The Income Tax (Exemption) (No. 2) Order 2021 (‘Exemption Order’) which grants exemption from income tax on gains or profits derived from the Sukuk Prihatin, an Islamic securities with a nominal value of up to RM666,417,500.00 issued by the Malaysian Government on 22 September 2020 in accordance with the Murabahah principle, was gazetted on 4 March 2021.
Under the Exemption Order, a qualifying person resident in Malaysia is exempted from the payment of income tax in the basis person for each year of assessment in relation to gains or profits derived in lieu of interest from the Sukuk Prihatin.
According to the Exemption Order, a ‘qualifying person’ means:
- an individual who is a citizen of Malaysia aged eighteen years and above;
- a body corporate incorporated under the laws of Malaysia but excluding a financial institution and a holder of a Capital Markets Services Licence carrying on the business of fund management under the Capital Markets Services Act 2007; or
- a body of persons, partnership or limited liability partnership registered under any written law in Malaysia and carries on its business in Malaysia but excluding a trustee registered as a member of the Association of Trust Companies who acts on behalf of the person.
For the purposes of the Exemption Order, a ‘financial institution’ refers to:
- a bank, investment bank or insurer licensed or deemed licensed under the Financial Services Act 2013;
- an Islamic bank, takaful operator or international takaful operator licensed or deemed licensed under the Islamic Financial Services Act 2013;
- a development financial institution prescribed under the Development Financial Institutions Act 2002; or
- an entity that is a registered person under Part 1 of Schedule 4 to the Capital Markets Services Act 2007.
The Exemption Order does not absolve a qualifying person from submitting any return or statement of accounts or to furnish any other information under the Income Tax Act 1967.
The Exemption Order is deemed to have effect from the year of assessment 2020.