Venture Capital Tax Incentives

1. INTRODUCTION

The following incentives are currently available for the VC industry and qualifying investments into startups, summarised in the table below.

Kindly note that information in this table is a summary. More detailed information, particularly on the qualifying conditions, are outlined in the relevant tax orders referred below.

Beneficiary Incentive Key requirements Tax order
Venture Capital Company (“VCC”)

Tax exemption for registered VCC:

  • Exempt period of 5 years or remaining life of the fund (whichever shorter)
  • Exemption on all sources of statutory income (other than interest income arising from savings or fixed deposits and profits from syariah-based deposits)
  • VCC incorporated under Companies Act 2016 (“CA 2016”) and
  • VCC must be registered with SC no later than 31 Dec 2023
  • At least 50% of funds must be invested in qualifying venture companies

Income Tax (Exemption) (No.2) Order 2022 (“P.U.(A) 115/2022”)

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Venture Capital Management Company (“VCMC”)

Tax exemption for registered VCMC

  • Exempt period from YA2018 to YA2026
  • Exemption on management fees, share of profits, carried interest and performance fees derived from a tax exempt VCC (under P.U.(A) 115/2022)
  • VCMC registered with SC
  • VCMC must meet substance tests (min. local spend and staffing requirements)

Income Tax (Exemption) (No.3) Order 2022 (“P.U.(A) 116/2022”)

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Investors (companies or individuals with business income)

Tax deduction on investment made into a venture company (whichever is lesser)
  • Investment is in the form of the holding unlisted shares of the venture company (at the point of investment)
  • Investment must be held for at least 3 years from the date the investment

Income Tax (Deduction for Investment in a Venture Company or Venture Capital Company) Rules 2022 (“P.U.(A) 117/2022”).

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Tax deduction on investments made in a qualified VCC, equal to the investment made into a VCC or up to RM20 million annually (whichever is lesser)
  • VCC had maintained, on average over a 3-year period, at least 50% of invested funds in qualifying venture companies
  • Investment into the VCC must be held for at least 3 years from the date the investment
 

2.TAX INCENTIVE CERTIFICATION

Prior to making tax incentive claims, applicants must obtain certification from SC to assess the qualifying conditions of the incentives above are met.
The certification process is outlined in the VC Tax Incentive Guidelines and the Application Kit. These documents, along with the relevant forms are available for download below.

3. VC REGISTRATION

Please note that registration of VCC and VCMC is a prerequisite for the above tax exemptions and deduction into qualifying funds. If you wish to register your firm as a VCC or VCMC, kindly refer to the relevant information at this webpage below:

4. GETTING IN TOUCH

Any questions or queries regarding these incentives can be addressed to [email protected]


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