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Extension of Tax Incentive for Angel Investor

Updated: Nov 9, 2022

To Download Budget 2023 Speech and some other related publications - https://t.me/YourAuditor/3276

Current Position

According to the Income Tax (Exemption) (No 3) Order 2014, an Angel Investor is exempt from income tax in the second year of assessment following the year of assessment in which the angel investor makes an investment in an investee company.


The total amount of income that will be exempt from taxation equals the amount of investment that the angel investor made in the company they funded (the investee company).


The angel investor is required to satisfy the following conditions to be eligible for the income tax exemption:


  • a resident in Malaysia whose sources of income are not solely derived from business;

  • an application is made to the Minister of Finance in the period from 1 January 2013 until 31 December 2023 (extended from 31 December 2020 under the Income Tax (Exemption) (No 3) 2014 (Amendment) Order 2019) to invest in an investee company.

  • The time frame for the application period of this incentive was initially up to 31 December 2017 and given the first extension to 31 December 2020 under the Income Tax (Exemption) (No 3) 2014 (Amendment) Order 2017;

  • the angel investor does not have a parent, a parent-in-law, a child including a stepchild or adopted child, a brother or sister, a grandparent or grandchild or a spouse who makes any investment in the investee company;

  • the investment is in the form of holding ordinary shares in the investee company and is paid in cash;

  • the investment is for the sole purpose of financing the activities of the investee company as approved by the Minister, and

  • the investment shall not be more than 30% of the invested company's total paid-up share capital.

Investee Company
An investee company refers to a company resident in Malaysia where at least 51% of its shares are owned directly by Malaysian shareholders. It engages in activities approved by the Malaysian government.

Footnotes

An angel investor who has made a claim for a deduction under the Income Tax (Deduction for Investment in a Venture Company) Rules 2005 will not be eligible for the exemption under the Income Tax (Exemption) (No 3) Order 2014.

Proposal

To attract more angel investors to contribute to economic activities through capital funding in investee companies, it is proposed that tax incentives be extended for 3 years.

Effective Date

For applications received by the Ministry of Finance from 1 January 2024 until 31 December 2026



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