1. The Income Tax (The Incentive for Manufacturers of Pharmaceutical Products Scheme) Rules 2022 [P.U.(A) 34/2022] (‘Rules’) were gazetted on 17 February 2022 and are deemed to have effect from the year of assessment 2021.
2. https://lom.agc.gov.my/ilims/upload/portal/akta/outputp/1723693/PUA34_2022.pdf
3. The chargeable income of a qualifying company which carries on the business in respect of a qualifying activity under the Incentive for Manufacturers of Pharmaceutical Products Scheme for the specified years of assessment is subject to income tax at the following rates:
(a) for the first period of 10 years of assessment, 0% to 10%; or
(b)for the next period of 10 years of assessment, 10%.
4. The key definitions as provided for under the Rules are as follows:
(a) a ‘qualifying company’ is a manufacturer of pharmaceutical products whose application for the Manufacturers of Pharmaceutical Products Incentive Scheme has been approved by the Minister of Finance (‘Minister’) under rule 5(2) of the Rules;
(Rule 5(2) of the Rules requires an application under the Manufacturers of Pharmaceutical Products Incentive Scheme to be received by the Minister through the MIDA on or after 21 January 2021 but not later than 31 December 2022.)
(b)a ‘manufacturer of pharmaceutical products’ is a company that:
- is incorporated under the Companies Act 2016 and is resident in Malaysia;
- possesses a manufacturing licence under the Industrial Co-ordination Act 1975 from the Ministry of International Trade and Industry or a letter confirming it is exempted from a manufacturing licence from the Malaysian Investment Development Authority (‘MIDA’); and
- undertakes manufacturing of pharmaceutical products including formulation in Malaysia but excluding fill and finish activity;
(The expression ‘fill and finish activity’ means the process of filling vials with vaccines and finishing the process of packaging the medicine for distribution.)
(c) a ‘qualifying activity’ is an activity prescribed by the Minister as specified in the Guidelines for Incentive for Manufacturers of Pharmaceutical Products including vaccines under the 2021 Malaysian Budget (‘Incentive Guidelines’), issued or as revised by MIDA and approved by the Minister;
- https://www.mida.gov.my/wp-content/uploads/2021/09/GD_PHARMA_VACCINE_01092021.pdf
(d) the ‘Incentive for Manufacturers of Pharmaceutical Products Scheme’ means an incentive scheme for a qualifying company which carries on the business in respect of a qualifying company and approved by the Minister.
5. Conditions for Incentive for Manufacturers of Pharmaceutical Products Scheme
A qualifying company approved under the Incentive for Manufacturers of Pharmaceutical Products Scheme must comply with all of the following conditions:
- the first qualifying expenditure (excluding land) shall be incurred within one year from the date the approval letter is issued;
- the full amount of the qualifying expenditure specified in the approval letter shall be incurred within five years from the date the first qualifying expenditure is incurred; and
- any conditions specified in the Schedule to the Rules and any other conditions imposed by the Minister as specified in the approval letter and the Incentive Guidelines, issued or as revised by MIDA and approved by the Minister.
The Schedule to the Rules is reproduced below:
Source:
https://www.skrine.com/insights/alerts/february-2022/rules-for-tax-incentive-for-manufacturers-of-pharm
