The Malaysian Investment Development Authority (“MIDA”) announced on 6 April 2021 that the Government of Malaysia has agreed to consider relaxation of conditions imposed on approved manufacturing and services projects. This is part of the measures undertaken by the Government to continue Malaysia’s economic revitalization efforts by facilitating investments and restoring investors’ confidence.
Manufacturing and services projects which fall within MIDA’s purview can be approved with conditions and incentives are available. Conditions imposed include thresholds or meeting implementation timelines. Relaxation of such conditions for 2020 and 2021 will be considered.
1. Companies – To submit requests along with supporting documentation to MIDA and Ministry of Finance if they wish to avail themselves of the relaxation.
2. Investors – To submit appeal applications on relaxation/amendment of incentive or incentive conditions to the relevant divisions for specific industries and services in MIDA.
We would highlight that it is common practice for the Inland Revenue Board (“IRB”) to review compliance with the tax incentives/conditions and disallow incentives claimed where the conditions are allegedly not complied with. This is notwithstanding that the approval is granted by and the conditions are set by other government agencies.
Our Tax Practice Group had successfully defended a taxpayer in such an instance in the case of Ketua Pengarah Hasil Dalam Negeri v Latexx Manufacturing Sdn Bhd [2017] 7 MLJ 379. Here, the IRB had disallowed tax incentives under a pioneer certificate on grounds that the company had allegedly failed to comply with certain export conditions imposed. The High Court in this case agreed that the IRB was not the proper or rightful authority to decide on whether or not the incentive should be revoked as such power lies with the Ministry of International Trade and Industry. The Court of Appeal agreed with the High Court’s decision and the taxpayer’s claim for incentive was allowed.
Even with the above case, it is still the practice of IRB to question and withdraw/disapply tax incentives where there is alleged non-compliance with any terms and conditions. We would therefore advise taxpayers to obtain immediate approval or waiver from the relevant government agency where there is any potential non-compliance.
Please do not hesitate to contact any of the following persons from our Tax Practice Group if you require any clarification:
Vijey M. Krishnan (Partner)
(T): 603-2632 9868
(E): mkvijey@rdl.com.my
William Wong (Partner)
(T): 603-2632 9905
(E): williamwong@rdl.com.my