New Tax Incentive Scheme
In 2014, the Malaysian government had announced a new provision of investment tax allowance for green technology assets/projects and income tax exemption for green services. This tax allowance scheme will replace the previous scheme which expired on 31st December 2015.
This write-up is a general guide on the new tax incentive scheme according to Green Quarter’s experience in dealing with MIDA (Malaysian Investment Development Authority), GBI and GreenRE. Relevant application forms and details are also available on MIDA’s website. The new tax incentive scheme is valid until 31st December 2020, and continues on from the previous scheme without a break.
Our write-up only describes the investment tax allowance (ITA) for green technology assets and projects focusing on buildings in the construction industry. This is relevant for building developers or green building consultants, as it has significant potential savings on green projects. The figure below summarises the green technology tax incentives offered by the government today.
The Incentive for projects and assets
The green investment tax allowance is only applicable for commercial and industrial projects, residential projects do not qualify. Below are important details of the incentive.
- 100% of the qualifying capital expenditure incurred on green technology can be offset against 70% of statutory income in the year of assessment. Non-utilised allowances can be carried forward until they are fully absorbed.
- Qualified capital expenditure is the additional incremental green cost spent to purchase green products. All qualified capital expenditure must be related to an achieved credit in GBI or GreenRE criteria.
- For projects, qualified capital expenditure is the GBI or GreenRE Green Cost Certificate accepted by LHDN. Final Green Cost Certificate and Final Green Building Certificate must be obtained before claiming the tax allowances.
- Qualified capital expenditure must be incurred from 25 Oct 2013 to 31 Dec 2020. Green Cost Certificate and Final Green Building Certificate issued after 31 Dec 2020 is acceptable, so long as capital expenditure is incurred within the date above.
Application Procedure
Below is a flow chart demonstrating the application procedure.
Green Cost Certificate
The green cost certificate is issued by GBI or GreenRE and it quantifies the qualified capital expenditure approved for the given project. It basically determines the amount of tax allowance the company will enjoy. It is the responsibility of the consulting team to prepare the submission and obtain the approval of the green cost certificate.
For GBI, the green cost certificate can only be obtained after Completion & Verification Assessment (CVA) approval, which is typically 12 months after the building is completed or when the building is 50% occupied. For GreenRE, the green cost certificate can be obtained after Final Certificate approval, which is immediately after building completion.
The image below is an example of a green cost certificate, showing capital expenditure without green cost, capital expenditure with green cost and the qualified capital expenditure which is the approved tax allowance amount.
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