In March 2022, the Malaysian government gazette the “Income Tax (Global Trading Centre “GTC” Inventive Scheme) Rules 2022” and are deemed to have effect from the year of assessment “YA” 2021. It aims to encourage more companies to set up regional and global operations in Malaysia as well as create more job opportunities.
Key definitions:
Global Trading Centre Incentive Scheme | An incentive scheme for the qualifying company to undertake a qualifying activity and approved by the Minister. |
Qualifying Company | A Qualifying Company is a company incorporated under the Companies Act 2016 which is a resident in Malaysia, has not carried on any activity in Malaysia and fulfils the eligibility conditions imposed by the Minister under the Act and these Rules and uses Malaysia as its international trading base. |
Qualifying activity | It is an activity undertaken by a qualifying company in respect of strategic sourcing, procurement and distribution of raw materials, components and finished products to other company within or outside of Malaysia. |
Tax incentives:
GTC is subject to income tax at the rate of 10% for the specified YA (e.g. 5 consecutive YAs commencing from the date to be determined by the Minister of Finance “MOF”. The incentive may be extended for another 5 YAs with an application of extension is made within 30 days after the expiry of the specified YAs and the prescribed conditions are fulfilled.
Conditions for GTC Incentive Scheme:
A qualifying Company which applies for GTC Incentive Scheme must comply with all conditions imposed by the MOF specified in the approval letter and the Guidelines for Incentive for Setting Up a Global Trading Centre issued or as revised by the Malaysian Investment Development Authority and approved by the Minister, which includes the following conditions: · Has a paid-up capital of at least RM1 million to carry on the qualifying activity; · Annual operating expenditure of at least RM1.5 million to carrying on the qualifying activity; · Employ at least 15 full-time Malaysian employees with a minimum salary of RM5,000 per month in the basis period throughout the specified years of assessment to carrying on the qualifying activity and at least 50% of those employees are Malaysians and · Annual sales value from the qualifying activity of at least RM300 million.
Surrender of GTC Incentive Scheme: For qualifying companies that wants to surrender the GTC Incentive Scheme, a written notice is required to be sent to the MOF through Malaysian Investment Development Authority “MIDA” which is subject to approval. The surrender will then take effect on the first day in the basis period for the YA in which the application for surrender is received by the MOF through MIDA.
Non-application:
These Rules shall not apply to a qualifying company which in the specified years of assessment
· has made a claim for reinvestment allowance under Schedule 7A to the Income Tax Act “ITA” or investment allowance for service sector under Schedule 7B to the ITA;
· has been granted any incentive under the Promotion of Investments Act 1986 in respect of the similar qualifying activity;
· has been granted an exemption under paragraph 127(3)(b) or subsection 127(3A) of the ITA in respect of the similar qualifying activity; or
· has made a claim for deduction under any rules made under section 154 of the ITA except:
the rules in relation to allowance under Schedule 3 to the ITA;
the Income Tax (Deduction for Audit Expenditure) Rules 2006 [P.U. (A) 129/2006]; or
the Income Tax (Deduction for Expenses in relation to Secretarial Fee and Tax Filing Fee) Rules 2020 [P.U. (A) 162/2020].
Source:
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