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Tax incentive for tour operators extended
Under the Strategic Programme to Empower the People and Economy (PEMERKASA) unveiled on 17 March 2021, the Government announced that the tax incentives for tour operators will be extended until the year of assessment (YA) 2022 (previously YA 2020) (see Special Tax Alert No. 2/2021).
To legislate the proposal, the Income Tax (Exemption) (No. 9) Order 2021 [P.U.(A) 344] was gazetted on 23 August 2021. The Order provides that a qualifying person is exempted from the payment of income tax in respect of statutory income derived from a qualifying activity (i.e. tour operating business which provides domestic tour packages for travel within Malaysia undertaken by local and foreign tourists, inclusive of transportation by air, land or sea and accommodation).
The exemption will only apply if the qualifying activity is participated by not less than 200 local tourists for a YA. The Order also provides that the number of local and foreign tourists for the qualifying activity must be verified in writing by the Ministry of Tourism, Arts and Culture Malaysia.
The following terms have been defined in the Order:
(a) Qualifying person
A Malaysian resident company which is licensed under the Tourism Industry Act 1992 to carry out a tour operating business and a qualifying activity.
(b) Local tourists
Individuals who are Malaysian citizens or Malaysian residents
(c) Foreign tourists
Individuals other than local tourists, who are neither Malaysian citizens nor Malaysian residents
(d) Tour operating business
Same meaning assigned to it under the Tourism Industry Act 1992
The Order stipulates that the exemption granted does not absolve the qualifying person from any requirement to submit any return, statement of accounts or any other information as required under the ITA. The qualifying person is also required to maintain a separate account for the income exempted under the Order. The exempted income is to be treated as a separate and distinct source of business income.
The Order is effective from YA 2021 to YA 2022.