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The Green Incentive

In an effort to encourage businesses and developers to embrace sustainability and going green, the government has introduced new incentives to provide a conducive building environment for a sustainable economy.

By The iProperty.com News Team on Jul 05, 2017

LEED Gold Certification, Green Star, NatHERS, NABERS, BREEM and CASBEE— these are some of the most trusted sustainable rating systems used by countries around the world. With the continuous growth and development of urban communities, the practice of increasing the efficiency with which buildings use energy, water, materials, and of reducing its impacts on human health and the environment has become increasingly important.

Since the 90s, our urban population has exceeded the rural population. And even though urban centres and cities occupy only 2% of the world’s land area, 50% of the world’s population lives in the urban areas. Von Kok Leong, Immediate Past Chair of the Green Building Index (GBI) Accreditation Panel explains that this becomes a problem when the 2% of the land isn’t ready to receive a huge influx of population and as a result contributes to the increased amount of greenhouse gas emission per capita.

Which is why it is important to develop a sustainable rating system to better regulate the design and construction of new buildings by ensuring that they meet all the criteria of green, sustainable buildings. Modelled after other successful green rating tools around the world, the Green Building Index (GBI) is developed for the purpose of promoting sustainability in the built environment and to raise awareness about our responsibility to the environment.

“We wanted something that is unique to our construction industry so we studied the strengths and weaknesses, our loss and opportunities before coming up with this tool,” shares Leong.

However, it has been estimated that over 70% of the average city’s GHG emissions come from existing and old buildings. In Malaysia, more than 80% of our government buildings exhibit high carbon emission (GBI of 250 kWh/m2/year). This problem can be easily rectified by retrofitting the existing buildings, thus extending their life spans and efficiency, “You don’t have to change the façade of the building, just change parts that can help you become more energy efficient and increase productivity.”

The Economy of Green Buildings

In the initial years, green and sustainable building features were viewed as mere add-ons, hence they used to cost more than the less sustainable alternatives. But as public awareness and demand increases, coupled with several initiatives taken by the government, prices of these materials have become affordable. Developers started getting creative with their designs, finding new ways and alternatives that can be applied to provide environmental and social benefits without necessitating incremental costs such as orientating the building in the right direction to allow in natural light and promote better ventilation. 

In a bid to encourage developers to embrace sustainability and the practice of green building, and limit the amount of human impact on the environment, The Malaysian Investment Development Authority (MIDA) and Malaysian Green Technology Corp in a joint effort have introduced the investment tax allowance (ITA) for the purchase of green technology projects, equipment or assets, and income tax exemption (ITE) for green technology service and system providers.

According to Ir Chen Thiam Leong, Member of the GBI Accreditation Panel, the new incentives will catalyse and strengthen the development of green technology as they cover a broader scope. Through the new tax allowances and exemptions, developers will be encouraged to purchase certified green technology products which in turn can result in significant cost savings for the developer. 

developer. “With ITA, if you spent RM 4.6 million making the building green and made say, RM 10 million (after your income has been derived). Out of that profit amount you are left with 7 million after the adjustments, you can write off the RM4.6 million at one go. But if you have RM 10 million and RM 4.9 million is written off as tax exemption, you still have a surplus of RM 5.1 million which can be carried on to the next year until you finish it,” explains Leong.

To enjoy these tax incentives, all you have to do is register your project with GBI and submit your GBI DA (Design Assessment) or CVA (Completion & Verification Assessment) to MIDA for project approval. Once the conditional approval for ITA has been granted your project will obtain CVA or Green Cost Certificate from GBI. Submit your project along with the Green Cost Cert to MGTC for QE (Qualifying Capex) approval followed by LHDN (enclosing all three approvals) to make your claim.

“Green Cost submission can only be done after the GBI CVA certificate has been obtained and you have complied with 50% of the criteria. Make sure that you get it right and meet the requirement properly otherwise your claim will be rejected,” shares Leong.