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Tax Incentives for Carbon Capture and Storage

Updated: Nov 9, 2022

To Download Budget 2023 Speech and some other related publications - https://t.me/YourAuditor/3276

Current Position

Malaysia plans to reach its Low Carbon Nation Aspiration by 2040, which is part of its National Energy Policy 2022–2040.


To reach this goal, the government has devised a plan to control CO2 emissions using Carbon Capture and Storage Technology (CCS).


In Malaysia, the oil and gas and power generation industries are seen as the first ones to use CCS technology.


This technology comprises of 3 activities as follows:

  • carbon capture;

  • transportation of captured CO2; and

  • underground or sea bed carbon storage.


Proposal

To recognise CCS activities as a new source of economic growth and to achieve net zero greenhouse gas emissions, it is proposed tax incentives be given as follows:


i. companies undertaking CCS in-house activity

  1. Investment Tax Allowance (ITA) of 100% of qualifying capital expenditure for a period of 10 years and can be set off against up to 100% of business statutory income;

  2. full import duty and sales tax exemption on equipment for CCS technology commencing from 1 January 2023 until 31 December 2027; and

  3. tax deduction for allowable pre-commencement expenses within 5 years before the date of commencement of operation.

ii. companies undertaking CCS services

  1. ITA of 100% of qualifying capital expenditure for a period of 10 years and can be set off against up to 100% of statutory income; or

  2. tax exemption of 70% on statutory income for a period of 10 years; and

  3. c. full import duty and sales tax exemption on equipment for CCS technology starting 1 January 2023 until 31 December 2027.

iii. companies engaging in CCS services are to be given tax deductions on fees incurred for using CCS services.

Effective Date
  • For applications received by the Ministry of Finance from 1 January 2023 until 31 December 2027.

  • The tax deduction can be claimed through the Income Tax Return Form from the year of assessment 2023 until the year of assessment 2027.


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