ANGEL TAX INCENTIVE
The Angel Tax Incentive is designed to bridge the early stage investment gap by encouraging qualified individual investors to invest in early stage technology start-ups in Malaysia, to boost the growth of start-ups. The Angel Tax Incentive is administered by the Angel Tax Incentive Office (ATIO), a unit under Cradle Fund Sdn Bhd (Cradle).
ATIO’s role is to ensure that start-up companies in the technology space seeking investments from accredited angel investors are eligible and that investments made into these companies are genuine.
criteria
- Accredited angel investors who invested in a certified technology based start-ups (Investee Company)
- There must be NO familial ties between angel investor and investee
- Accredited angel investor must hold investment for a period of two years before claiming for tax exemption:
- Year 1 – Invest
- Year 2 – Claim tax deduction (during filing of tax returns for year 2)
- Accredited angel investors must hold not more than 30% of the issued of shared capital of the investee company.
- Investments below RM5,000 are not eligible for the tax incentive. Claims can only be made up to the
maximum of RM500,000. - All investment must be made in cash, in full and not in kind and there must be no obligation by the
investee to pay back angel investors - Shareholding must be reflected in the Shareholders’ agreement or any other relevant documents
acceptable at Cradle’s discretion - Share issued to the accredited angel investor must be in the form of ordinary shares only
Cradle programmes provides funding for your business
Investments in excess RM500,000 p.a will not be refunded to the angel investor or be available as a credit to set off his liability for that year of assessment or any subsequent of assessment.
FREQUENTLY ASKED QUESTIONS
application
Investee companies must follow these steps for the investor to be eligible for tax incentive.
- Application form (Form ATI-2) is available HERE. Print and complete.
- Prepare the following documents:
- Accreditation letter from the Malaysian Business Angel Network (MBAN) at mban.com.my
- Company’s Bank Statement
- Financial Statement (audited & draft)
- Shareholder’s Agreement and Term Sheet
- Form 24 (latest)
- Form 32A (if necessary)
- Form 49
- Submit the form and all documents to the MBAN Secretariat at Cradle.
- Processing fee of RM800 is to be made to Cradle Fund Sdn Bhd.
- Processing will take 25 calendar days from the date of complete submission.
- Applicants will receive a letter of approval for the investment from the Ministry of Finance.
Investors must follow these steps to be an accredited member of Malaysian Business Angel Network (MBAN).
- Application form is HERE. Print and complete.
- Prepare supporting documents:
- High net worth individual: Bank’s credit report within 3 months from the date of submission. A copy of NRIC for Angel applicant.
- High income individual: EA form and/or the latest income tax return that has been filed with Lembaga Hasil Dalam Negeri Malaysia. A copy of NRIC for Angel applicant.
- Submit the form and all documents to the MBAN Secretariat at Cradle.
- Membership fee of RM800 is to be made to Cradle Fund Sdn Bhd.
- Accreditation process will take 21 calendar days from the date of complete submission.
- Accreditation letter and certificate of membership for MBAN will be posted once it is ready.
about
- Tax Resident in Malaysia You must be a tax resident in Malaysia.
- High Income Earner Individual: RM 180,000, or combined: RM 250,000 (With spouse).
- High Net Worth Total wealth or net personal assets of RM3 million and above.
- Accreditation Be an accredited angel and member of the Malaysian Business Angel Network (MBAN). Accreditation and membership are valid for two years. Renewal of membership for subsequent two years will cost RM500.
- Domain Expertise Domain expertise or management experience of at least 5 years and ideally a member of an angel club.
Angel Tax Incentive is a new initiative approved by the Government to encourage more early stage investments by the private sector. This incentive hopes to reduce the risks usually associated with early stage investments by giving back in the form of tax exemption to the investors.
Angel Tax Incentive is administered by the Angel Tax Incentive Office (ATIO) a unit under Cradle Fund Sdn Bhd (Cradle) under the auspices of the Ministry of Finance (MoF).
The Angel Tax Incentive is designed to encourage more angel investments from the private sector into early stage companies in technology space. As such, ATIO’s role is to ensure that start-ups seeking investments from accredited angel investors are eligible and that investments made into these companies are genuine.
The investee companies will first have to apply with ATIO to receive qualification for investment under Angel Tax Incentive where they can then obtain a letter to present it to the accredited angel investors. ATIO will then submit all investment related documentations to MoF for approval & endorsement after the investment takes place.
The Malaysian Business Angel Network (MBAN) will accredit angel investors in Malaysia.
Malaysian Business Angel Network or better known as MBAN is a body that functions like a trade organisation, driving regional and international linkages between angel investors. MBAN is responsible for the accreditation of individual angel investors and angel investor clubs, creating awareness and training for investors, and monitoring angel investment statistics in Malaysia.Cradle on the other hand, serves as the interim secretariat for MBAN. The network is managed by a pro-tem committee comprising of various government agencies and angel groups including Angelsden, Virtuous Investment Circle (ViC), Pikom Angels Chapter and AIPO Business Angels Club.
ATIO works closely with MBAN. MBAN, representing the private sector, will accredit the angel investors, whilst ATIO, representing the public sector, will provide qualification to the start-ups and validate the investments into these companies.
Angel Tax Incentive’s investment focus is in diverse areas of high growth technology industries with innovation including the following:
- Advanced electronics and information technology;
- Telecommunications;
- Equipment/instrumentation, automation and flexible manufacturing systems;
- Healthcare;
- Electro-optics, non-linear optics and optoelectronics;
- Advanced materials;
- Transportation;
- Value-add services; and
- Emerging technologies
investor
If you meet the following criteria, you are then eligible to become an investor by obtaining the accreditation certification from Cradle.
- Must be a tax resident in Malaysia;
- Either considered a High Net Worth Individual or High Income Earner
- High Net Worth Individual – Total wealth or net personal assets of RM3 million and above or its equivalent in foreign currencies; OR
- High Income Earner – The gross annual income of not less than RM180,000.00 in the preceding twelve (12) months; or jointly with his or her spouse, with gross annual income of RM250,000.00 in the preceding twelve (12) months.
To apply as an angel investor, you will need to fill in the accreditation form provided by MBAN (for the time being, Cradle will act as the interim secretariat for MBAN until further notice).
Yes, you can invest in more than one company per year but the maximum investment approvals per annum is five (5) only. The minimum amount per investment is RM5,000.00 and up to a maximum of RM500,000 investment per annum in total.
The investors must hold shares in the invested company for a period of two years prior to claiming the exemption. If the shares are disposed before the two years, the investment will be considered void for the tax incentive purposes.The investment is qualified for tax relief on the third (3rd) year of his/her shareholding. For example, if an investment is made in the year 2013, the investor will be able to claim for tax exemption when he or she files for their tax returns in the year 2015.
The amount qualified for deduction is equivalent to the value of the investment made to the investee company. The aggregate income should comprise from all sources including business income for the basis period of year assessment.
No. All investments must be made in cash
In order for the investors to qualify for the tax relief, he/she must obtained accreditation from MBAN before making any sort of investments to the investee companies. If the investors did not obtain the accreditation from MBAN, the investors will not enjoy the tax exemption for any investment that he/she has made.
Yes. The company must own the IP and / or have the rights to the IP.
investee
Investee companies must follow these steps for the investor to be eligible for tax incentive.
- Application form (Form ATI-2) is available HERE. Print and complete.
- Prepare the following documents:
- Accreditation letter from the Malaysian Business Angel Network (MBAN) at mban.com.my
- Company’s Bank Statement
- Financial Statement (audited & draft)
- Shareholder’s Agreement and Term Sheet
- Form 24 (latest)
- Form 32A (if necessary)
- Form 49
- Submit the form and all documents to the MBAN Secretariat at Cradle.
- Processing fee of RM800 is to be made to Cradle Fund Sdn Bhd.
- Processing will take 25 calendar days from the date of complete submission.
- Applicants will receive a letter of approval for the investment from the Ministry of Finance.
In order for a start-up to be eligible as an Investee Company for the Angel Tax Incentive, they must be certified as an Investee Company by the Angel Tax Incentive Office at Cradle. The eligibility criteria for Investee Company are as follows:
- Malaysia individual(s) must hold at least 51% of equity interest in the company;
- The Company must be a private company limited by shares, incorporated in Malaysia and is a resident in Malaysia.
- The Company’s core business, product or service must fall into one of the following focus areas as approved by the Ministry of Finance, Malaysia:
- Advanced electronics and information technology;
- Telecommunications;
- Equipment/instrumentation, automation and flexible manufacturing systems;
- Healthcare;
- Electro-optics, non-linear optics and optoelectronics;
- Advanced materials;
- Transportation;
- Value-add services; and
- Emerging technologies
- The company’s cumulative revenue must be less than RM5 million and has been in operation for three (3) years or less (based on the latest financial year result upon application); and
- The investee company must not be wound-up or and/or liquidated.
Investee Company refers to technology based start-up who is looking for investment/funding from the private sector.
As below:
- Minimum 51% Malaysian owned;
- Must be a Sdn Bhd company and incorporated in Malaysia;
- Company’s core business must be in qualifying activities as approved by the MoF;
- Cumulative revenue less than RM5 million and has been in operation for 3 years or less (based on the latest financial year result upon application); and
- The company must not be wind-up and/or in liquidation.
The qualifying period to apply as an investee company starts from 1 January, 2013 until further notice.
The validity period is two (2) years only.
The ideal situation would be that the investee company must already be in talks/discussion with the potential investors before applying to Cradle. The tax incentive would be an enticing motivation for the angel investors to make an investment into the investee company.
Yes
investment
The investment eligibility criteria consist of the following:
- Investment must be made into a qualified investee companies/start-ups;
- Must not be an immediate family member i.e. spouses, children, parent and grandparent;
- Shall be for the sole purpose of financing the activities as approved by MoF;
- Must hold the investment for a period of two (2) years prior to claiming the exemption;
- Is not disposed of within two (2) years from the date the investment is made;
- The angel investor must not hold more than thirty (30) percent of the total equity of the investee company;
- Minimum amount of RM5,000.00 per investment and up to a maximum of RM5000,000.00 investment per annum in total;
- Shall be a maximum of five (5) investment approvals per annum;
- Investments made are to be paid in cash and in full and not in-kind;
- New shares issued and reflected in the Shareholders’ Agreement;
- The shares issued to the angel investors must be in the form of ordinary shares only. If preference shares are issued, it cannot be converted into a loan or call option, but can only be converted into ordinary shares.
The angel tax incentive is open for qualifying investments made from 1 January, 2013 to 31 December, 2017. The qualified investment must be made by qualified investors into a qualified investee companies. The investment made must be approved and endorsed by the Ministry of Finance.
It starts on the date the fresh cash injection is made into the company.
The risks are to be borne by both the investors and the investee company. However, the tax relief is still applicable for the investors on the 3rd year of his/her shareholding.
The maximum share percentage in every investment is thirty (30) percent of the total equity of the investee company.
The minimum investment amount is RM5,000.00 each up to a maximum of RM500,000.00 per annum in total.
Yes, the investee company must have business activities in Malaysia for at least two (2) years after the investment is made.
