Forwarding Enquiry: Platform for Entrepreneurial skill

Hi, 

With regards to MaGIC initiative, we have described about MaGIC roles here.

With regards to MaGIC Central, we have described about it here. 

We are getting MaGIC partner agencies to answer about angel investor.

Best regards.

The Angel Tax Incentive Programme which was announced during last year budget aimed at providing tax incentive to the Angel Investor who have invested in the certified technology-based startups in Malaysia. Often, this technology based startups faced variety of challenges in obtaining funding to fund their business. Conservatively, they rely too much on the Government grants which are now shrinking and they also find it very difficult for them to obtain financing from conservative financial institutions like commercial banks, where those institutions require a collateral in which most of the times the startups have none. In order to bridge the funding gap, Cradle Fund Sdn Bhd has been actively lobbied for an incentive in the form of tax deduction to be given to the Angel Investor who have invested in this startups.

In the Angel Tax Incentive Programme, prospective Angel Investor has to be accredited by the Malaysian Business Angel Network (“MBAN”) as an accredited Angel Investor. The Eligibility Criteria to be accredited Angel Investor by MBAN shall be as follows;

• You must be a tax resident in Malaysia;

Note: For further reference on the definition of a tax resident, please refer to Section 7 of the Income Tax Act 1967.

You are either considered a High Net Worth Individual or High Income Earner, according to the following criteria:

• 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– A gross total annual income of not less than RM180,000 in the preceding twelve (12) months; or jointly with one’s spouse, a gross combined total annual income of RM250,000 in the preceding twelve (12) months.

Once you have been accredited as an Angel Investor by MBAN, you are now free to make investment in any certified Investee Company. Kindly note that in order for your investment to be eligible for the tax deduction under the Angel Tax Incentive Programme, you must make an investment in the certified Investee Company (Technology-based startups that has been certified by the Angel Tax Incentive Office of Cradle Fund Sdn Bhd as an Investee Company under the Angel Tax Incentive Programme). The following shall be the Investment eligibility criteria;

• Investment must be made into a certified Investee Company;

• The Angel Investor shall not have any immediate related connection with the Investee Company (Parent, Spouse, Children, Sibling, Grandparent and Grandchildren);

• To be eligible for the tax deduction, the Investor shall hold the shares in the Company for a period of two years prior to claiming the tax deduction (simply mean, that the Angel Investor shall not dispose of the shares within the period of two years after the Investment);

• The Angel Investor shall not hold more than thirty percent (30%) of the total issued and paid up capital of the Investee Company. If there is more than one Angel Investor, cumulatively, the percentage held by the Angel Investors shall not exceed 30%.

• Minimum amount of Investment eligible for the tax deduction shall be RM5,000 and maximum RM500,000.00;

• The Investment shall be paid in full and in cash;

• The issuance of shares and the amount of Investment should be reflected in the Shareholders Agreement entered into by the Investee Company, the Promoter and the Investor;

• The Instrument for the investment (to be eligible for the tax deduction) shall be in the form of Ordinary Shares only.

Once your Investment satisfy all the eligibility criteria, we will recommend your Investment to be approved by the Ministry of Finance for final approval. Once approved, your investment will then be eligible for the tax deduction.

As for the tax deduction, the deduction will be equivalent to the amount of investment made in the Investee Company, for example, if you have invested RM250,000 in the Investee Company, after two(2) years of your shareholding, you will then be eligible to deduct RM250,000 from your aggregate income in that particular year of assessment. For the avoidance of doubt or if you need any further clarification, you can always have a look at the tax simulation in our website at (http://www.cradle.com.my/tax-calsim/). Kindly also note that, in the event the investment exceeds the aggregate income of the angel investor for that year of assessment, any excess amount 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 years of assessment. For more info regarding the angel tax incentive, visit the website http://www.cradle.com.my/angel-tax-incentive/ .