Extension of East Coast Economic Region (ECER) incentives

Extension of East Coast Economic Region (ECER) incentives

As highlighted in an earlier tax alert (see Tax Alert No. 7/2022), five of the tax incentives that have been provided to encourage investments in the ECER have been extended by way of statutory orders gazetted on 1 April 2022.

Further to the above, the following ECER incentives have also been extended (see Tax Alerts No. 13/2016 and 14/2016):

(a)  Stamp Duty (Exemption) (No. 2) Order 2016

The Order provides a stamp duty exemption on any instrument which is chargeable with ad valorem duty for transfer of real property or lease of land or building used for the purpose of carrying on a qualifying activity (as specified in the Schedule of the Order) in the ECER.

(b)  Income Tax (Exemption) (No. 9) Order 2016

The Order provides a 100% income tax exemption on the statutory income derived from the following qualifying activities by a qualifying development or park manager:

• For a development manager – provision of management, supervisory or marketing services relating to the development of an industrial park or a free zone
• For a park manager – provision of park management services including maintenance, marketing and rental of common facilities and utilities services in the industrial park or free zone

(c)  Income Tax (Deduction for Investment in Qualifying Activity) Rules 2016

The Rules provide a tax deduction on the value of investment made in the related company by a qualifying person. The amount that is allowable as a tax deduction is equivalent to the amount incurred by the related company in the qualifying activity (as specified under Rule 2 and the Schedule of the Rules) in respect of which the investment is made.

(d)  Income Tax (Deduction for the Sponsorship of Hallmark Event) Rules 2016

The Rules provide a deduction equal to any cash contribution or contribution-in-kind made by a qualifying person in relation to a hallmark event (as defined) held in the ECER. The deduction is capped at RM1 million for each YA.

The incentives are subject to conditions.

To qualify for the above incentives:

• For Item (a), the instrument must have been executed between 13 June 2008 and 31 December 2020.
•  For Items (b) to (d), applications must have been made to the ECER Development Council between 13 June 2008 and 31 December 2020.

To legislate the extensions of the above-mentioned tax incentives to 31 December 2022, the following Amendment Orders and Amendment Rules were gazetted on 22 April 2022:

(a)   Stamp Duty (Exemption) (No. 2) 2016 (Amendment) Order 2022 [P.U.(A) 123]

(b)   Income Tax (Exemption) (No. 9) 2016 (Amendment) Order 2022 [P.U.(A) 124]

(c)    Income Tax (Deduction for Investment in Qualifying Activity) (Amendment) Rules 2022 [P.U.(A) 125]

(d)   Income Tax (Deduction for the Sponsorship of Hallmark Event) (Amendment) Rules 2022 [P.U.(A) 126]