Malaysia: Government releases income tax exemption order for 2017-2018

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The government released an Exemption Order (the Order) on 10 April 2017 providing a temporarily reduction in corporate income tax rates based on incremental taxable income compared to the preceding year of assessment.  The “Income Tax (Exemption) (No. 2) Order 2017” has effect for the year of assessment 2017 and year of assessment 2018.

The order applies to a qualifying person whose  business  has  been  in  operation  for  not  less  than  twenty  four months. Also applies to a qualifying person who has chargeable income from a source consisting of a business in the basis  period  for  a  year  of  assessment  and  the  year  of  assessment immediately  preceding  that  year  of  assessment  and  has  made  up  its account for a period of twelve months ending on the same date for each of those years of assessment.

The Order will not apply in certain cases including a company claiming the reinvestment allowance tax incentive, incentives under the Promotion of Investments Act 1986, or a group relief.

The reduction in the corporate income tax rates would apply as follows:

Percentage of increase in taxable income from previous YAs
Percentage point in tax rate reduction (%)
Tax rate on incremental taxable income (%)

5% – 9.99%

1 23

10% – 14.99%

2

22

15% – 19.99%

3

21

Over 20% 4

20

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