How Angel Tax Incentive Can Encourage Investments in Malaysia

How Angel Tax Incentive Can Encourage Investments in Malaysia

Angel Tax Incentive: A Great Way For Angel Investors Exemption From The Income Tax Malaysia

Angel tax incentive is a government-aided program to encourage more private investments in the Malaysian tech companies. Technology is the key to tomorrow’s world, the government recognizes it, and this incentive is one of its schemes to have more technology-based businesses in the country, helping them get access to private funds. Malaysian Business Angel Network (MBAN) moderates this program. It targets primarily to the angel investors. This program has a lot of potentials, and today we talk about everything you need to know about it in details.

Angel Tax Incentive: What is it all About?

This is an incentive directed towards the accredited angel investors in Malaysia, which grants them a tax exemption for the investments between RM5, 000 and RM500, 000, per annum based on tech businesses. The accreditation period is two years, and during this time, the investor can make investments on as many as five firms, inside the investment threshold of the tax relief.

Requirements

In order to qualify for the program, investor, Company and the investment, all have to fulfil requirements.

Investor

  • Should be a Malaysian Citizen or PR holder.
  • Should be either a high-income earner or have high net worth.
  • Either, a minimum net worth of RM3 million or minimum annual income of RM180,000 (250,000 in case of family income) is needed.

Company

  • Should be an Sdn Bhd incorporated with SSM.
  • At least 51% of the ownership should be claimed by a Malaysian.
  • The revenue of the company can’t exceed RM 5 million, and it shouldn’t be in operation for more than three years.
  • The company’s business should be in the activities of the qualifying field as defined by MoF.
      1. Advanced electronics and information technology
      2. Telecommunications
      3. Equipment, automation and flexible manufacturing systems
      4. Healthcare
      5. Electro-optics, non-linear optics and optoelectronics
      6. Advanced materials
      7. Transportation
      8. Value-add services
      9. Emerging technologies
  • The company can’t be owned by an immediate family member of the angel investor.
  • The company shouldn’t be wind-up or in liquidation.
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Investment

  • The investment should be for the sole purpose of approved financing activities.
  • The investment should be held for at least two years.
  • The angel investor can’t hold more than 30% of the equities of the company.
  • The investment should be paid in cash.
  • The company can issue new shares and reflect it in the Shareholder’s Agreement.
  • The shares for the angel investors should be ordinary shares.
  • The company shouldn’t be under any obligation to return the investment.

How Angel Tax Incentive Can Encourage Investments in Malaysia

Application Procedure

To apply for the program, both, the investor and the investee company should go through a process of showing that they are eligible for the program.

Investor

  • First, you will need accreditation from the Malaysian Business Angel Network. For that, have the required documents that show that you have a high net worth or a high income.
  • To show you have a high net worth you will need a photocopy of your NRIC and documents showing your assets, and in case you are a high-income earner, you will need a photocopy of your NRIC and a copy of your latest e-BE.
  • Then, you will need to apply to the MBAN secretariat at Cradle along with the following documents.
      • Accreditation letter from MBAN You could get it http://www.mban.com.my/).
      • Company’s Bank Statement
      • Financial Statement
      • Shareholder’s Agreement Sheet
      • Form 24
      • Form 32A
      • Form 49
  • You will need to pay a Membership fee of RM800 to the Cradle Fund Sdn Bhd.

Company

  • First, download the application from here. ( http://www.cradle.com.my/application-for-6_steps_tax_deduction.doc).
  • After that, submit the form and the following documents to the MBAN Secretariat at Cradle.
      • Form 24 Companies Regulation
      • Form 9 of Companies Regulation
      • Form 49 Companies Regulation
      • Form 13
      • Form 32A (if necessary)
      • Memorandum and Articles of Association
      • Agreements about the business
      • Financial Statements
      • Executive Summary
      • Copy of Minutes of the First Board Directors Meeting
      • Account Statements showing profit and loss
  • You will also need to pay a processing fee of RM800 to the Cradle Fund Sdn Bhd.
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Note: The processing will take 21 days for the investors and 25 days for the company before they get a letter of approval.

In conclusion, this was all for the angel tax incentive. I hope this article helps you.

Thinking of starting a business now? Here is the information on guide to start a IT company in Malaysia. You may also know more information about Malaysia tax incentives.


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