This Income Tax (Exemption) Order 2024 [P.U. (A) 37/2024] was made under paragraph 127(3)(b) of the Income Tax Act 1967.
The Order provides tax exemptions for IDR-status companies carrying out qualifying activities in approved nodes within the Iskandar Development Region.
The Order defines key terms such as "IDR status company", "qualifying activity", and "qualifying capital expenditure". The IDR status company referred to in this Order is a company which:
is incorporated under the Companies Act 2016 [Act 777];
is resident in Malaysia;
undertakes a qualifying activity in an approved node; and
approved by the Minister. For the purposes of this Order, “approved node” means an area within the Iskandar Development Region as approved by the Iskandar Regional Development Authority.
The Order also specifies the sectors and activities that qualify for the tax exemption, which includes creative industries, educational services, healthcare, logistics, tourism, global business services, and digital businesses and services.
The tax exemption applies to statutory income equivalent to 100% of qualifying capital expenditure incurred. Other key details include the application process, conditions, withdrawal, and non-application of the tax exemption.
In summary, this Income Tax (Exemption) Order 2024 aims to promote investments in key sectors in the Iskandar Development Region by providing 100% income tax exemption on qualifying capital expenditure for a period of 5 years.
The Order was gazetted on 2 February 2024; there are different commencement dates for various provisions:
Except for subitem 3(e) and items 6 and 7 of the Schedule, the Order is deemed to have come into operation on 24 October 2013.
Subitem 3(e) and item 7 of the Schedule are deemed to have come into operation on 1 January 2021.
Item 6 of the Schedule is deemed to have come into operation on 1 November 2016.
So, in summary:
The main provisions of the Order are deemed to have commenced on 24 October 2013.
The provisions relating to subitem 3(e) (on emerging digital technologies as a qualifying activity) and item 7 of the Schedule commenced on 1 January 2021.
The provisions relating to item 6 of the Schedule (on global business services as a qualifying activity) commenced on 1 November 2016.
For businesses in Malaysia that would like to enjoy the tax incentives under this Income Tax (Exemption) Order 2024:
Determine if your company and activities qualify under the Order's definitions of "IDR status company", "qualifying activity", and "qualifying capital expenditure". Ensure your business and proposed investment meet the scope.
Apply to incorporate or register your company in Malaysia under the Companies Act 2016. This is necessary as the tax exemption is only given to companies.
Consider locating or setting up operations for your qualifying activities in an approved node within the Iskandar Development Region. Identification of suitable node is important.
Ensure your qualifying capital expenditures are solely for the approved activities, such as purchase of buildings, machinery or plants used only for the activity. Mixed expenditures may affect amounts.
Apply for the tax exemption by submitting written application to the Minister through Iskandar Regional Development Authority from 24 October 2013 until 31 December 2024.
Comply with all conditions imposed for the approval. Failure may result in withdrawal of exemption.
Maintain proper separate accounts and tax compliance. Do proper tax planning as well.
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