Enhancing Social Entrepreneurship in theDigital Age: Legal Framework for Special Tax Treatment for Social Enterprise Business Entity

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Zuhairah Ariff Abd. Ghadas, Rabiatul Adawiyah Binti Mohd. Ariffin, Mohd. Shahrilnizam Md. Radzi


 The quick-moving improvement in the digital economy gives incredible assets to the present social and environmental difficulties. In the midst of thedigital traffic, social enterprises are critical to the economy as it makes the independence of revenue driven organizations and the impetuses of market influences to bear on worldwide social issues such that neither pure capitalism nor pure charity has been able to match.Good tax policies can play an important role in delivering the results that Malaysia has set itself when it comes to digital economy. Tax presents one of the significant issues for social entrepreneurs in operating their business as a social enterprise because operating as business entity imposes them with similar tax treatment to traditional business entities. In Malaysia, social enterprises (SE) which operate via corporate entity are imposed with corporation tax, which is up to 24%. In 2019, Malaysia introduced an accreditation guideline for SE which qualify it for several advantages. Although this is a positive move taken by the government to recognize social enterprises, it is not resolving the issue of taxation for social enterprises as SE still need to pay taxation similar to commercial entities despite that revenue and profit of the businesses are mainly allocated for social good. In developed countries such as in the UK and the USA, there is a special tax scheme/ treatment given to the SE.This article discussed a proposed legal framework for a special tax treatment for social enterprises in Malaysia to encourage more social enterprises businesses practices in this country. Such proposal can be materialized by utilizing the existence Income Tax Act 1967 but with a modification on the tax legal framework for business entities and charitable organizations. Research methodology applied in this paper are the doctrinal and statutory analysis.

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