VC investment tax incentive approved, to be gazetted by year-end, says minister

The tax deduction amount claimable is capped at RM20m a year per company or investor over a 5-year period


THE government has approved the RM20 million income tax exemption incentive proposed in Budget 2018 for investments made in venture capital (VC) funds.

Energy, Science, Technology, Environment and Climate Change Minister Yeo Bee Yin (picture; left) said the tax incentive — which applies to private sector companies and high net worth individuals who invest in VC — will be gazetted by year-end.

The tax deduction amount claimable is capped at RM20 million a year per company or investor over a five-year period.

“We actually wanted to incentivise private investment in VC because we believe there will be greater market access. More expertise and more networks are needed to grow and ensure the increase of the success rates of our start-ups.

“As of now, this incentive will be until 2023 and we will update if there is an extension,” Yeo told reporters after the launch of ScaleUp Malaysia in Kuala Lumpur yesterday.

Companies that wish to invest can put their money into any VC fund and claim the tax allowance from the government after three years of investment, she added.

While the incentive will be gazetted by the end-2019, investors can already begin dispersing the funds.

“They will just have to go through the process and the Securities Commission Malaysia is ready to help even without a gazette,” Yeo said.

Previously, the government had implemented policies such as the Angel Tax Incentive, aimed at encouraging more funding and reducing the administrative requirements for small companies at the start-up stage.

“Having both the Angel Tax Incentive and the corporate investment incentive lightens the burden on the government in continuing to fund the technology sector on its own,” Yeo added.

Under the Ministry of Energy, Science, Technology, Environment and Climate Change’s new policy, more than 50% of research and development (R&D) funds will go towards research conducted in collaboration with industry players.

“If you are from universities or colleges and you want to apply for our ministry’s R&D fund, you must have collaboration with small and medium enterprises or companies to be eligible for the grant.

“Through this, we are gearing towards funds that will impact the market,” Yeo said.

Meanwhile, ScaleUp Malaysia has announced the opening of applications for the inaugural cohort of its accelerator programme.

The programme aims to develop and train 50 scaleups over the next three years, as well as to grow the next generation of entrepreneurs. Cohort 1 of the programme is open for applications from now to Oct 31, 2019.

ScaleUp Malaysia founder and senior partner Dr Sivapalan Vivekarajah said only 10 companies with the potential to scale regionally and grow to be worth at least RM100 million will be selected for participation in each of the five cohorts.

“The programme is structured as a six-month intensive programme which includes classroom-style training, gap analysis, coaching and customised investor readiness boot camp.

“Participants will receive a RM200,000 investment to scale their revenues and growth plans,” he said at the launch yesterday.