(Tax Update) Unlocking the Benefits of Pioneer Status Tax Incentive

Public Ruling 10/2023 Pioneer Status Incentive

The publication of Public Ruling 10/2023 on the Pioneer Status Incentive by IRBM on December 29, 2023, is particularly relevant. As tax agents, we consistently recommend that our taxpayers and investors consult official publications from MIDA.

This incentive is designed to attract and facilitate investment in key sectors, offering substantial tax benefits to qualifying companies. As an investor, understanding these details is critical for making informed decisions about potential investments in Malaysia

Pioneer Status is, in general, given by way of exemption from tax on 70% of the statutory income for five years and the remaining 30% is taxed at the prevailing tax rate.

For a comprehensive understanding of the Pioneer Status tax incentive, we invite you to explore our case study, available on our KTP website at https://www.ktp.com.my/pioneer-status.

Here's a summary of key points of Public Ruling 10/2023 :

Objective

This incentive aims to explain the pioneer status available to companies engaged in promoted activities or producing promoted products in Malaysia.

Pioneer Status

It's a tax incentive under the Promotion of Investments Act (PIA), providing tax relief on statutory business income for companies in certain sectors.

Qualifying Companies

Pioneer status is granted to companies undertaking promoted activities or producing promoted products. This includes sectors like manufacturing, agriculture, hotels, tourism, etc.

Promoted Activities and Products

These are determined by the Minister of International Trade and Industry, in concurrence with the Minister of Finance, and are updated periodically.

Application Process

Applications for pioneer status are handled by the Malaysian Investment Development Authority (MIDA). Companies can apply for pioneer status for multiple activities or products.

Grant of Pioneer Status

The status is granted based on the fulfillment of certain criteria and is subject to conditions specified in the approval letter.

Pioneer Certificate

Companies must apply for this within 24 months of pioneer status approval. It certifies the company as a pioneer company, identifies the pioneer factory, and states the production day.

Withdrawal and Cancellation

Pioneer status can be withdrawn or canceled if the company fails to comply with terms and conditions.

Tax Relief Period

Typically five years from the production day, during which part or all of the statutory income from the pioneer business is exempt from tax. Extension of Tax Relief Period: Companies can apply for an extension of another five years.

Tax Treatment

The ruling details the tax treatment of pioneer companies, including basis periods, computation of pioneer income, and capital allowances.

Pioneer Company Losses

Statutory income of a pioneer business will be fully or partially exempted, but subject to deductions for losses.

Separate Accounts

Companies must keep separate accounts for the pioneer and any other business activities.

Source :

Public Ruling 10/2023 Pioneer Status Incentive https://www.hasil.gov.my/media/wrqhhbta/pr-10-2023-pioneer-status-incentive.pdf

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