WARTA KERAJAAN

PERSEKUTUAN

7 Jun 2019 FEDERAL GOVERNMENT

7 June 2019
P.U. (A) 163 GAZETTE

PERINTAH CUKAI PENDAPATAN

(PENGECUALIAN) (NO. 7) 2019

INCOME TAX (EXEMPTION) (NO. 7) ORDER 2019

DISIARKAN OLEH/
PUBLISHED BY
JABATAN PEGUAM NEGARA/
ATTORNEY GENERAL’S CHAMBERS
 P.U. (A) 163

INCOME TAX ACT 1967

INCOME TAX (EXEMPTION) (NO. 7) ORDER 2019

IN exercise of the powers conferred by paragraph 127(3)(b) of the

Income Tax Act 1967 [Act 53], the Minister makes the following order:

Citation and commencement

1. (1) This order may be cited as the Income Tax (Exemption) (No. 7) Order 2019.

(2) This Order is deemed to have come into operation from the year of assessment
2016 until the year of assessment 2020.

Interpretation
2. In this Order—

“export” means direct export from Malaysia of agricultural produce or product from
manufacturing but does not include—

(a) sales to any company in an area declared as free zones under the Free
Zones Act 1990 [Act 438];

(b) sales to any company which is granted a licence for warehousing or a licence to
carry on any manufacturing process under section 65 or 65A of the Customs Act
1967 [Act 235], as the case may be; and

(c) sales to any company within Langkawi, Labuan or Tioman;

“agricultural produce” means fresh and dried fruits, fresh and dried flowers, ornamental
plant, and includes ornamental fish, frozen raw prawn, frozen cooked and peeled prawn,
frozen raw cuttlefish and frozen raw squid;

“manufacturing” has the meaning assigned to it in paragraph 9 of Schedule 7A to the

Act;
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“qualifying company” means a company incorporated under the

Companies Act 2016 [Act 777] and resident in Malaysia.

Exemption
3. (1) Subject to subparagraphs (2) and (3), and paragraph 4, the Minister exempts a
qualifying company which achieves increase in export sales of agricultural produce or
product from manufacturing from the payment of income tax in respect of the income derived
from export sales in the basis period for a year of assessment.

(2) The exemption referred to in subparagraph (1) is subject to the following

conditions:

(a) the qualifying company has a paid-up share capital in respect of its ordinary
shares not exceeding two million five hundred thousand ringgit at the
beginning of the basis period for a year of assessment;

(b) the agricultural produce is planted, reared or caught by the qualifying

company; and

(c) the product from manufacturing is manufactured by the qualifying

company.

(3) The exemption under subparagraph (1) does not apply to the export of—

(a) product from manufacturing which is subject to prohibition of exports under

the Customs Act 1967; and

(b) product from manufacturing which is listed in the Schedule.

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Amount of income to be exempted

4. (1) The amount of income exempted under paragraph 3 is an amount equal to—

(a) ten per cent of the value of increased exports of the manufacturing product
of the qualifying company where the manufacturing product exported
attained at least twenty per cent of the value added;

(b) fifteen per cent of the value of increased exports of the manufacturing
product of the qualifying company where the manufacturing product
exported attained at least forty per cent of the value added; or

(c) ten per cent of the value of increased exports of the agricultural produce of
the qualifying company.

(2) Notwithstanding subparagraph (1), the amount of income exempted shall not
exceed seventy per cent of the statutory income of the qualifying company for a year of
assessment.

(3) In this paragraph, “value added” means the sale price of goods at the factory price
which is less the total cost of raw material.

Determination of value of increased exports

5. (1) The value of increased exports shall be determined based on the difference
between—

(a) the free-on-board value of export sales in a basis period with the free-on-
board value of export sales in the basis period immediately preceding that
basis period, where both basis periods of the qualifying company are twelve
months period ending on the same date; or

(b) the average free-on-board value of export sales in a basis period with the
average free-on-board value of export sales in the basis period immediately
preceding that basis period, where both basis periods of the

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qualifying company are not twelve months period ending on the same date
due to the change of the basis period of the qualifying company or the
qualifying company is newly incorporated.

(2) For the purpose of subparagraph (1), the value of free-on-board export sales in a
basis period or the basis period immediately preceding that basis period shall not be equal to
zero.

Insufficiency of income
6. Where, by reason of the absence or insufficiency of the statutory income, exemption
cannot be granted or cannot be granted in full as the qualifying company is entitled under
paragraph 3 for that year of assessment, then so much of the statutory income in respect of
which exemption cannot be granted for that year of assessment shall be given exemption for
the first subsequent year of assessment for the basis period for which the qualifying company
has statutory income from the export of agricultural produce or product from manufacturing
and for subsequent year or years of assessment until the exemption is granted in respect of the
whole statutory income as the qualifying company is entitled under paragraph 3 but shall not
exceed seventy per cent from the statutory income for each year of assessment.

Separate source and separate account

7. (1) Where a qualifying company carries on an activity in relation to the export of
agricultural produce or product from manufacturing and activity other than the activity in
relation to the export of agricultural produce or product from manufacturing, each activity
shall be treated as a separate and distinct source of the activity.

(2) The qualifying company which is granted an exemption under paragraph 3 shall
maintain a separate account for the income derived from each activity referred to in
subparagraph (1).

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Non-application
8. This Order shall not apply to a qualifying company in respect of the same export of
agricultural produce or product from manufacturing if in the basis period for a year of
assessment—

(a) the qualifying company has been granted reinvestment allowance under Schedule
7A to the Act or investment allowance for service sector under Schedule 7B to
the Act;

(b) the qualifying company has been granted any incentive under the Promotion of
Investments Act 1986 [Act 327];

(c) the qualifying company has been granted any exemption under paragraph
127(3)(b) or subsection 127(3A) of the Act; or

(d) the qualifying company has made a claim for deduction under any rules made
under section 154 of the Act except—

(i) rules in relation to allowance under Schedule 3 to the Act;

(ii) the Income Tax (Deduction for Audit Expenditure) Rules 2006 [P.U.
(A) 129/2006]; or

(iii) the Income Tax (Deduction for Expenses in relation to Secretarial Fee and
Tax Filing Fee) Rules 2014 [P.U. (A) 336/2014].

SCHEDULE

No. Product Harmonized system code

(H. S)

1. Tin ingot or slab, tin ore and 80.01;

concentrate 2609.00 000

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No. Product Harmonized system code

(H. S)

2. Natural rubber sheet and slab, standard 4001.10; 4001.21

Malaysian rubber, crepe natural rubber, 4001.22; 4001.29
natural rubber latex and natural gum 4001.30

3. Crude palm kernel oil, palm kernel cake 1513.21 100;

and crude palm oil 2306.60 000;
1511.10 000

4. Copra, copra cake and crude coconut 1203.00 000;

oil 1513.11 000;
2306.50 000

5. Log, sawn timber (ungraded and 44.08; 44.07;

non-kiln dry) and wood chip (except 44.01; 44.30
briquette)

6. Petroleum oil (crude and other than 2709.00; 2710.00;

crude oil) and petroleum gas and other 27.11; 27.12; 27.13;
gaseous hydrocarbon (liquefied or in 2804.10 000;
gaseous state) hydrogen, nitrogen and 2804.30 000;
oxygen 2804.40 000

Made 16 May 2019

[Perb. CR(8.20)116/1-138(2016)(SJ.2)(SK.2); LHDN.01/10.5-1/61-5; PN(PU2)80/XCIV]

LIM GUAN ENG

Minister of Finance

[To be laid before the Dewan Rakyat pursuant to subsection 127(4) of the
Income Tax Act 1967]