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Income tax exemption on gains or profits derived, in lieu of interest, from Sukuk Prihatin
Under the Short-term Economic Recovery Plan (PENJANA) unveiled on 5 June 2020, the Government announced that the Sukuk Prihatin would be issued in the third quarter of 2020 (see Take 5: COVID-19: Short-term Economic Recovery Plan). The Sukuk will be utilized for specific programs, e.g. to improve internet connectivity to schools, fund micro enterprises and for research grants for infectious diseases.
Following the above, the Income Tax (Exemption) (No. 2) Order 2021 [P.U.(A) 95] was gazetted on 4 March 2021. The Order provides that a qualifying person resident in Malaysia is exempted from the payment of income tax for each year of assessment (YA) on the gains or profits derived, in lieu of interest, from Sukuk PrihatinNote.
Note:
Sukuk Prihatin refers to the Islamic securities with a nominal value of up to RM666,417,500 issued by the Government in accordance with the principle of Murabahah on 22 September 2020.
The following terms have been defined in the Order:
a) Qualifying person
(i) An individual who is a Malaysian citizen aged 18 years and above
(ii) A body corporate incorporated under the laws of Malaysia, but excludes a financial institution (FI) and a holder of a Capital Markets Services Licence carrying on the business of fund management under the Capital Markets and Services Act 2007 (CMSA), or
(iii) A body of persons, partnership or limited liability partnership registered under any written law in Malaysia and carries on its business in Malaysia, but excludes a trustee registered as a member of the Association of Trust Companies Malaysia who acts on behalf of the person
b) Financial institution
(i) A bank, investment bank or insurer licensed or deemed licensed under the Financial Services Act 2013 (FSA)
(ii) An Islamic bank, takaful operator or international takaful operator licensed or deemed licensed under the Islamic FSA
(iii) A development FI prescribed under the Development Financial Institutions Act 2002, or
(iv) An entity listed under Part 1, Schedule 4 to the CMSA
The Order stipulates that the exemption granted does not absolve the person from any requirement to submit any return, statement of accounts or any other information, as required under the Income Tax Act 1967.
The Order is deemed to be effective from YA 2020.