Authored by Dylan Chong. You can email him at

Tax Incentive for Flower Grower

Flower exporter may enjoy tax incentive if they have fulfilled the criteria under the increased export allowance 1999 Rules. A tax incentive allows for the business to claim for allowance for them to be able to export more produce to the oversea market and as a result contributing more to the country’s revenue.

However, the recent Court of Appeal’s case in Classic Japan (M) Sdn Bhd (09 March 2022) has decided that flower exporter has to grow, cultivate and plant their own fresh flower to be eligible for the increased export incentive.

Brief Facts – Classic Japan (M) Sdn Bhd – Court of Appeal

A flower exporter (respondent) has been exporting fresh flowers to oversea market since year 2006. The respondent bought fresh flowers from 7 contract growers in Cameron Highlands where agreements were entered with them to supply fresh flowers to the respondent. The respondent’s increased export increased from 2007 to 2010 respectively at the figure of RM4.7 million, RM2.9 million, RM2.2million and RM4.4 million.

The Inland Revenue Board (IRB) had conducted an audit over the respondent’s business and disallowed on the respondent’s claim on the increased tax allowance on its fresh flower exported to oversea market. IRB argued that respondent did not produce the fresh flower itself, thereby they did not fulfill the criteria of “engaged in agriculture”.

Argument by the Respondent – Classic Japan (M) Sdn Bhd – Court of Appeal

The respondent claimed that it has fulfilled the criteria under the increased export allowance under the 1999 Rules.

Argument by Appellant (Inland Revenue Board) – Classic Japan (M) Sdn Bhd – Court of Appeal

The IRB contended that for the respondent to be qualified to claim the increased exports allowance, the agricultural products exported by the respondent must be produced by the respondent.

The IRB also contended that the phrase “engage in agriculture” brings the meaning of producing the agriculture product from the activity of farming such as crop selection, land preparation, seed selection, irrigation, fertilizers, and harvesting to produce the agriculture product.

Decision – Classic Japan (M) Sdn Bhd – Court of Appeal

The phrase engaged in agriculture clearly showed that it requires direct involvement such as planting the said flowers. This decision overturned the decision in the High Court.

Authored by Dylan Chong, Partner from JR Ng & Chin who specialises in tax appeal (Income Tax, Real Property Gains Tax, Service and Sales Tax, Custom Duties) and tax planning for companies’ directors and individuals. You may contact him at

The contents of this publication are given as general information for reference purposes only and do not constitute the firm’s legal advice. For any specific matter or legal issue, please do not rely on this publication but make sure to consult a legal adviser. We would be delighted to answer your questions, if any.

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