IN exercise of the powers conferred by paragraph 127(3)(b) of the Income Tax Act 1967 [Act 53], the Minister makes the Income Tax (Exemption) (No. 3) Order 2023 [P.U. (A) 252/2023]. This Order, alongside the earlier Income Tax (Exemption) (No. 2) Order 2023, was gazetted by the Minister of Finance to provide tax incentives for principal hub companies operating in Malaysia.
While the No. 2 Order offers a tax exemption for existing principal hubs, the No. 3 Order introduces a more attractive 10-year (initial 5 years + potential 5-year extension) income tax exemption specifically targeting new principal hub companies incorporated in Malaysia.
Both orders aim to promote the growth and development of principal hubs to transform Malaysia into a global supply chain hub. The incentives reflect the government's commitment to spurring investments and economic activities through the principal hub initiative. Here is a summary of the key points of the Income Tax (Exemption) (No. 3) Order 2023 [PUA 252/2023], with remarks on differences from the Income Tax (Exemption) (No. 2) Order 2023 [PUA 251/2023]:
This applies to new companies incorporated in Malaysia as principal hubs without existing entities carrying out qualifying services.
(differs from Order No.2, which covers existing companies)
Provides 10-year (initial 5 years + potential 5-year extension) income tax exemption on statutory income from qualifying services and trading activities
(differs from the 5-year partial exemption in No.2)
Minimum number of full-time new employees in Malaysia with a minimum salary of twenty-five thousand ringgit per month for Category 5, 4 for Category 2
(No.2: 5)
Minimum RM10 million annual operating expenditure for Category 1, RM5 million for Category 2
(differs from RM10-13 million in No.2)
Similarity:
Separate source and accounts for exempt vs. non-exempt income
(same as No.2)
Tax losses disregarded during and after the exempt period
(same as No.2)
Excludes companies granted other incentives/exemptions
(same as No.2)
Minimum paid-up capital exceeds RM2.5 million.
(same as No.2)
The Minister may withdraw the exemption granted.
The Minister may, at any time, except where the principal hub fails to comply with any conditions imposed in relation to the exemption, allow the principal hub to surrender the exemption granted.
References:-
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