Updates to the Public Rulings issued by the IRB

The Inland Revenue Board of Malaysia (IRB) issued updated/revised Public Rulings covering Accelerated Capital Allowance, Venture Capital Tax Incentives, Taxation of LLPs, Property Development, Reinvestment Allowance as well as the Commer-cialization of Public Resource-Based Research & Development Findings.

The salient points are set out in the table below:

Public Ruling	Salient Points
PR 6/2022 Accelerated Capital Allowance	Only the capital portion of the instalment payments for assets acquired through Hire Purchase (“HP”) are a qualifying expenditure for Accelerated Capital Allowance. If the HP instalment period partially falls outside the qualifying period, the total qualifying expenditure in respect of the HP asset is not eligible for Accelerated Capital Allowance. The Rules covered under the “Income Tax (Accelerated Capital Allowance) (Machinery and Equipment including Information and Communication Technology Equipment) Rules 2021" are covered under the amendments to PR 6/2022, including an explanation of machinery and equipment based on the definition of “qualifying plant expenditure”. The updated PR 6/2022 incorporates the following rules: Extension of the Automation Equipment Allowance incentive period to YA 2023; Accelerated Capital Allowance for the purchase and installation of IT equipment (e.g., computers and components, screens, printers, software systems, and software packages); Accelerated Capital Allowance on moulds purchased for use in the production of Industrialised Building Systems for a manufacturing or construction company; Accelerated Capital Allowance to licensed tour operators on the purchase of excursion buses.
PR 7/2022 Venture Capital Tax Incentives	PR 7/2022 replaces PR 2/2016 and incorporates updates to reflect the changes in the legislation following the issuance of gazette orders for tax incentives for venture capital, i.e., tax exemption for venture capital company, tax exemption for venture capital management company, and tax deduction for investment in a venture company.
PR 8/2022 Taxation of Limited Liability Partnerships	PR 8/2022 replaces PR 5/2015. There are no significant changes in this PR. There are no significant changes in this PR. The changes consist of adapting the content of the PR to current tax legislation and inserting an example of deductibility of remuneration or similar payments to partners.
PR 9/2022 Property Development	PR 9/2022 replaces PR 1/2009, which provides guidance on determining gross income for purposes of calculating adjusted income from property development. PR 9/2022 has been updated to clarify that any method accepted by the IRB (e.g., floor area) may be used in addition to the relative sales value method to apportion land costs among the various types of units within a residential block after the land costs of the residential block have been apportioned. Fees paid to manage and operate a project after the project is secured must be capitalized in the development cost account, and the tax deduction is claimed progressively based on the percentage of completion of the project. Expenses for model homes must be capitalized in the development cost account, and the tax deduction must be claimed based on the percentage of completion method. Land costs for a model home built outside the development area are not allowable expenses. The stock withdrawal or deemed disposal provision applies to a model home that was a trading asset but was later transferred and used as a business asset. The cost of building a sales gallery and an administrative office is not tax deductible. The amount or compensation claim for compulsorily abandoned inventory under Section 4C of the Income Tax Act is taxable as of January 1, 2014. [In December 2022, the Federal Court of Malaysia held in Wiramuda (M) Sdn Bhd v. Ketua Pengarah Hasil Dalam Negeri that Section 4C of the Income Tax Act is unconstitutional as it violates the Federal Constitution]. It sets forth a list of aspects to be considered in determining whether a landowner has taken an active role in the development of land under a joint venture and is deemed to be engaged in the business of land development. This includes the extent of influence the landowner has over project planning, hiring of contractors, marketing activities, setting the sales price of development units, or the existence of trademarks.
PR 10/2022 Reinvestment Allowance Part I (Manufacturing Activity) & PR 11/2022 Reinvestment Allowance Part II (Agricultural and Integrated Activities)	The updates in these PRs are to incorporate the special Reinvestment Allowance incentives announced under the PENJANA initiative in 2020. Illustration for determining the floor area for the factory expansion that qualifies for the Reinvestment Allowance, including whether the area used as warehouse space exceeds 10 percent of the total expanded area. The special Reinvestment Allowance under PENJANA, which runs from YA 2020 through YA 2024, is only applicable to taxpayers whose 15-year Reinvestment Allowance claim period and/or 3-year additional Reinvestment Allowance period from YA 2016 through YA 2018 has expired. The unused special Reinvestment Allowance under PENJANA can only be carried forward for up to 7 years after the end of the claim period for the special Reinvestment Allowance under PENJANA.
PR 12/2022 Commercialization of Public Resource-Based Research & Development Findings (Part I - Tax Incentive for Investor Company)	PR 12/2022 provides guidance on the tax incentive available to a company that invests in its related company for the sole purpose of financing the commercialization of public resource-based research and development (“R&D”) findings in Malaysia.
PR 13/2022 Commercialization of Public Resource-Based Research & Development Findings (Part II - Tax Incentive for Eligible Company)	PR 13/2022 provides guidance on the tax incentive available to a company (where its holding company has made investments) for the purpose of financing commercialization of public resource-based R&D findings in Malaysia.

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