绿科技能源奖励 GREEN SUSTAINABILITY

GOVERNMENT INCENTIVES OVERVIEW

Overview of Current Incentives

Companies embarking on sustainability activities may be entitled to tax benefits as part of the Government's effort to promote sustainable growth in Malaysia.

The recent revamp of Ministries such as the Ministry of Energy, Green Technology and Water and the Ministry of Natural Resources and Environment is an indication of the increasing level of commitment undertaken by the Government of Malaysia in relation to the 'green' agenda.

A survey1 conducted by PricewaterhouseCoopers has shown that global business leaders recognise the need for tax and regulations to drive sustainability. A combination of carrot (tax incentives) and stick (regulation, tax charges) is deemed necessary for effective sustainability implementation.

Overview of Current Incentives

How effective do you feel each of the following tools are/would be at encouraging your business to reduce its environmental impact? Base: Total (654)

In addition, numerous policies have been introduced to align mitigation, adaptation, investment and financing of sustainability measures. Among them are the National Green Technology Policy and the Second National Communication, Vulnerability and Adaptation (V&A) Plan of Action.

The National Green Technology policy is a RM1.5 billion funding scheme to improve the supply and utilisation of Green Technology. Malaysian companies that produce or use green technology are eligible for a 2% interest rate discount that will be borne by the Government. The Government will also guarantee 60% of the financing amount via Credit Guarantee Corporation Malaysia Berhad (CGC) whilst the participating financial institutions will bear the remaining 40% financing risk.

Features	Producer of Green Technology	User of Green Technology
Financing size	Maximum: RM 50 million per company	Maximum: RM 10 million per company
Financing tenure	Up to 15 years	Up to 10 years
Eligibility criteria	Legally registered Malaysian-owned companies (at least 51%) in all economic sectors	Legally registered Malaysian-owned companies (at least 70%) in all economic sectors
Participating financial institutions	All commercial and Islamic banks. Development Financial Institutions (DFIs): Bank Pembangunan, SME Bank, Agrobank, Bank Rakyat, EXIM bank and Bank Simpanan Nasional (Listing of commercial banks and Islamic banks available from Bank Negara)

GTFS Guidelines2

National Communication, Vulnerability and Adaptation (V&A) Plan of Action is an ongoing activity launched in May 2006 to ensure improvement and sustained efforts on Malaysia's technical and institutional capacities to help the country meet its obligations under the United Nations Framework Convention on Climate Change (UNFCCC).

For further reading, please go to www.gtfs.my and www.undp.org.my

An Overview of Income Tax Acts and Income Tax Rules that Incentivise Sustainability Activities in Malaysia

In the 2010 budget, tax incentives for buildings obtaining Green Building Index (GBI) certificate was introduced. The GBI is a comprehensive rating system designed specifically for Malaysian tropical weather, environmental and development context, to evaluate the environmental design and performance of Malaysian buildings. It is based on a building's energy efficiency, indoor environment quality, sustainable site planning and management, materials and resources, water efficiency and innovation.

In addition to the incentives granted to GBI rated buildings, below are examples to illustrate activities which will enable a company to qualify for tax incentives.

Examples of Sustainability Initiative	Reference
A company which provides an area for child care facilities for young children which enable parents to bring their children to work. Facilities include a room equipped with children's books, toys, adult providing supervision for the young children as well as time for employees to visit their children at work will qualify for a single tax deduction for the amount spent on the child care facility	S 34 (6) (i) of the Income Tax Act, 1967 allows for a single tax deduction
Safety training programmes organised for non-employees of a company are entitled to a single tax deduction. The objective of providing safety training is to provide information on safety which are applicable to the community	S 34 (6) (n) of the Income Tax Act, 1967 allows for a single tax deduction
Setting-up and managing a school for children with learning disabilities catered for the children of the school-going age who require extra help and attention to address their disabilities. Managing such a non-profit oriented school will enable the company to qualify for a tax exemption	PU (A) 247/2008 Income Tax (Exemption) (No. 5) Order 2008 allows for tax exemption
An organisation implementing processes to manage the recycling of its waste is eligible for claiming its 6-year capital allowance within a 2-year period.	Income Tax (Accelerated Capital Allowances) (Recycling of Wastes) Rules 2000 permits accelerated capital allowance
A company which incurs high capital expenditure in installing its own water chilling plant to recycle its water to produce electricity is considered a company that conserves energy for its own consumption and due to the high initial investments for the future benefit of its company, the Ministry of Finance provides the company with a Pioneer status with tax incentives	Promotion of Investments Act
An individual or a company acquiring property with GBI certification is entitled to the exemption of stamp duty	PU (A) 410/2009 Income Tax (Exemption) (No. 8) Order 2009

Sustainability-Related Tax Benefits

Qualifying Expenditure	Reference
Double Tax Deduction
Allowances paid to unemployed graduates undergoing certain training scheme	PU (A) 172 / 2007 – Income Tax (Deduction for Allowances under the Capital Market Graduates Training Scheme) Rules 2007
Remuneration paid for the employment of disabled persons	PU (A) 73 / 1982 – Income Tax (Deductions for the Employment of Disabled Persons) Rules 1982
Single Tax Deduction
Cash contribution and sponsorship of a cultural or arts performance held in the Federal Territory Kuala Lumpur	PU (A) 380 / 2005 – Income Tax (Deduction for Cash Contribution and Sponsor of a Cultural or Arts Show held in Federal Territory Kuala Lumpur) Rules 2005
Expenditure incurred up to RM 500,000 per year for sponsoring local arts and cultural performances	S 34 (6) (k) of the Income Tax Act, 1967
Expenditure incurred on the provision of any equipment necessary to assist any disabled person(s) employed by him	S 34 (6) (e) of the Income Tax Act, 1967
Contribution on provision of library facilities which are accessible to the public or libraries of schools and institutions of higher learning (with certain limits)	S 34 (6) (g) and S 44 (8) of the Income Tax Act, 1967
Expenditure incurred for the provision of services, public amenities and contribution to a charity or community project pertaining to education, health, housing, infrastructure, ICT, conservation or preservation of the environment and enhancement of income of the poor as approved by the Minister	S 34 (6) (h) of the Income Tax Act, 1967
Expenses incurred in the provision of infrastructure in relation to business which is also for public benefit and approved by the Minister	S 34 (6) (ha) of the Income Tax Act, 1967
Expenditure incurred for the provision and maintenance of child care facilities for the business	S 34 (6) (i) of the Income Tax Act, 1967
Expenditure incurred in establishing and managing a musical or cultural group approved by the Minister	S 34 (6) (j) of the Income Tax Act, 1967
Expenditure incurred in the provision of a scholarship to a student (provided that certain conditions are satisfied)	S 34 (6) (l) of the Income Tax Act, 1967
Expenditure incurred in providing practical training to nonemployees	S 34 (6) (n) of the Income Tax Act, 1967
Gift of money or contribution in kind (the value to be determined by the relevant local authority) made by him in the basis year for that year for the provision of facilities in public places for the benefit of disabled persons	S 44 (9) of the Income Tax Act, 1967

Qualifying Expenditure	Reference
Single Tax Deduction
Gift of money or medical equipment not exceeding RM 20,000 to any healthcare facility approved by the Ministry of Health	S 44 (10) of the Income Tax Act, 1967
Gift of painting (to be determined by the National Art Gallery or any state art gallery)	S 44 (11) of the Income Tax Act, 1967
Approved donation up to 10% of aggregate income Approved charitable donations Contributions towards sports activities approved by the MOF and sports bodies approved by the Commissioner of Sports Contributions towards project of national interest	S 44 (6), S 44 (11B) and S 44 (11C) of the Income Tax Act 1967
Tax Exemption
Tax exemption for a qualifying person carrying out activities related to the management of public cemeterial grounds	PU (A) 266/2005 Income Tax (Exemption) (No. 36) Order 2005
Tax exemption for management of non-profit oriented schools	PU (A) 247/2008 Income Tax (Exemption) ( No. 5) Order 2008
Tax exemption for income derived from trading of Certified emission Reductions (CERs) certificates	PU (A) 378/2008 Income Tax (Exemption) ( No. 8) Order 2008
Accelerated Capital Allowance
Accelerated capital allowances (Recycling of wastes)	Income Tax (Accelerated Capital Allowances) (Recycling of Wastes) Rules 2000
Accelerated capital allowances (Renewable Energy)	Income Tax (Accelerated Capital Allowances) (Renewable Energy) Rules 2005
Pioneer / ITA
Generation of energy using biomass and other sources of renewable energy	Promotion of Investments Act
Conservation of energy for own consumption	Promotion of Investments Act
Tax Incentives for buildings awarded Green Building Index (GBI) certificate	PU (A) 414/2009 Income Tax (Exemption) (No. 8) Order 2009
Import Duty and Sales Tax Exemptions
Import duty and sales tax exemption for equipment used in energy conservation which is not produced locally while equipment purchased locally is granted sales tax exemption	Customs Act, 1967 and Sales Tax Act, 1972
Industrial Building Allowance
Expenditure on the construction and purchase of a building for the purposes of that business for the provision of child care facilities for individuals employed by him in that business	Para 42A(2) of Schedule 3 the Income Tax Act, 1967
Stamp Duty
Stamp duty exemption on instrument of transfer for property with GBI certificate	PU (A) 410/2009 Income Tax (Exemption) (No. 8) Order 2009

Incentives for Environmental Management

Qualifying Expenditure	Incentive Provided
Forest Plantation Projects	Pioneer Status with income tax exemption of 100% of the statutory income for ten years; or Investment Tax Allowance (ITA) of 100% on the qualifying capital expenditure incurred within five years. The allowance can be offset against 100% of the statutory income for each year of assessment. Any unutilised allowances can be carried forward to subsequent years until fully utilised
Storage, Treatment and Disposal of Toxic and Hazardous Wastes	Pioneer Status, with income tax exemption of 70% (100% for promoted areas) of the statutory income for a period of five years; or Investment Tax Allowance of 60% (100% for promoted areas) on the qualifying capital expenditure within a period of five years. The allowance can be offset against 70% (100% for promoted areas) of the statutory income in each year of assessment. Any unutilised allowances can be carried forward to subsequent years until fully utiised
Waste Recycling Activities	Pioneer Status, with income tax exemption of 70% (100% for promoted areas) of the statutory income for a period of five years. Unabsorbed capital allowances as well as accumulated losses incurred during he pioneer period can be carried forward and deducted from the post pioneer period of the company; or Investment Tax Allowance of 60% (100% for promoted areas) on the qualifying capital expenditure incurred within a period of five years. The allowance can be offset against 70% (100% for promoted areas) of the statutory income in each year of assessment. Any untilised allowances can be carried forward to subsequent years until fully utilised
Energy Conservation	Pioneer Status, with income tax exemption of 100% of the statutory income for a period of ten years. Unabsorbed capital allowances as well as accumulated losses incurred during he pioneer period can be carried forward and deducted from the post pioneer period of the company; or Investment Tax Allowance of 100% on the qualifying capital expenditure incurred within a period of five years. The allowance can be offset against 100% of the statutory income in each year of assessment. Any untilised allowances can be carried forward to subsequent years until fully utilised
Energy Generation Activities using Renewable Energy Resources	Pioneer Status, with income tax exemption of 100% of the statutory income for a period of ten years. Unabsorbed capital allowances as well as accumulated losses incurred during he pioneer period can be carried forward and deducted from the post pioneer period of the company; or Investment Tax Allowance of 100% on the qualifying capital expenditure incurred within a period of five years. The allowance can be offset against 100% of the statutory income in each year of assessment. Any untilised allowances can be carried forward to subsequent years until fully utilised
Environmental Management	Companies using environmental protection equipment are eligible for an initial allowance of 40% and an annual allowance of 20% on the qualifying capital expenditure. The full amount can be written off within three years

incentives for environmental management in malaysia

Incentives for Environmental Management in Malaysia1

Further information is available at www.mida.gov.my

Impact Assessment of Taxes and Incentives Abroad

Globally, countries are using a combination of taxes, incentives and regulation to promote sustainable practices. As more Malaysian companies expand abroad, these taxes and incentives may impact their operations.

These taxes and incentives could also be an indicator of the possible future direction that Malaysia may adopt.

Sample Green taxes

Tax	Description	Annual Revenues
Dutch Packaging Tax	A "Packaging Tax" aimed at taxing materials such as glass, plastics, wood and cardboard. The amount of packaging tax depends on the packaging materials used, how the materials are used and the weight of the materials. The taxable persons are defined as Producer, Importer and VAT Group	€365 million
UK Fuel Duty	The UK Fuel Duty is an excise tax imposed on the sale of fuel intended for transportation. Value Added Tax (VAT) is also charged on the price of the fuel and on the duty. Diesel for use by farmers and construction vehicles has a reduced tax rate compared to main road fuel (petrol and diesel)	£27 billion in 2008
Scandinavian Carbon Taxes	Carbon taxes on fossil fuels	Various
Irish plastic bag tax	A tax of 22 cents per plastic bag used levied on consumers	€20 million per annum estimated

Sample Green taxes

Sample Green incentives

Green Incentives	Description
US Production tax credit	2.1c per KwH or 1c per KwH tax rebates for renewables
China – tax favoured projects	Tax reductions and holidays for green business ventures
UK capital allowances	100% capital allowances for energy saving equipment
Brazilian tax rebate	Companies can withhold 10% of tax bill to invest in sustainability projects including reforestation

Sample Green incentives

Sample Regulations

Regulation	Description
California Renewable Portfolio Standards	Utilities have to obtain a percentage of their power from renewable sources
UK Producer Responsibility Obligations (Packaging Waste) Regulations	Businesses that place products in the market have to assume some of the waste management costs of the product when the product reaches their end of life
UK capital allowances	100% capital allowances for energy saving equipment
US Clean Air Act	To protect and improve the country's air quality and stratospheric ozone layer