MIDA - Tax Incentives For Green Technology Industry

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18 April 2017

Eastin Hotel, Penang

TAX INCENTIVES FOR


GREEN TECHNOLOGY INDUSTRY
By: Zabidah Daud
Clean Technology & Environment Management Division, MIDA
1
Table of Contents
MIDA in Brief
Approved Investments
Green Technology Policy
Investment Tax Allowance (ITA)

Income Tax Exemption (ITE)


Application Procedures
Criteria of Verification of Assets/Project by MGTC
Requirement from Energy Commision for Renewable
Energy – Solar Power for Own Consumption

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MIDA IN BRIEF

3
Who Are We?
Promotion

The principal Malaysian


Government agency Evaluation
responsible for the
promotion of
investments and
coordination of
industrial development Planning
and selected services
sectors in the country

Follow Up/
Monitoring
First point of contact for
investors who intend to set up
projects in the manufacturing
and services sectors in
Malaysia 4
23 Overseas Centres • Los Angeles • Tokyo
• Houston • Osaka
around the world
• New York • Beijing
• Boston • Guangzhou
• San Jose • Shanghai
• Chicago
• Seoul
• London • Mumbai
• Stockholm • Singapore
• Munich • Taiwan
• Frankfurt • Sydney
• Milan
• Paris
• Dubai

12 State offices

Alor Setar
Kota Bharu
HQ
v KL Sentral,
Penang Kuala
Kota Kinabalu
Kuala Lumpur
Ipoh Terengganu

Selangor
Kuantan
Seremban
Melaka
v
Johor Bahru
Kuching
Based in MIDA

Labour Telekom Malaysia


Immigration Royal Malaysian Department Berhad
Department Customs

Based outside MIDA

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APPROVED
INVESTMENTS

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EE Projects Approved as at 31 December 2016
Total Investment
Type of Services No. of Projects
(RM mill)
Own Consumption 106 5,962.04
ESCO 23 492.52
Total 129 6,454.56

RE Projects Approved as at 31 December 2016


RE Projects Based No. of Projects Total Investment
on Sources (RM mill)
Solar 318 3,288.9
Biomass 126 4,758.0
Biogas 73 1,015.0
Mini Hydro 23 1,630.0
Geothermal 1 506.3
Total 541 11,198.2
* Approved Incentives since year 2001 - 2016
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Source: MIDA
Waste Recycling Projects Approved as at 31 December 2016

Total Investment
Industry No. of Projects
(RM million)
Basic Metal Products 45 1,909.7
Rubber Products 47 1,814.2
Chemical & Chemical
43 1,216.4
Products
Plastic Products 73 844.5
Petroleum Products 22 339.4
Fabricated Metal
7 269.3
Products
Electronics & Electrical
22 202.5
Products
* Approved Incentives since year 1980- 31 Dec 2016

Source: MIDA
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Waste Recycling Projects Approved as at 31 December 2016
Total Investment
Industry No. of Projects
(RM million)
Non-Metallic Mineral 5 163.4
Products
Food Manufacturing 4 109.9
Textiles & Textile 7 75.7
Products
Paper, Printing & 4 31.6
Publishing
Solid / Medical Waste / 3 392.0
Waste to Energy
Miscellaneous 3 58.3

Total 285 7,426.9


* Approved Incentives since year 1980 – 31st Dec 2016
Source: MIDA
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GREEN
TECHNOLOGY
POLICY

11
12
Investment Tax
Allowance (ITA) Green
Technology
Incentive,
Income Tax
Income Tax Act, 1967
Exemption (ITE)
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INVESTMENT
TAX ALLOWANCE
(ITA)

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Eligible companies
• Companies that undertake investments in promoted projects
that encourage sustainability and green environment
• Either for own use or business purposes

Incentive
• Investment Tax Allowance (ITA) of 100% of qualifying capital
expenditure (QCE) incurred from YA 2013 (not earlier than 25
Oct 2013) until YA 2020.
• The ITA can be utilised to offset against 70% of statutory
income
Industry Project
Renewable Energy Generation of energy such as electricity, steam, heat and chilled
(RE) water using RE sources like solar*, biomass, biogas, mini-hydro
and geothermal
*Excluding solar FiT project

Energy Efficiency (EE) Investment in energy efficient equipment or technologies e.g


energy efficient motor, variable speed drive, chiller, cogen etc.
Green Building Building owners of the commercial / industrial building that
have been awarded green building certificates from certification
body approved by the Government.

Green Data Centre Purchase of any energy efficient product or solution for data
centre which have been awarded green building certificates
from relevant certification body approved by the Government
Integrated Waste Waste recycling / recovery / treatment activities and additional
Management activities such as composting / storage / collection / disposal
Activity
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• Company must be incorporated under the Companies
Act, 1965

• Company must achieve the following green results:


 minimises the degradation of the environment or
reduces greenhouse emission;
 promotes health and improves environment;
 conserves the use of energy and/or other forms of
natural resources or promotes the use of renewable
energy or recycles waste material resources.

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Example 1: Assumption: ITA: RM4.6 million
WITHOUT TAX INCENTIVE WITH TAX INCENTIVE
(RM) (RM)
Profit before tax 10,000,000 10,000,000
add/less tax adjustments 2,000,000 2,000,000
Adjusted income 12,000,000 12,000,000
Less: Capital allowances (5,000,000) (5,000,000)
Statutory income 7,000,000 7,000,000
Percentage (%) 70% 30%
4,900,000 2,100,000
(-) ITA Nil 4,600,000 -
300,000 2,100,000
Chargeable income 7,000,000 2,400,000
Tax liability @ 24% 1,680,000 576,000
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Example 2: Assumption: ITA: RM10 million
WITHOUT TAX INCENTIVE WITH TAX INCENTIVE
(RM) (RM)
Profit before tax 10,000,000 10,000,000
add/less tax adjustments 2,000,000 2,000,000
Adjusted income 12,000,000 12,000,000
Less: Capital allowances (5,000,000) (5,000,000)
Statutory income 7,000,000 7,000,000
Percentage (%) 70% 30%
4,900,000 2,100,000
(-) ITA Nil *10,000,000 -
0 2,100,000
Chargeable income 7,000,000 2,100,000
Tax liability @ 24% 1,680,000 504,000
Balance to be carried forward to next year of assessment 5,100,000
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* Only RM4.9 million will be utilised.
INCOME TAX
EXEMPTION
(ITE)

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Eligible companies
• Companies which provide green services that support
investments in green project

Incentives
• Income tax exemption of 100% of statutory income
from the year of assessment 2013 until year of
assessment 2020.
Industry Services
Renewable Energy Feasibility study, system design & advisory & consultancy, testing
(RE) & commissioning
Energy Efficiency (EE) Advisory & consultancy, energy audit & management,
measurement & verification, testing & commissioning
Green Building Design & consultancy, testing & commissioning of green building
equipment/system
Green Data Centre System design & feasibility study, advisory & consultancy, testing
& commissioning
Certification or Green certification of products, equipment and buildings
Verification Bodies
Green Township Advisory & consultancy , design & feasibility study in green
township and low carbon cities planning
Electric Vehicles • Installation, maintenance and repair of EV charging
equipment, infrastructure and EV charging station.
• Operation of EV charging station.
• Maintenance, repair and overhaul of EV
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• Company must be incorporated under the Companies Act,
1965 and has started operation in green services after 25
Oct 2013.

• Company must meet the following:


 At least one competent / qualified personnel of
company in green technology;
 Company must have a green policy related to
environmental/sustainability; and
 100% of company’s income must be derived from
green technology services.

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Example : ITE (Statutory income 100% exempted)

WITHOUT TAX INCENTIVE WITH TAX INCENTIVE


(RM) (RM)

Profit before tax 10,000,000 10,000,000


add/less tax adjustments 2,000,000 2,000,000
Adjusted income 12,000,000 12,000,000
Less: Capital allowances (5,000,000) (5,000,000)
Statutory income 7,000,000 7,000,000

Chargeable income 7,000,000 100% Exempted


Tax liability @ 24% 1,680,000 Nil

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APPLICATION
PROCEDURES

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Applicant checks on project eligibility to apply
ITA/ITE

Applicant submits application to MIDA by 31 Dec 2020


(Form GT/JA)

MIDA receives complete application from applicant


MIDA requests further
Yes No information and
verification

MIDA prepares evaluation report

Presentation to National Committee on Investment


(NCI)

Issuance of Approval Letter


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Applicant submits application to MGTC together with:
•Completed MIDA Form GT/JA
•Conditional Approval Letter

Project Services
MGTC validates project MGTC verifies service
complies to GT project listed/registered under Project
criteria MyHIJAU Mark
Service MGTC requests
Comply Comply Not comply further information
and verification

MGTC’s validation letter to applicant Services


MGTC requests
applicant to
register under
Applicant submits tax form to IRB together with MyHIJAU Mark
verification letter from MGTC Service
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CRITERIA OF
VERIFICATION OF
ASSETS/PROJECT
BY MGTC

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MGTC’s role:
• To verify the technical requirement including the main equipment / assets
as major components for the performance and green impact from the
project

Documents required
• Application Form (GT/JA) which submitted to MIDA earlier
• Approval Letter from MIDA

Criteria
• 60% of main equipment/assets in the GITA Project must be recognised
and registered under the MyHIJAU Mark or have product certification
that is recognised and accepted by GreenTech Malaysia.
• Project’s impacts to the environment i.e. GHG emission reduction, waste
reduction, fuel savings, environmental improvement, energy consumption
savings and water consumption savings

Application procedure – refer to Malaysia Green Technology Corporation (MGTC)


Website: http://www.greentechmalaysia.my/ 29
REQUIREMENT FROM
ENERGY COMMISION FOR
RENEWABLE ENERGY –
SOLAR POWER FOR OWN
CONSUMPTION

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• Company has to apply for license pepasangan persendirian under Electricity
Supply Act 1990 to generate electricity for own consumption.

• Application for licence pepasangan persendirian below 5MW can be submitted


through ST office in the area.

• Application for license pepasangan persendirian above 5MW must submit to


headquarter (HQ) - ST.

• Types of qualifying activities include generation of electricity for own


consumption by using energy efficient technology i.e. co-generation or
renewable energy sources (RE) i.e. solar power for own consumption.

• Application procedure – refer to garis panduan tatacara pelesenan pembekalan


elektrik. Website: http://www.st.gov.my/

31
THANK YOU
Zabidah Daud (Ms) Azhana Mohamed Saleh (Ms.)
Senior Deputy Director
Director
Clean Technology & Environment Management
Division MIDA Penang
MIDA Sentral Menara Boustead Penang
No. 5, Jalan Stesen Sentral 5 39, Jalan Sultan Ahmad Shah
KL Sentral, 50470 Kuala Lumpur 10050 Pulau Pinang
Tel: 03 – 2267 6719/3633 Tel: +604-2280575
Fax: 03 – 2274 8470 Fax: +604-2280327
Email: zabidah@mida.gov.my Email: azhana@mida.gov.my
investmalaysia@mida.gov.my penang@mida.gov.my

www.mida.gov.my 32

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