of Skrine.

1 To qualify for the 10-year income tax exemption under the Principal Order, a company must satisfy the requirements set out in paragraph 2A of the Principal Order. These include, among others, the requirement to (a) be incorporated under the Companies Act 2016; (b) be resident in Malaysia; (c) carry on a qualifying activity in an approved node; (d) be approved by the Minister of Finance; and (e) satisfy the minimum employment requirement and the minimum annual operating expenditure or minimum adequate investment amount in fixed assets in a carrying out a qualifying activity in an approved node.
2 The Amendment Order was gazetted on 9 October 2023.

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