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Green technology tax incentives
Prior to the Budget 2024 proposal on green technology tax incentives (see EY Take 5 Malaysia Budget 2024), the incentives were as follows:
a) Green Investment Tax Allowance (GITA) Assets (for own consumption) – including the purchase of green technology assets under the rainwater harvesting system
b) GITA Project
c) Green Investment Tax Exemption (GITE) Services
d) GITE Solar leasing
The above were applicable to applications received by the Malaysian Investment Development Authority (MIDA) or Malaysian Green Technology and Climate Change Corporation (MGTC) by 31 December 2023.
To legislate the incentives above, the following exemption orders were gazetted on 17 September 2024:
Income Tax (Green Technology Incentive) (Asset) (Exemption) Order 2024 [P.U.(A) 243]
Incentive | 100% investment tax allowance on qualifying capital expenditure incurred between 25 October 2013 and 31 December 2023. The allowance can be set off against 70% of the statutory income and any unutilized allowances can be carried forward to subsequent years of assessment (YAs) until fully absorbed.
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Qualifying capital expenditure | Purchase of green technology asset used in Malaysia solely for the purpose of carrying on business.
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This Order is deemed to have come into operation on 25 October 2013.
Income Tax (Green Technology Incentive) (Project) (Exemption) Order 2024 [P.U.(A) 244
Incentive | 100% investment tax allowance on qualifying capital expenditure incurred for three consecutive years, from the date the first qualifying capital expenditure was incurred. The allowance can be set off against 70% of the statutory income and any unutilized allowances can be carried forward to subsequent YAs until fully absorbed.
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Qualifying capital expenditure | Purchase of green technology asset used in Malaysia solely for the purpose of carrying on a qualifying activity. The qualifying activity refers to the specified activity in the following sectors: • Renewable energy • Energy efficiency • Green data centre • Integrated waste management
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This Order is deemed to be effective from YA 2020.
Income Tax (Green Technology Incentive) (Green Building) (Exemption) Order 2024 [P.U.(A) 245]
Incentive | 100% investment tax allowance on qualifying capital expenditure incurred on or after 1 January 2020, for three consecutive years, from the date the first qualifying capital expenditure was incurred. The allowance can be set off against 70% of the statutory income and any unutilized allowances can be carried forward to subsequent YAs until fully absorbed. |
Qualifying capital expenditure | Additional expenditure incurred in relation to the construction of a building, or alteration, renovation, extension or improvement of an existing building, or plant or machinery for the purpose of obtaining Final Green Building Certificate from the relevant green building rating tools recognized by the MGTC.
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This Order is deemed to be effective from YA 2020.
Income Tax (Green Technology Incentive) (Services) (Exemption) Order 2024 [P.U.(A) 246]
Incentive | 70% income tax exemption on statutory income (as specified),excluding intellectual property income, derived from qualifying service activity, for a period of three YAs, from the YA where the first invoice relating to the qualifying service activity was issued. The exemption is subject to all the conditions specified in the incentive approval letter, including: • To employ at least five permanent full-time employees in Malaysia, including two personnel competent in green technology, to carry on the qualifying activity; • To incur an approved adequate amount of annual operating expenditure in Malaysia to carry on the qualifying activity for the purposes of its business. The annual operating expenditure shall include local services provided by local service providers; and • To undertake at least three qualifying activities from the Schedule of the Order (see below).
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Qualifying services | The qualifying services refer to the specified services in the following sectors: • Renewable energy • Energy efficiency • Green building • Green data centre • Green certification and verification • Green township • Electric vehicle
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This Order is deemed to be effective from YA 2020.
Income Tax (Green Technology Incentive) (Solar Photovoltaic System Leasing) (Exemption) Order 2024 [P.U.(A) 247]
Incentive | 70% income tax exemption on statutory income (as specified),excluding intellectual property income, derived from qualifying activity of providing solar photovoltaic system leasing services, from the YA where the first invoice relating to the qualifying activity was issued. The exemption period would be as follows:
The exemption is subject to all the conditions specified in the incentive approval letter, including: • To employ at least five permanent full-time employees in Malaysia, including two personnel competent in green technology, to carry on the qualifying activity; • To incur an approved adequate amount of annual operating expenditure in Malaysia to carry on the qualifying activity for the purposes of its business. The annual operating expenditure shall include local services provided by local service providers; and • To undertake at least three qualifying activities from the Schedule of the Order (see below). | ||||||
Qualifying services | The qualifying activity of providing solar photovoltaic system leasing services is in relation to the implementation of Net Energy Metering Scheme for sales of electricity or solar photovoltaic system leasing.
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This Order is deemed to have come into operation on 1 January 2020.