Incentive for green buildings

According to Green Building Council of South Africa, green building incorporates designs,
construction and operational practices that significantly reduce or eliminate the negative impact of
development and people. Green building are energy efficient, resource efficient and environmentally
responsible. In short, green buildings are environmentally and ecological friendly.
Green building ratings development has started with BREEAM (UK, 1990) in the early of
1990s and followed by a better known ones, LEED (USA, 1996) (Tan 2009). Green Building Index
(GBI) was introduced on 21 May 2009 in Malaysia by the Association of Consulting Engineers
Malaysia (ACEM) and the Board of Architects Malaysia (PAM). It served as an initiative to expand
the adaptation of green technology in the construction of buildings which would eventually address
increasing energy costs and changing world climate.
In order to be awarded with GBI certificate, the buildings have to meet the six keys criteria
namely, energy efficiency; indoor environmental quality; sustainable site planning and management;
material and resources; water efficiency; and innovation. In line with the introduction of GBI, the
government in its budget 2010 had introduced tax incentive for GBI-certified buildings in order to
encourage the development of green buildings which are;

100 % Income tax exemption to the additional capital expenditures incurred by the building

owners who have GBI certificates

Stamp duty exemption on instruments of transfer of ownership for buyers who purchased
buildings with GBI certificates.

The exemptions are effective from 24 October 2009 to 31 December 2014 which means the
owners have to obtain the GBI certificate and the purchasers have to execute the transaction within
the said period. However, this incentive is not applicable to a person who has incurred qualifying
expenditure on a building, plant or machinery for a basis period for a YA where during that basis
period the person has claimed in respect of that building, plant, or machinery under the exemption
stated in Income Tax (Exemption) (No.5) Order 2011, PU(A) 325/11.
There are a few tax issues relating to this incentive. The main one being the scope of GBI
tax incentive is too narrow as the incentive is only applicable to those who construct as well as own
green buildings. Property developers are being left out (Eco-Business 2010). Moreover, according
to Journal of Accountancy August 1, 2009, some buildings are owned by government agencies
which of course they do not pay taxes. Hence, there was a worry that the effect of the incentive
would be significantly reduced since it was not applicable to the said buildings owners. To counter
the problem, the United States Congress made out of norm decision to give green light to the
building designers to take the deduction although they have own no ownership in the property.
Hence, Malaysian government has to take this issue into consideration in order for the purpose of
GBI to be achieved holistically.

Investment Incentive for Tourism Industry

Tourism industry has being one of the important sectors in Malaysia that significantly
contributed to our economic growth over the years. Realizing the importance of this sector, our
government has provided investment incentives in order to boost the foreign direct investment and
also the domestic investment. Generally, there are two investment incentives to opt for that are
related to tourism industry namely pioneer status (PS) and investment tax allowance (ITA).
A 5 years exemption of 70% of statutory income from the payment of income tax is given to
the company which received PS. This takes effect from the commencement of its production day
which is announced by the Minister of International Trade and Industry (MITI). In addition,
companies situated in Sabah, Sarawak, Labuan and the designated Eastern Corridor of
Peninsular Malaysia will be given an exemption of 100% of their statutory income during the 5 years
exemption period.
Meanwhile, ITA is a substitute for PS. The ITA claimed is 60% of the qualifying capital
expenditure incurred within 5 years. Later, it has to be set off against 70% of the statutory income in
order for the set off to be credited into exempt income account. Any untilised allowance can be
carried forward to subsequent years until the whole amount has been used up. The remaining 30%
of the statutory income will be taxed at prevailing corporate tax rate. In addition, companies situated
in Sarawak, Sabah, Labuan and the designated Eastern Corridor of Peninsular Malaysia received
a 100% allowance of the qualifying capital expenditure incurred.
Besides, there are additional incentives and tax exemptions for the tourism industry namely
double deduction on approved trade fairs, double deduction on overseas promotion, tax exemption
for promoting international conferences and trade exhibition; tax exemption for tour operators,
incentive for car rental operators and deduction on cultural performances.
There are a few developments of incentives for tourism industry. For instance, the
government has been keep revising the tax exemption for the tour operators. From YA 2007 to YA
2011, tour operators are eligible for a 100% income tax exemption on their statutory income derived
from the business of operating domestic tour packages participated in by a minimum of 500 foreign
tourists per year or 1,200 domestic tourists per year. Meanwhile, in budget 2013, tour operators still
enjoyed the same benefit but the required number of tourist participation increased where there
should be a minimum of 750 foreign tourists per year or 1500 domestic tourists per year. The
proposal is effective from YA 2013 to YA 2015. Currently, in budget 2016, our government had
announced an extension of incentives for tour operating companies for another three years up to YA
2018 with the same criteria stated in budget 2013. On top of that, there was an amendment to the
Promotion of Investment Act 1986 (PIA) in 2014. Also, an amendment to Section 29 of Investment

Tax Allowance, Purchase of a building is inserted in Section 29 (7) (iii) where purchase of a
building is now included as part of the definition of capital expenditure for hotel business.

References
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