On October 25, 2013, the Green Technology Tax Incentive for the purchase and use of green technology was announced in Malaysia with great anticipation. This was definitely good news for the solar industry in Malaysia.
Today, the Malaysian government is still encouraging the purchasing of green technology equipment and assets, such as LED lighting, solar panels, wind energy, and electric vehicles using an Investment Tax Allowance (ITA). Moreover, an Income Tax Exemption (ITE) for green technology service providers, such as solar companies in Malaysia has also been introduced.
These are the three groups under the Green Technology Tax Incentive:
- Assets (GITA)
- Projects (GITA)
- Service providers (under Green Income Tax Exemption (GITE))
The main benefits of these tax incentives are:
- To encourage investment in green technology on a project basis either for business or own consumption.
- To motivate companies in acquiring green technology assets
- To enhance the number of green technology service providers
What Are Green Investment Tax Allowance (GITA) Assets?
The Green Investment Tax Allowance (GITA) assets are for companies that obtained qualifying green technology assets. To take advantage of this tax allowance, companies should comply with all the following requirements:
- The companies in Malaysia should minimize the deterioration of the environment or reduce greenhouse emissions.
- They should focus on promoting health and improvement of the environment.
- They need to conserve the use of energy, water and other forms of natural resources, or promote the use of renewable energy, or recyclable waste material resources.
What is The Rate of Incentive?
- GITA of 100% of qualifying capital expenditure incurred on approved green technology assets from the date of purchase until 31 December 2020.
- The allowance can be offset against 70% of statutory income in the year of assessment.
- Unutilized allowances can be carried forward until they are fully absorbed.
What Is The Green Investment Tax Allowance (GITA) Project?
GITA Projects are for companies that undertake a qualifying green technology. Companies should comply with all of the following requirements:
- Minimize the degradation of the environment or reduce greenhouse emission
- Promote health and improvement of the environment
- Conserve the use of energy, water and/or other forms of natural resources, or promote the use of renewable energy, or recyclable waste material resources
- The application should be received by MIDA by 31 December 2020.
What Are The Green Income Tax Exemption (GITE) Services?
The GITE is applicable for qualifying green technology service providers listed under the MyHIJAU Directory.
Qualifying Activities To Be Approved For The Tax Exemptions
There are two qualifying activities:
1. Renewable Energy – Energy from a source that is not depleted when used, such as:
- Solar Power
- Mini Hydro
2. Energy Efficiency – Companies that reduce the amount of energy required to provide products and services, and invest in energy-efficient equipment or technology.
It is important to understand that the solar industry in Malaysia is producing 67 per cent of the 270MVH or renewable energy right now. Companies are installing more solar panel systems in Malaysia every day to take advantage of this green technology, save money and conserve the environment.
The solar power in Malaysia has all the elements for higher growth given the excellent conditions in the country. According to SEDA, the target for renewable energy generation is 2,080 MW or 11% by 2020 and 4,000 MW by 2030. The incentive will certainly add momentum to the adoption of green technology around the country.
Last but not least, the benefits of the use of solar energy are simply amazing because:
- Solar power is pollution-free and causes no greenhouse gases to be emitted after installation.
- Reduced dependence on foreign oil and fossil fuels
- Clean power that is available every day of the year, especially in a tropical country such as Malaysia, where even cloudy days produces power.
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