Kuala Lumpur, 28 September 2009
SC issues guidelines on venture capital tax incentives
The Securities Commission Malaysia (SC) today released the Venture Capital Tax Incentives Guidelines (VC Tax Incentives Guidelines), to incorporate the new tax incentive for the venture capital industry as stipulated in the Income Tax (Exemption)(Amendment) Order 2009 (Tax Order 2009). These new guidelines supersede the Guidelines for Annual Certification for Tax Incentives for the Venture Capital Industry first issued in 2001 and last amended in 2007.
Under the Tax Order 2009, venture capital companies (VCCs) registered with the SC are eligible for tax exemption for five years of assessment subject to them investing at least 30% of their invested funds in the form of seed capital, start-up and/or early stage financing in qualified investee companies. Application for this exemption must be submitted to the SC by 31 December 2013.
This new and more attractive tax exemption incentive supplements existing incentives, where VCCs registered with the SC are eligible for tax exemption for ten years of assessment if they invest either at least 70% of their invested funds in the form of seed capital, start-up and/or early stage financing or at least 50% of their invested funds in the form of seed capital in qualified investee companies.
In addition to tax incentives in the form of tax exemption for VCCs registered with the SC, the current venture capital tax framework also provides tax deduction for an amount equivalent to the value of the investment made by an individual or a company in qualified investee companies.
Venture capital management companies (VCMC) registered with the SC can also enjoy tax exemption on income arising from a profit-sharing agreement between the VCMC and the VCC. The VCMC, however, need not obtain certification from the SC provided that the VCC under the profit-sharing agreement is registered with the SC and has received certification for tax exemption from the SC.
Applicants for the tax incentives are advised to read and understand the content of the VC Tax Incentives Guidelines before submitting any application for certification to the SC. The VC Tax Incentives Guidelines and application forms are available here.