TAX RELIEF UNDER BURSA MALAYSIA
By MALAYA CORPORATE
Tax exemption for the cost of listing on the Bursa Malaysia.
Companies wishing to list on the Bursa Malaysia are currently ineligible for a tax deduction on listing expenses.
In Budget 2020, it was proposed that technology-based companies and SMEs that raise additional capital by listing on the Access, Certainty, Efficiency (ACE) Market or Leading Entrepreneur Accelerator Platform (LEAP) Market receive a tax deduction of up to RM1.5 million on the following listing costs:
Fees to authorities;
professional fees; and
fees for underwriting, placement, and brokerage
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] were gazetted on 3 September 2020 to legislate the aforementioned proposal.
The Rules will apply to a technology-based company that applies for listing on the ACE Market or LEAP Market of Bursa Malaysia Securities Berhad from YA 2020 to YA 2022, and provide that in calculating the company’s adjusted income for a YA, a deduction equal to the amount of the following expenditure incurred by the company in relation to the business will be allowed.
1. Fees to the authorities;
2. Professional fees:
Advisory fee to the sponsor (i.e. main adviser for listing on the ACE Market) or approved adviser (i.e. main adviser for listing on the LEAP Market); and
Fees to a solicitor, company secretary, tax adviser, reporting accountant, auditor, valuer, independent market researcher, issuing house, and share registrar in relation to the listing exercise;
3. Underwriting, placement, and brokerage commissions
The Rules provide that the tax deduction, which is capped at RM1.5 million, may only be claimed by a technology-based firm for the basis period in the YA if the company is listed on the ACE Market or the LEAP Market. The entire amount of deduction shall not exceed the company’s adjusted income for the basis period in that YA, and such adjusted income shall be calculated prior to such deduction. Furthermore, if there is no or insufficient adjusted income in that YA, the deduction for the aforementioned expenditure cannot be claimed, or cannot be claimed in full, the excess cannot be carried forward to consecutive YAs.
The Rules define the following terms:
(a) Government Authorities
Malaysia Securities Commission and Bursa Malaysia Securities Berhad
(b) Technology-based company
A company engaged in the design, development and manufacture, production, or application in any of the fields and activities specified in the Schedule (refer to the Appendix to this Alert), and such activity has been certified by Bursa Malaysia Securities Berhad as the company’s primary business activity.
The Rules are effective from YA 2020.
The Schedule to the Rules states that an eligible company must be engaging in the activities specified in column (3) of the Schedule in the fields listed in column (2) of the Schedule:
Telecommunications;
advanced electronics and information technology;
telecommunications;
equipment/instrumentation,
automation, and flexible manufacturing systems;
life sciences and biotechnology;
healthcare;
electro-optics,
non-linear optics, and optoelectronics;
advanced materials
aerospace,
transportation, and
value-added services (including specified education and training services).
The Rules allow an eligible company to claim a tax deduction for an amount equal to the amount of the following expenditures incurred by the eligible company in relation to its listing on the Exchange’s ACE Market or the LEAP Market, for the purpose of calculating its adjusted income for the basis period in a fiscal year:
1. payment of fees to the Exchange and Securities Commission Malaysia;
2. payment of the following professional fees:
advisory fee to the sponsor, who is the main adviser for a listing on the ACE Market, and an approved adviser, who is the main adviser for a listing on the LEAP Market;
fees payable to a solicitor, company secretary, tax adviser, reporting accountant, auditor, valuer, independent market researcher
3. payment of underwriting, placement, and brokerage costs
The deduction allowed by the Rules is conditional on the following:
The eligible company must apply for listing on the ACE Market or the LEAP Market from year of assessment 2020 to year of assessment 2022;
the deduction can only be claimed by the eligible company for the basis period in the year of assessment in which it is listed on the ACE Market or the LEAP Market;
the total amount of the deduction shall not exceed RM1,500,000;
the amount of deduction shall not exceed RM1,500,000;
the amount of deduction shall not exceed RM1,500,000;
the amount of deduction shall not exceed RM1,500,000