Update: The Ismail Sabri Government Budget is no longer applicable.
Malaysia's national budget for 2023 was re-tabled again in February 2023; for more info, please visit - https://www.ccs-co.com/post/budget-2023-malaysia-madani.
This tax incentive included in Budget 2023, tabled in Parliament on 7 October 2022, was not included in Budget 2023 (Re-tabled) on 24 February 2023.
Response from MOF: MOF is currently reviewing off-budget items.The phrase "MOF is currently reviewing off-budget items" typically refers to the Ministry of Finance (MOF) evaluating or examining expenses or financial matters not included in the official budget. Off-budget items are expenditures or revenue sources not directly accounted for in the regular budgeting process.
Governments often create budgets to allocate funds for various programs, projects, and expenses. However, certain financial activities may fall outside the scope of the official budget. These off-budget items could include emergency spending, special funds, grants, subsidies, or other financial transactions not explicitly accounted for in the regular budgeting process.
When the MOF reviews off-budget items, they scrutinise these financial activities to assess their impact, legality, appropriateness, or potential risks. This review aims to ensure transparency, fiscal responsibility, and effective financial management within the government. It helps identify discrepancies, assess the necessity and effectiveness of off-budget items, and make informed decisions regarding their continuation or modification.
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 [This tax incentive included in Budget 2023, tabled in Parliament on 7 October 2022, was not included in Budget 2023 (Re-tabled) on 24 February 2023]
To attract more angel investors to contribute to economic activities through capital funding in investee companies, tax incentives are proposed to 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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