Government Incentives for PV
RE promotion in Malaysia is based on the Small Renewable energy Power (SREP) programme. Projects developed under the SREP programme are eligible for Pioneer Status (PS) or Investment Tax Allowance (ITA). These incentives have been provided from 2001 but have been enhanced over the years. The government has expanded the scope of RE to include PV generated power and has extended the range of fiscal incentives (in national Budgets for 2008 and 2009) to promote the adoption of GC-BIPV as well as other forms of RE and EE.
Generation of RE for own use such as from PV is now also eligible for ITA under the 2008 Budget.
This means that businesses (classified as syarikat Sdn. Bhd. or syarikat Bhd.) which invest in BIPV for their own use can benefit from Capital Allowance (CA).as well as ITA. This is equivalent to “double tax deduction”. The corporate tax rate is 26% for 2008 and 25% for 2009 and beyond.
In addition, the main PV system products are also eligible for exemption from paying import duty and sales tax as elaborated below. This provision helps to reduce the cost of PV systems for prospective non-business investors.
Current PS and ITA incentives, in brief, are:
For RE to be sold under the SREP scheme:
PS - 100% of investment against 100% of statutory income (taxable income) for 10 years, or
ITA – 100% against 100% of statutory income (taxable income) for 5 years.
For RE to be used for own consumption:
ITA – 100% against 100% of statutory income (taxable income) for 5 years.
Import Duty (I-D) and Sales Tax (S-T) exemption for “Registered Third Party Distributors (TPD)”.
Under Budget 2009 “Registered Third Party Distributors (TPDs)” as well as manufacturers of the relevant products, whether for RE or EE can seek exemption from payment of I-D or S-T as appropriate (Please refer to Appendix 18 below for details for solar RE). ST will register the qualified TPDs and manufacturers according to specific qualification criteria as follows:
Manufacturers and importers of solar products (PV or thermal) acn apply to PTM (MBIPV) to register for eligibility to seek such exemption. Approval for exemption is based on satisfying the following criteria:
- For local manufacturers:
-
Company business profile and validity as an on-going business,
-
Manufacturing License for the range of relevant products,
-
The product manufacturing standards - Malaysian Standards (MS) or equivalent international standards such as IEC for each product category (model, rating, etc.),
-
Product or performance validation from a recognized institution or laboratory.
- For importers:
-
Company business profile and validity as an on-going business,
-
Certificate (or letter) as “Authorised Agent” from the product supplier or principal,
-
The product manufacturing standards - Malaysian Standards (MS) or equivalent international standards such as IEC, for each product category (model, rating, etc.),
-
Product or performance validation from a recognized institution or laboratory, particularly for EE products to demonstrate the energy efficiency performance of the EE product against its “standard” equivalent.
Applications for import duty and sales tax exemption for solar photovoltaic system equipment and sales tax exemption on the purchase of solar heating system equipment from local manufacturers or TPDs must be submitted to MoF together with ST letter of “validation. Exemptions are given for a period of one year, commencing from the date the application is received.
The government fiscal incentives are in addition to the MBIPV project incentives indicated under the “Market” section of this project.
Sample Calculations for ITA benefits
Extract from the Budget Appendix (Appendix 18 for 2009) detailing the PS and ITA incentives, as well as for I-D and S-T for RE is shown below.
