Incentives to Spearhead Development

As part of efforts to promote the VC and CVC segments, incentives have been incorporated into various policy measures and guidelines. Recent VC-related capital market measures under the CMP3 include the following:

Revision of the VC/PE framework
  • Additional eligibility tests to encourage pooling by angel investors.
  • Streamlining of registration requirements.
  • Shareholder approval for qualified acquisitions have been reduced to a simple majority.
  • A professional VC/PE background is now deemed eligible experience for SPAC management.

Besides the above, the enhancements to the VC/PE Guidelines in November 2022 target to broaden the investor base and make available more capital, especially for early-stage start-ups, including the following:

  • Augment the pool of eligible investors that can invest in VC and PE funds, with the introduction of a new minimum investment test of RM250,000. This will allow more investors, particularly angel investors, to put their money into VC and PE funds.

  • Simplify the registration requirements for VC and PE firms, to encourage the setting up of new local and foreign firms in Malaysia, and to deepen the professional VC and PE talent pool.
  • Require registration only for companies that undertake fund management activities vis-à-vis VC and PE funds. As such, entities that are strictly fund vehicles will not need to be registered under the VC/PE Guidelines.

  • Remove the 50-investor limit on VC and PE funds, to cater to the changing requirements of the industry and the increasing popularity of other structures such as limited partnerships.

Over the next couple of years, the SC will focus on policy enhancement, capacity-building programmes, as well as stakeholder engagement and awareness to continue developing this segment. In the meantime, VC investors (or VCCs) are also eligible for tax incentives when they invest in VC entities or start-ups. These include the following:

Corporate VC Tax Incentive-02

If a VCC suffers losses from the disposal of shares in a VC investee company during the tax-exempt period, such losses can be carried forward to the post-tax-exempt period. Nonetheless, these incentives entail certain requirements before they can be enjoyed. For instance, applicants must obtain certification from the SC to ascertain that the qualifying conditions of the incentives have been fulfilled. The certification process is outlined in the VC Tax Incentive Guidelines and the Application Kit.  In a recent development, the SC will also look at promoting corporate venturing through a more facilitative tax and incentives policies including enabling tax losses from corporate venturing to be utilised by the parent company to set off other sustainable investments within the group.