Malaysia Tax Incentive - Pioneer Status

Inland Revenue Board of Malaysia (IRBM) released Public Ruling No.10/2023 to explain the overview of Pioneer Status Incentive. Here is a breakdown and summary of key points regarding the tax incentive.

What is Pioneer Status?
Pioneer status is a tax incentive granted under the Promotion of Investments Act 1986. This incentive provides a tax relief on part or all of a statutory business income to a pioneer company participating in a promoted activity or producing a promoted product in Malaysia.

Qualifying Company

1. A pioneer status is granted to a company incorporated in Malaysia under the Companies Act 2016 and resident in Malaysia who carrying on a promoted activity or producing a promoted product.
2. A company in relation to agriculture in respect of a promoted activity or promoted product includes an agro-based co-operative socirty, Area Farmers' Association, Federal Farmers' Association, State Farmers' Association, Area Fishermen's Association, Federal Fishermen's Association, State Fishermen's Association and sole proprietorship, partnership, or association solely engaged in agriculture that carries on promoted activity and produces promoted product related to agriculture.

Promoted Activities and Promoted Products
Promoted activities and promoted products have been issued through statutory orders as follows:

1. Promotion of Investment (Promoted Activities and Promoted Products for High Technology Companies) Order 2012 and is read together with the Promotion of Investments (Promoted Activities and Promoted Products for High Technology Companies) (Amendment) 2018;
2. Promotion of Investments (Promoted Activities and Ppromoted Products for Selected Industries) Order 2012;
3. Promotion of Investments (Promoted Activities and Promoted Products for Reinvestment) Order 2012;
4. Promotion of Investments (Promoted Activities and Promoted Products) Order 2012;
5. Promotion of Investments (Promoted Activities and Promoted Products for Small Scale Companies) Order 2012.

Tax Relief Period
The tax relief period for a pioneer company is five (5) years, starting from the production day stated in the pioneer certificate. During this period, part or all of the statutory income of the pioneer business will be exempt from tax/

Grant of Pioneer Status
Pioneer status may be granted if the minister is satisfied that the company has fulfilled the qualifying criteria. The company is subject to the conditions as specified in the approval letter.

A pioneer company can be granted an extension of the tax relief period for the next five (5) years. The extension of the tax relief period will commence immediately after the end of the previous tax relief period.

An application for an extension of tax relief period shall be made within 30 days or such further period allowed by the Minister after the expiration of the tax relief period.

Pioneer Status Certification
A company that has been granted pioneer status must make an application to the Minister of International Trade and Industry ("Minister") to reqeust a pioneer certificate within 24 months from the date of the pioneer status approval is granted, or within an extended period allowed by the Minister.

Withdrawal of Pioneer Status
If a company, which has been granted pioneer status fails to comply with any of the terms or conditions imposed, the Minister may by notice in writing require the company to give reasons why the approval should not be withdrawn within 30 days from the date of service of the notice.

Cancellation of Pioneer Status
A pioneer certificate may be cancelled if the pioneer company fails to comply with any of the conditions imposed. The pioneer company must provide reasons why the pioneer certificate should not be cancelled, within 30 days from the date of delivery of the written notice issued by the Minister.

Surrender of Pioneer Status or Pioneer Certificate
A company that has granted pioneer status or a pioneer company, may at any time surrender the pioneer status or the pioneer certificate by giving a written notice to the Minister. If the Minister is satisfied with the reasons provided, an approval letter will be issued to specify the effective date of the surrender.