| Malaysia
is a reasonably tax friendly jurisdiction. There
are no annual wealth taxes, no estate duties,
no gift taxes, no accumulated earnings tax, no
federal (as opposed to national) income tax, no
controlled foreign company legislation, no thin
capitalization rules (yet) and no transfer pricing
rules (although the tax authorities will apply
normal transfer pricing principles to related
party transactions). Moreover capital gains tax
when levied is only levied in very limited circumstances.
The regular rate of corporate income tax was 28%
but has recently been cut- see below. In addition,
Malaysia offers a number of attractive incentives
and special regimes, linked from below.
Although
the October, 2005, Malaysian government budget
stopped short of cutting rates of corporate tax,
then Prime Minister and Minister of Finance, Datuk
Seri Abdullah Ahmad Badawi, detailed a number
of tax-related measures designed to boost economic
activity.
One
of the more significant proposals outlined by
the Prime Minister was the introduction of group
relief for losses, a measure which is likely to
be welcomed by the business community. This will
allow firms within a group with a minimum of 70%
ownership between them to offset the current year
losses of a company against the profits of another.
By doing so, it is hoped that more companies will
be encouraged to take part in high-risk projects
requiring a large initial capital outlay.
The
Prime Minister also proposed to tempt more technology
firms to establish in Malaysia through a widening
of the Multimedia Super Corridor Incentives (MSC),
which extended the Investment Tax Allowance Incentive
to qualifying firms currently operating outside
of the MSC.
Small-and
medium-sized firms were also slated to receive
a tax break in the form of 50% stamp duty remission
on instruments for loans not exceeding RM1million
(USD265,250).
In
September, 2006, then Prime Minister Abdullah
Ahmad Badawi announced a package of tax cuts,
including a 2% corporate tax cut and tax breaks
for businesses across a number of economic sectors,
as the government attempts to boost the nation's
competitiveness.
Tabling
his third budget as Prime Minister and Minister
of Finance, Abdullah announced that the corporate
tax rate will be cut to 27% in 2007, followed
by an additional one-percentage-point cut in 2008.
The rate for 2009 is 25%.
"Although
this measure will result in a significant reduction
in revenue, the government is confident that it
will have a positive overall effect on the economy,"
he stated. Although it is Asia's third largest
economy, Malaysia's corporate tax rate compares
unfavourably to other economic powers in the region,
particularly Singapore and Hong Kong.
The
2008/9 budget conentrated on improving the tax
system for Islamic finance, including substantial
tax breaks for Islamic bonds, or Sukuk.
The
Finance Act 2008 also contained further measures
to expand tax incentives including for luxury
hotels and environmetally-friendly and energy-saving
projects.
The
2009 budget directed the Inland Revenue Department
to formulate new rules on thin capitalization.
The new rules, when introduced, will be effective
from January 1, 2009.
The
March 2009 fiscal stimulus package contained measures
that would enable companies in Malaysia to carry
back losses, which was previously not permitted.
In
August 2009, Prime Minister, Najib Razak, opened
Malaysia’s first Special Economic Zone (SEZ)
in the East Coast Economic Region (ECER). Through
the SEZ’s special incentives, it is hoped
to attract MYR90bn (USD26bn) in domestic and international
investments by 2020, and to create more than 220,000
new job opportunities.
In
September 2009, The Securities Commission Malaysia
(SC) released new Venture Capital Tax Incentives
Guidelines (VC Tax Incentives Guidelines), to
incorporate the new tax incentives for the venture
capital industry as stipulated in the Income Tax
(Exemption)(Amendment) Order 2009 (Tax Order 2009).
Under
the Tax Order 2009, venture capital companies
(VCCs) registered with the SC are eligible for
tax exemption for five years of assessment subject
to them investing at least 30% of their invested
funds in the form of seed capital, start-up and/or
early stage financing in qualified investee companies.
Application for this exemption must be submitted
to the SC by December 31, 2013.
Malaysia Knowledge
Base
- MALAYSIA
INVESTMENT TAX ALLOWANCES
- MALAYSIA INCOME TAX INCENTIVES
- MALAYSIA THE "MALAYSIAN
SATAY" HOLDING COMPANY STRUCTURE
|
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