Principal Rules - Tax Incentive
According to the Income Tax (Deduction for Investment in a BioNexus Status Company) Rules 2016 [P.U.(A) 306/2016]:
a qualifying person is permitted a deduction of an amount equivalent to the actual value of investment made by the qualifying person in a BioNexus Status Company
for the investment period between January 1, 2016, and December 31, 2020.
On 22 June 2022, the Minister, in the exercise of the powers conferred by paragraph 154(1)(b) of the Income Tax Act 1967 [Act 53], gazetted the Income Tax (Deduction for Investment in a Bionexus Status Company) (Amendment) Rules 2022 [P.U (A) 212/2022].
The Amendment Rules, deemed to have come into operation on January 1, 2021, have extended the eligibility period for the incentive to include qualifying investments made from January 1, 2021, all the way through December 31, 2022.
A Friendly Reminder
It is important to keep in mind that in order to be eligible for this tax incentive, the conditions that are outlined in the Principal Rules must be satisfied.
Conditions for Deductions
The investment made by the qualifying person in a BioNexus status company must be approved by the Minister of Finance.
The application must be submitted on or after the 1st of January 2021 and not later than the 31st of December 2022 through the Malaysian Bioeconomy Corporation Sdn Bhd.
Malaysia Bioeconomy Development Corporation Sdn. Bhd
means a company incorporated under the Companies Act 2016/1965 whose function is for the purpose of developing the biotechnology industry in Malaysia.
Qualifying Person means—
a company incorporated under the Companies which is not related to another company which has been given a similar tax deduction for investment into a BioNexus status company [Rule 4(1)(b)]; or
an individual who is a Malaysian citizen, resident and has a business income source, and who is not a family member/relative of a person who owns any of the paid-up capital of the BioNexus status company [Rule 4(1)(c)].
BioNexus Status Company means—
A company incorporated under the Companies Act which is engaged in a business of life sciences such as:
anthropology, ecology; or
any other branches of science
which deal with living organisms and their organisation, life processes and relationships to each other and their environment.
The investment must be for the purpose of financing activities at the initiation of commercialisation stage of a new business approved by the Minister.
“new business” means the first biotechnology business undertaken by a BioNexus status company;
initiation of commercialization stage” means the stage of research, assessment and development of an initial concept or prototype before the technology or product is commercialized but excludes the increase of production capacity, product development or product marketing.
Investment is in the form of:
cash with no obligation to be repaid; or
holding of paid-up capital, i.e. investment which is paid in cash in respect of ordinary shares.
Cessation of Tax Deduction
The deduction allowed to a qualifying person under these Rules shall cease in the basis period for a year of assessment when the BioNexus status company begins the commercialization of the activities in respect of which the investment is made, which is based on the date of the first sales invoice.
Disposal of Investment in the form of holding of Paid-up Capital in respect of Ordinary Shares
Where an investment is in the form of holding paid-up capital, the ordinary shares shall not be disposed of within five years from the date of the last investment
In the event that the ordinary shares are sold for a sale consideration within five years of the date of the investor's latest investment, then the amount received by the investor shall be taxable to the investor upon receipt of the proceeds.
The taxable amount shall not exceed the total tax deduction claimed in relation to the investment.
has made an investment in BioNexus status company which has been granted an exemption under the Income Tax (Exemption)(No. 18) Order 2007;
has made a claim for reinvestment allowance under Schedule 7A to the Income Tax Act 1967(“ITA1967”) or investment allowance for the service sector under Schedule7B to the ITA1967;
has been granted an incentive under the Promotion ofInvestmentsAct1986;
has been granted an exemption under section 127 of the ITA1967;
has made a claim for deduction under any rules made under section 154 of the ITA1967 except -
the rules in relation to an allowance under Schedule3 to the ITA1967 (i.e. rules in relation to capital allowance, etc.);
the Income Tax (Deduction for Audit Expenditure) Rules 2006;
the Income Tax (Deduction for Cost relating to Training for Employees for the Implementation of Goods and Services Tax) Rules 2014; or
the Income Tax (Deduction for Expenses in relation to Secretarial Fee and Tax Filing Fee) Rules 2014.