The Income Tax (Exemption) Order 2023, which is deemed to have taken effect from the year of assessment 2021, introduces a tax exemption for existing manufacturing companies that relocate their operations to Malaysia.
To qualify, companies must:
Be incorporated in Malaysia.
Have an existing manufacturing operation in Malaysia.
Relocate manufacturing operations to Malaysia for a new business involving products that are not an expansion of existing products.
The tax exemption is on statutory income derived from qualifying new manufacturing activities. It is equivalent to the amount of qualifying capital expenditure incurred in the basis period.
Companies must apply in writing to the Minister of Finance through MIDA from 1 July 2020 to 31 December 2024. Approval is subject to conditions, including investing over RM300 million in fixed assets within 3 years and employing at least 80% Malaysian workers within 3 years.
As determined by MIDA, the tax exemption period is 5 consecutive years from the first qualifying capital expenditure date.
The exemption is not applicable for companies that have claimed reinvestment allowance, pioneer status incentive, investment tax allowance, or deductions under rules made under section 154 of the Income Tax Act 1967.
The Income Tax (Exemption) Order 2023 [P.U (A) 240/2023] grants a 5-year tax exemption for existing manufacturers that relocate operations to Malaysia for new manufacturing activities, subject to certain conditions. The exemption is backdated to take effect from the year of assessment 2021.
We encourage all readers to download the Income Tax (Exemption) Order 2023 to read the full context for a better understanding.
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