Tax deduction for cost of listing on Bursa Malaysia

Tax deduction for cost of listing on Bursa Malaysia

In the retabled Budget 2023, it was proposed that the deduction of up to RM1.5 million on the cost of listing on the Access, Certainty, Efficiency (ACE) Market or Leading Entrepreneur Accelerator Platform (LEAP) Market be extended for another three years until the year of assessment (YA) 2025. The scope of deduction is also expanded to include the cost of listing  technology-based companies on the Main Market of Bursa Malaysia (see Take 5: Retabling of Malaysia Budget 2023).

To legislate the above-mentioned proposal, the Income Tax (Deduction for Expenses in relation to Listing on Main Market, Access, Certainty, Efficiency (ACE) Market or Leading Entrepreneur Accelerator Platform (LEAP) Market of Bursa Malaysia Securities Berhad) Rules 2023 [P.U.(A) 235] were gazetted on 7 August 2023. The Rules will apply to a technology-based company which applies for listing on the Main Market, ACE Market or LEAP Market of Bursa Malaysia Securities Berhad from YA 2023 until YA 2025.  The Rules provide that in ascertaining the adjusted income of the company for its business for a YA, there shall be allowed a deduction equivalent to the amount of the following expenditure incurred by the company in relation to the listing:

a)    Fees to the authorities, i.e., Bursa Malaysia Securities Berhad and Securities Commission Malaysia

b)    Professional fees:

-     Advisory fee to the principal adviser (for listing on the Main Market), sponsor (the main adviser for listing on the ACE Market) or the approved adviser (the main adviser for listing on the LEAP Market); and

-     In relation to the listing exercise, fees to a solicitor, company secretary, tax adviser, reporting accountant, auditor, valuer, independent market researcher, issuing house and share registrar

c)     Fees for underwriting, placement and brokerage

The Rules stipulate that the tax deduction, capped at RM1.5 million, shall only be claimed by the technology-based company for the basis period in the YA when the company is listed on the Main Market, ACE Market or LEAP Market. The total amount of deduction shall not exceed the adjusted income of the company for the basis period in that YA, before such deduction. If there is no or insufficient adjusted income in that YA such that the deduction in respect of the above-mentioned expenditure cannot be claimed or cannot be claimed in full, the excess cannot be carried forward to subsequent YAs.

The Rules apply to a technology-based company co which is involved in the design, development and manufacture, production or application in any of the fields and activities specified in the Schedule to the Rules, and such activity has been certified by Bursa Malaysia Securities Berhad as the principal business activity of the company. The list of the field and activities specified in the Schedule is similar to the one listed under the Income Tax (Deduction for Expenses in Relation to Listing on Access, Certainty, Efficiency (Ace) Market or Leading Entrepreneur Accelerator Platform (Leap) Market of Bursa Malaysia Securities Berhad) Rules 2020 [P.U.(A) 263] (see Tax Alert No. 15/2020).