Equity Crowdfunding Tax Incentive

This article is prepared with the aim of clarifying how the tax exemption for Equity Crowdfunding (ECF) in Malaysia works, and when individuals should file for the exemption.

Do note that this article is a non-definitive guide. pitchIN makes no representations tax matters competency. Investors are advised to seek confirmations and clarifications from tax agents or Lembaga Hasil Dalam Negeri.

In Budget 2021, to encourage individuals to invest in ECF, it was proposed that individual investors be given an income tax exemption, subject to limits.

To legislate the above proposal, the Income Tax (Exemption) (No. 4) Order 2022 [P.U.(A) 142] was gazetted on 28 April 2022. The Order provides that:

• Qualifying individual is given an income tax exemption in respect of his aggregate income equivalent to 50% of the amount of investment, up to a maximum of RM50,000 for each Year Assessment (YA).
• The amount is limited to 10% of the aggregate income of the qualifying individual for the YA in the basis period for a year of assessment in which the exemption is granted.

• Individual must be an individual who is a Malaysian-resident makes an investment in pitchIN.
• The qualifying individual does not have a parent (including parent-in-law), child (including stepchild or child adopted in accordance with any law), brother, sister, grandparent, grandchild or spouse who has invested in the investee company.
• The Equity crowdfunding (ECF) investments must be made between 1 January 2021 and 31 December 2023.
• Investors must hold all the shared for 2 years. There should not be any partial or full disposal made in the 2 years, including selling shares on the PSTX.
• At the end of 2 years, pitchIN will issue a certificate to confirm your eligibility for tax exemption.

For example. if you made an investment in 2021, the end of the investment period will be in 2023. You can then claim for tax exemption in the Year Assessment 2023, which you will file in 2024. This means that for the investment made in 2021, you will file for tax exemption in 2024. Similarly, Investments made in 2022 will be claimed in 2025 when investors file their Year Assessment 2024 (YA2024).

*As of January 2024, the Ministry of Finance has proposed that the above tax incentive be extended to 31 December 2026 as part of the Belanjawan Madani 2024.

We shall duly provide an update here once further announcements have been made by the relevant authorities.

• Official FAQ provided by Securities Commission Malaysia
• Belanjawan Madani 2024