Carbon Credit Utilisation

Expansion of Carbon Utilisation Activities and Tax Incentives for CCUS in Malaysia

The Malaysian government has unveiled significant initiatives to boost Carbon Capture, Utilisation, and Storage (CCUS) activities under Budget 2025. These ESG efforts underscore the nation’s commitment to reducing carbon dioxide emissions while fostering technological innovation and industrial growth. By addressing the pressing challenge of climate change, Malaysia is poised to play a pivotal role in advancing environmental sustainability and enhancing economic opportunities.

But what exactly is CCUS? And how does it benefit businesses while protecting the environment?

What is CCUS?

CCUS, short for Carbon Capture, Utilisation, and Storage, is an innovative technology designed to prevent carbon dioxide (CO₂) emissions from industrial sources from entering the atmosphere. The process involves capturing CO₂ emissions and then either reusing them as part of downstream products or storing them securely in large-scale, long-term storage facilities.

This technology is particularly valuable in industrial applications where greenhouse gas emissions are challenging to eliminate altogether. By integrating CCUS into their operations, businesses can mitigate their environmental impact while contributing to a low-carbon economy.

Expansion of Carbon Utilisation Activities

As part of the Budget 2025, Malaysia has emphasized the expansion of carbon utilisation activities. These activities aim to transform captured CO₂ into valuable downstream products, creating opportunities for businesses to innovate and diversify their offerings. This initiative aligns with Malaysia’s Environmental, Social, and Governance (ESG) objectives, ensuring economic growth while safeguarding the environment.

To encourage greater participation in CCUS, the government is offering comprehensive tax incentives to businesses involved in these activities. Whether you’re implementing CCUS in-house, providing CCS services, or using these services, there’s something beneficial for everyone.

Tax Incentives for CCUS Activities

The government has introduced a range of incentives tailored to support businesses involved in CCUS activities. Here’s a breakdown of what’s available:

1. For Companies Undertaking In-House CCS Activities

  • Investment Tax Allowance (ITA): Receive 100% of qualifying capital expenditure (QCE) to set off against 100% of statutory income for up to 10 years.
  • Full import duty and sales tax exemption on equipment used for CCS technology.
  • Tax deduction for eligible pre-commencement expenses within five years from the start of operations.

2. For Companies Undertaking CCS Services

  • Option 1: ITA (100% QCE) to offset 100% of statutory income for up to 10 years.
  • Option 2: Tax exemption of 70% on statutory income for up to 10 years.
  • Full import duty and sales tax exemption on equipment used for CCS technology.

3. For Companies Using CCS Services

  • Tax deductions on fees incurred for using CCS services.

Application Period

Eligible businesses must submit their applications between 25 February 2023 and 31 December 2027 to take advantage of these tax incentives.

Existing Tax Incentives for Carbon Capture Storage

The incentives introduced in Budget 2025 complement the existing tax benefits for carbon capture storage (CCS) activities, reinforcing the government’s long-term commitment to promoting sustainable and innovative practices in Malaysia.

Why Do These Incentives Matter?

These incentives not only make sustainable practices more affordable for businesses but also position Malaysia as a regional leader in green innovation. By encouraging businesses to adopt CCUS technologies, the government is fostering a culture of environmental responsibility while stimulating industry growth. The result? A cleaner Malaysia, thriving businesses, and a step closer to Malaysia’s ESG goals.

The Road Ahead

The expansion of carbon utilisation activities and the introduction of tax incentives for CCUS activities signal a significant shift towards a greener future for Malaysia. If your business is involved in emitting or managing carbon emissions, now is the perfect time to explore these opportunities. With substantial financial support, you can enhance operational efficiency, meet ESG goals, and contribute to a more sustainable Malaysia.

Are you ready to join the movement? The clock is ticking, so make sure to submit your applications before 31 December 2027 to leverage these incentives!

Want to know more about Malaysia CCUS ? A good reference would be MIDA’s website .

For further enquiries and interested parties, please get in touch with the Green Technology Division of MIDA at https://www.mida.gov.my/staffdirectory/green-technology-division/

author avatar
Tan Lee Ling
Tax Consultant by training in the Big Four and trained several years with Dr Choong. Being a Chartered Accountant with a law degree. Specialised in compliance, tax planning and tax investigation in her early years. Being in tax for 12 years, to her Tax is like a tree, it is the life force for the country, tax is dynamic, continuously changing and growing. Lee Ling is the conduit in charge of not just sharing these tax changes, also to bring Dr Choong's brilliant tax planning to the tax professionals and business community.
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