Guideline and procedures for the application of the tax incentive for the manufacturing of electric vehicle charging equipment

Guideline and procedures for the application of the tax incentive for the manufacturing of electric vehicle charging equipment

In the retabled Budget 2023, it was proposed that the manufacturer of electric vehicle (EV) charging equipment be exempted from tax. Applications must be received by MIDA between 25 February 2023 and 31 December 2025 (see Take 5: Retabling of Malaysia Budget 2023).

Following the above, MIDA has published on its website the guidelines (dated 14 August 2023) on the above-mentioned proposal – available via this link. Some of the salient points are outlined below.

A new company or existing company undertaking expansion and/or diversification activity for the manufacturing of EV charging equipment will be eligible for:

a)    100% income tax exemption on the statutory income

• The incentive is given for a period of ten YAs, from YA 2023 to YA 2032

Note : Companies that make investments after YA 2023 will only enjoy the incentive on the remaining exemption period, up until YA 2032.

• Any unabsorbed losses can be carried forward for seven consecutive YAs (it is interesting to note that this is not in line with the general ten-year carry-forward period for losses and it is not known if this point will be updated in the guidelines in due course).
• The incentive will be provided under the Income Tax (Exemption) (No. 11) Order 2006 [P.U.(A) 112].

b)    100% investment tax allowance on the QCE. The allowance can be offset against 100% of statutory income of the qualifying business activity.

• The allowance is given to the QCE incurred for a period of five years.
• Any unabsorbed investment tax allowances can be carried forward until fully utilized.
• The incentive will be provided under the Income Tax (Exemption) (No. 12) Order 2006 [P.U.(A) 113]

“Expansion activity” refers to a company in the similar sector which expand its current products into the manufacturing of EV charging equipment. The EV charging equipment manufacturing activity must not be similar to the company’s existing product.

To qualify for the incentives, the manufacturing company must:

a)    Be incorporated under the Companies Act 2016

b)    Have a Manufacturing Licence from the Ministry of Investment, Trade and Industry (MITI) or a Confirmation Letter of Exemption from Manufacturing Licence from MIDA (whichever applicable).

c)     Incur an adequate investment level and operating business expenditures for the proposed project.

d)    Have full-time employees (FTEs) comprising at least 80% Malaysians.

e)    The value add for company’s product(s) must be at least 20%.

f)     Science and technical staff index must be at least 15% of the company’s full-time workforce.

g)    Nurture/collaborate with local vendors in the sector in terms of technologies, capabilities, certification, human capital development, etc.

h)    Provide an adequate number of Malaysian internships at the technical and vocational education and training (TVET) level or at least at diploma level; or collaborate with TVET institutions/institutions of higher learning in relevant fields, as proposed.