Pioneer Status and ITA
Policy measure

According to APERC (2010), the Malaysian government is offering a number of economic subsidies to encourage energy efficiency improvement in industry.


Financial incentives, either in the form of pioneer status (cost based tax incentive) or ITA (performance-based tax incentive), are offered to performance contracting companies, i.e. companies that are directly involved/undertaking in/undertake energy efficiency projects such as energy services companies (ESCOs).


The subsidies include:

  • “Pioneer Status: A company granted Pioneer Status will enjoy partial exemption from the payment of income tax. The company will only have to pay tax on 30% of its statutory income. The period of tax exemption is five years, commencing from the Production Day as determined by the Ministry of International Trade and Industry (MITI).

  • Investment Tax Allowance (ITA): A company granted Investment Tax Allowance will be given an allowance of 60% in respect of qualifying capital expenditure (such as factory, plant, machinery or other equipment used for the approved project) incurred within five years from the date on which the first qualifying capital expenditure is incurred.”

Implementation

The following rules apply (APERC, 2010):

 

“Companies providing services for energy efficiency improvement are eligible for:

  • Pioneer status with an income tax exemption of 100% of statutory income for 10 years or

  • An investment tax allowance of 100% on the qualifying capital expenditure incurred within a period of five years. The allowance is to be set off against 100% of the statutory income for each year of assessment and

  • An import duty and sales tax exemption on energy-efficient equipment that is not produced locally and a sales tax exemption on the purchase of equipment from local manufacturers


Companies that make capital expenditures to improve their energy consumption are eligible for:

  • An investment tax allowance of 100% of the qualifying capital expenditure incurred within 5 years. The allowance is to be set off against 100% of the statutory income for each year of assessment and

  • An import duty and sales tax exemption on energy-efficient equipment that is not produced locally and a sales tax exemption on the purchase of equipment from local manufacturers.

Companies that import energy efficient products are eligible for:

  • An exemption of import duty and sales tax on energy-efficient equipment such as high-efficiency motors and insulation materials for importers, including authorized agents, approved by the Energy Commission

  • A sales tax exemption is given on the purchase of locally manufactured energy-efficient household appliances such as refrigerators, air conditioners, lighting, fans and televisions.”

Challenges
No identified challenges.
Outcomes
No identified outcomes.
References

APERC (Asia Pacific Energy Research Centre), 2011. Compendium of Energy Efficiency Policies of APEC Economies – Malaysia. Tokyo. Available at: http://www.ieej.or.jp/aperc/CEEP/2010/Malaysia_2010.pdf.