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  • Acquisition of Foreign Owned Company

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    Syakira Harith
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    The document outlines an incentive for Malaysian companies to acquire foreign owned companies. It provides that a locally owned Malaysian company can deduct 20% of the acquisition costs of a foreign owned company annually over 5 years from their business income. To qualify, the foreign company must use high technology, the local company must acquire at least 51% shares, and the local company's shareholders must be at least 60% Malaysian citizens (or 50% if a public company). If the local company disposes of the shares within 5 years, the tax deductions must be added back as income.

    Original Description:

    P6 MYS ACCA

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    The document outlines an incentive for Malaysian companies to acquire foreign owned companies. It provides that a locally owned Malaysian company can deduct 20% of the acquisition costs of a foreign owned company annually over 5 years from their business income. To qualify, the foreign company must use high technology, the local company must acquire at least 51% shares, and the local company's shareholders must be at least 60% Malaysian citizens (or 50% if a public company). If the local company disposes of the shares within 5 years, the tax deductions must be added back as income.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
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    34 views2 pages

    Acquisition of Foreign Owned Company

    Uploaded by

    Syakira Harith
    The document outlines an incentive for Malaysian companies to acquire foreign owned companies. It provides that a locally owned Malaysian company can deduct 20% of the acquisition costs of a foreign owned company annually over 5 years from their business income. To qualify, the foreign company must use high technology, the local company must acquire at least 51% shares, and the local company's shareholders must be at least 60% Malaysian citizens (or 50% if a public company). If the local company disposes of the shares within 5 years, the tax deductions must be added back as income.

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    © All Rights Reserved
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    Incentive for Acquisition of Foreign Owned Company

    Foreign owned company is a company :- a) Located outside Malaysia


    b) Wholly owned directly or indirectly by non-
    Malaysian citizen
    c) Which owned and uses high technology in the
    manufacturing activity or provision of selected
    services outside Malaysia

    Investor company is given the incentive of revenue deduction over 5 years on the cost of
    investment in foreign owned company (MIDA will verify this)

    Investor company must be:- a) Locally owned company


    b) Incorporated under the Companies Act
    1965
    c) Resident in Malaysia
    d) Carrying on the business of-
     Manufacturing of product
     The provision of selected services
    approved by Minister of Finance

    Shareholding of the investor company has a) Non-listed company


    to be: At least 60% of the shares owned by
    Malaysian citizens

    b) Listed company
    On the first day of listing on stock
    exchange, at least 60% of ordinary shares
    are owned by Malaysian citizens,
    thereafter at least 50%

    Criteria to be complied with:


    a) MIDA
    b) Cash acquisition of at least 51% paid up capital of the foreign owned company
    c) Uses the high technology acquired from the foreign company in:
    i) The production or improvement of material, devices, products, produce or
    processes
    ii) The improvement of processing or quality of the selected services
    The locally owned company must not previously enjoyed pioneer status or investment tax
    allowance except high technology company incentives under the Promotion of Investment Act
    1986. In the case of pioneer company, the incentive on acquisition of foreign owned company will
    be suspended and be deducted in the first YA of the post pioneer period.

    Consideration
    of shares paid including professional fees paid to
    Acquisition bankers, valuers, auditors,
    cost accountants, tax agents,
    Incidental cost
    consultants, or legal advisers; cost
    of transfers including stamp duties;
    related travelling and
    accommodation expenses incurred
    for the purpose of the acquisition.

    Deduction would be 20% of the cost of investment for each year for a period of 5 YAs against
    business income of the investor company.

    Deduction

    Amount is 1st
    20% of cost of Each year for a Against business deducted in the YA
    investment period of 5 YAs income which full
    settlement fell

    Withdrawal of incentive
    Incentive is in the form of revenue deduction on the cost of investment over a period of 5 years.
    Where the shares are disposed of within 5 years from the date of completion, the deduction
    previously claimed shall be gross income in the YA of disposal.
    Mutually exclusive with:
     Reinvestment allowance or investment allowance
     s 127 income tax exemption
     Specific deduction provided under s 154
     The foreign owned company is a related company of a locally owned company. Related
    company means companies having at least 20% direct or indirect shareholding between
    them.

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