[Incentives for Manufacturing Sector][Incentives for Agricultural Sector]

• Agro-based cooperative societies and associations
• Sole proprietorships and partnerships engaged in agriculture.
Companies producing promoted products or engaged in promoted activities (See List of Promoted Activities and Products - General) the agricultural sector qualify for the following incentives:

2.1 Main Incentives for the Agricultural Sector

(i) Pioneer Status
As in the manufacturing sector, companies producing promoted products or engaged in promoted activities are eligible for Pioneer Status.

A Pioneer Status company enjoys a partial exemption from income tax. It pays tax on 30% of its statutory income for five years, commencing from its Production Day (defined as the day of first sale of the agriculture produce).

Unabsorbed capital allowances as well as accumulated losses incurred during the pioneer period can be carried forward and deducted from the post pioneer income of the company.

Applications should be submitted to MIDA.

(ii) Investment Tax Allowance
As an alternative to Pioneer Status, companies producing promoted products or engaged in promoted activities can apply for Investment Tax Allowance (ITA). A company granted ITA is eligible for an allowance of 60% on its qualifying capital expenditure incurred within five years from the date the first qualifying capital expenditure is incurred.

Companies can offset this allowance against 70% of their statutory income for each year of assessment. Any unutilised allowances can be carried forward to subsequent years until fully utilised. The remaining 30% of the statutory income is taxed at the prevailing company tax rate.

Applications should be submitted to MIDA.

To increase the benefits to agricultural projects, qualifying capital expenditure is defined to include expenditure incurred on:

• Clearing and preparation of land
• Planting of crops
• Breeder stock for aquaculture
• Breeder stock for animal farming
• Provision of plant and machinery used in Malaysia for the purpose of crop cultivation, animal farming, aquaculture, inland fishing or deep-sea fishing, and other agricultural or pastoral pursuits
• Construction of access roads including bridges, construction or purchase of buildings (including those provided for the welfare of people or as living accommodation), and structural improvements on land or other structures which are used for crop cultivation, animal farming, aquaculture, inland fishing and other agricultural or pastoral pursuits. Such roads, bridges, buildings, structural improvements on land and other structures should be on land forming part of the land used for the purpose of such crop cultivation, animal farming, aquaculture, inland fishing and other agricultural or pastoral pursuits
In view of the time lag between start-up and processing of the produce, integrated agricultural projects qualify for ITA for an additional five years for expenditure incurred for processing or manufacturing operations.

Applications should be submitted to MIDA.

(iii) Incentives for Food Production
Specific incentives are introduced to attract investment into food projects both at the farm level as well as at the production/processing level. These will enhance the supply of the raw material for the food processing sector and thus reducing reliance on imports of such raw material.

Tax incentives are given to both company which invests in a subsidiary company engaged in an approved food production project and its subsidiary company undertaking the food production activities. The tax incentives given are as follows:

a. A company which invests in its subsidiary company engaged in food production activities can be considered for tax deduction equivalent to the amount of investment made in that subsidiary; and
b. The subsidiary company undertaking food production activities can be considered for a full tax exemption on its statutory income for 10 years of assessment for new project or 5 years of assessment for expansion project. The exemption period commences from the first year the company derived statutory income, in which;

• losses incurred before the exemption period are allowed to be brought forward after the exemption period;

• losses incurred during the exemption period are also allowed to be brought forward after the exemption period.
The incentives can be granted on the following conditions:
• the equity condition for a company which invests at least 70% in the subsidiary company that undertakes food production activities;
• the approved food production activities by the Minister of Finance are cultivation of kenaf, vegetables, fruits, herbs, spices; aquaculture; rearing of cattle, goats, sheep; and deep sea fishing; and
• the food production project should commence within a period of one year from the date the incentive is approved.
The above incentives can be considered for applications received by the Ministry of Agriculture and Agro-based Industry until 31 December 2015 (extension as in the 2011 Budget).

b) Incentives for Existing Companies which Reinvest
An existing company that reinvests in the production of the above food products qualifies for the same incentives for a period of five years.

The food production project for both new and existing companies should commence within a year from the date the incentive is approved. Applications should be submitted to the Ministry of Agriculture and Agro-based Industry by 31 December 2015.

c) Incentives for 'Halal' Products
(i) Incentives for Production of Halal Food
To encourage new investments in halal food production for the export market and to increase the use of modern and state-of-the-art machinery and equipment in producing high quality halal food that comply with the international standards, companies which invest in halal food production and have already obtained halal certification from JAKIM are eligible for the Investment Tax Allowance (ITA) of 100% of qualifying capital expenditure incurred within a period of 5 years.

The allowance can be set-off against 100% of statutory income in the year of assessment. Any unutilized allowance can be carried forward to subsequent years until the whole amount has been fully utilized.

For further information on obtaining halal certification from JAKIM, please visit www.halal.gov.my

Applications should be submitted to MIDA.

(ii) Halal Industry Development Corporation (HDC) Incentives
a) Halal Park Operator
In an effort to promote the attractiveness of the Halal Parks, the following incentives are recommended:
• Full income tax exemption for a period of 10 years; or
• 100% income tax exemption on qualifying capital expenditure within a period of 5 years

b) Incentives for Halal Industry Players
Companies proposing to undertake projects in the designated Halal Park can be considered for:
• 100% income tax exemption on qualifying capital expenditure for a period of 10 years; or
• Income tax exemption on export sales for a period of 5 years.
The activities must be in the following four (4) industry sectors:
• Specialty processed food
• Pharmaceuticals, cosmetics and personal care products
• Livestock and meat products
• Halal ingredients

c) Incentives for Halal Logistics Operators
In an effort to promote Halal Industry and Halal supply chain in Malaysia, the incentives are broaden up to the logistics operators. The recommended incentives are:
• Full income tax exemption for a period of 5 years;
• 100% income tax exemption on qualifying capital expenditure for a period of 5 years.

Services provided by Halal Logistic Operators must be integrated which comprises of the three (3) principal activities:

• Forwarding
• Warehousing
• Transportation
Applications should be submited to Halal Industry Development Corporation (HDC).

(iii) Double Deduction for Expenses to Obtain Halal Certification and Quality Systems and Standards Certification

To enhance the competitiveness of Malaysian companies in the global market for "halal" products including "halal" food, double deduction will be given for the purpose of income tax computation to companies which incur expenses in obtaining;

• quality system and standards certification as well as 'halal' certification from JAKIM
• international quality systems and standards certification
Claims shold be submitted to IRB.

(iv) Incentives for Reinvestment in Food Processing Activities
A locally-owned manufacturing company with Malaysian equity of at least 60% that reinvests in promoted food processing activities is eligible for:

a. Pioneer Status with income tax exemption of 70% of statutory income for a period of five years. Unabsorbed capital allowances as well as accumulated losses incurred during the pioneer period can be carried forward and deducted from the post pioneer income of the company; or

b. Investment Tax Allowance of 60% on the additional qualifying capital expenditure incurred within a period of five years. The allowance can be offset against 70% of the statutory income for each year of assessment. Any unutilised allowances can be carried forward to subsequent years until fully utilised.

2.2 Additional Incentives for the Agricultural Sector

(i) Reinvestment Allowance
Persons or companies engaged for at least 36 months in the production of essential food such as rice, maize, vegetables, tubers, livestock, aquatic products, and any other activities approved by the Minister of Finance are eligible for Reinvestment Allowance (RA).

The RA is in the form of an allowance of 60% of the qualifying capital expenditure incurred within a period of 15 years beginning from the year the first reinvestment is made. The allowance can be offset against 70% of the statutory income in the year of assessment. Unutilised allowances can be carried forward to the following years until fully utilised.

The qualifying capital expenditure includes expenditure incurred on:

• Clearing and preparation of land
• Planting of crops
• Breeder stock for aquaculture
• Breeder stock for animal farming
• Provision of plant and machinery used in Malaysia for the purpose of crop cultivation, animal farming, aquaculture, inland fishing or deep-sea fishing, and other agricultural or pastoral pursuits
• Construction of access roads including bridges, construction or purchase of buildings (including those provided for the welfare of people or as living accommodation), and structural improvements on land or other structures which are used for crop cultivation, animal farming, aquaculture, inland fishing and other agricultural or pastoral pursuits. Such roads, bridges, buildings, structural improvements on land and other structures should be on land forming part of the land used for the purpose of such crop cultivation, animal farming, aquaculture, inland fishing and other agricultural or pastoral pursuits
Claims should be submitted to IRB.

(ii) Incentives for Reinvestment in Resource-Based Industries
These incentives are offered to companies that are at least 51% Malaysian-owned and are in the rubber, oil palm and wood-based industries producing products which have export potential. Companies in these industries reinvesting for expansion purposes are eligible for:

a. Pioneer Status with income tax exemption of 70% of statutory income for a period of five years. Unabsorbed capital allowances as well as accumulated losses incurred during the pioneer period can be carried forward and deducted from the post pioneer income of the company; or

b. Investment Tax Allowance of 60% on the additional qualifying capital expenditure incurred within a period of five years. The allowance can be offset against 70% of the statutory income for each year of assessment. Any unutilised allowances can be carried forward to subsequent years until fully utilised.

Applications should be submitted to MIDA.

(iii) Accelerated Capital Allowance
Upon the expiry of the Reinvestment Allowance (RA), companies that reinvest in promoted agricultural activities and food products are eligible to apply for the Accelerated Capital Allowance (ACA). These activities include the cultivation of rice, maize, vegetables, tubers, livestock, aquatic products and any other activities approved by the Minister of Finance.

The ACA provides a special allowance to write off the capital expenditure within two years, i.e. an initial allowance of 20% in the first year and an annual allowance of 40%.

Claims should be submitted to the IRB, accompanied by a letter from MIDA certifying that the companies are undertaking promoted agricultural activities or producing promoted food products.

(iv) Agricultural Allowance
A person or a company carrying on an agricultural activity can claim Capital Allowances and special Industrial Building Allowances under the Income Tax Act 1967 for certain capital expenditure. Capital expenditure which qualifies includes expenditure incurred on:

• Clearing and preparation of land
• Planting of crops
• Breeder stock for aquaculture
• Breeder stock for animal farming
• Provision of plant and machinery used in Malaysia for the purpose of crop cultivation, animal farming, aquaculture, inland fishing or deep-sea fishing, and other agricultural or pastoral pursuits
• Construction of access roads including bridges, construction or purchase of buildings (including those provided for the welfare of people or as living accommodation), and structural improvements on land or other structures which are used for crop cultivation, animal farming, aquaculture, inland fishing and other agricultural or pastoral pursuits. Such roads, bridges, buildings, structural improvements on land and other structures should be on land forming part of the land used for the purpose of such crop cultivation, animal farming, aquaculture, inland fishing and other agricultural or pastoral pursuits
A company continues to get the allowance for as long as it incurs the expenditure, regardless of whether it already enjoys Pioneer Status or ITA.

Claims should be submitted to IRB.

(v) Accelerated Agriculture Allowance for the Planting of Rubberwood Trees
To ensure a regular supply of rubberwood for the furniture industry, a non-rubber plantation company that plants at least 10% of its plantation with rubberwood trees is eligible for the Accelerated Agriculture Allowance whereby the write-off period of the capital expenditure incurred on land preparation, planting and maintenance of rubberwood cultivation is accelerated from two years to one year. This incentive is effective until the year of assessment 2010.

Applications should be submitted to the Ministry of Plantation Industries and Commodities.

Claims should be submitted to IRB.

(vi) 100% Allowance on Capital Expenditure for Approved Agricultural Projects
Schedule 4A of the Income Tax Act 1967 provides for a 100% allowance on capital expenditure for Approved Agricultural Projects as approved by the Minister of Finance. This covers qualifying capital expenditure incurred within a specific time frame for a farm that cultivates and utilises a specified minimum acreage as stipulated by the Minister of Finance.

Approved agricultural projects are those for the cultivation of vegetables, fruits (papaya, banana, passion fruit, star fruit, guava and mangosteen), tubers, roots, herbs, spices, crops for animal feed and hydroponic-based products; ornamental fish culture; fish and prawn rearing (pond culture, tank culture, marine cage culture, and off-shore marine cage culture); cockles, oysters, mussels, and seaweed culture; shrimp, prawn and fish hatchery; and certain species of forest plantations.

The incentive enables a person carrying on such a project to elect to deduct the qualifying capital expenditure incurred in respect of that project from his aggregate income, including income from other sources. Where there is insufficient aggregate income, the unabsorbed expenditure can be carried forward to subsequent years of assessment. Where he so elects, he will not be entitled to any capital allowance or agricultural allowance on the same capital expenditure.

The qualifying capital expenditure includes expenditure incurred on:

• Clearing and preparation of land
• Planting of crops
• Breeder stock for aquaculture
• Breeder stock for animal farming
• Provision of plant and machinery used in Malaysia for the purpose of crop cultivation, animal farming, aquaculture, inland fishing or deep-sea fishing, and other agricultural or pastoral pursuits
• Construction of access roads including bridges, construction or purchase of buildings (including those provided for the welfare of people or as living accommodation), and structural improvements on land or other structures which are used for crop cultivation, animal farming, aquaculture, inland fishing and other agricultural or pastoral pursuits. Such roads, bridges, buildings, structural improvements on land and other structures should be on land forming part of the land used for the purpose of such crop cultivation, animal farming, aquaculture, inland fishing and other agricultural or pastoral pursuits
This incentive is not available to companies that have been granted incentives under the Promotion of Investments Act 1986 and whose tax relief periods have not started or have not expired.

Claims should be submitted to IRB.

(vii) Tax Exemption on the Value of Increased Exports
A company which exports fresh and dried fruits, fresh and dried flowers, ornamental plants and ornamental fish is eligible for a tax exemption of its statutory income equivalent to 10% of the value of its increased exports.

Claims should be submitted to IRB.

(viii) Incentives for Companies providing Cold Chain Facilities and Services for Food Products
Companies providing cold room and refrigerated truck facilities and related services such as the collection and treatment of locally produced perishable food products qualify for Pioneer Status or Investment Tax Allowance (ITA).

a) New Companies
New companies that provide cold chain facilities and services for perishable agricultural produce are eligible for:

i. Pioneer Status with income tax exemption of 70% of the statutory income for a period of five years. Unabsorbed capital allowances as well as accumulated losses incurred during the pioneer period can be carried forward and deducted from the post pioneer income of the company; or
ii. Investment Tax Allowance of 60% on the additional qualifying capital expenditure incurred within a period of five years. The allowance can be offset against 70% (100% for promoted areas) of the statutory income for each year of assessment. Any unutilised allowances can be carried forward to subsequent years until fully utilised.

b) Existing Companies that Reinvest
Existing locally owned companies that reinvest in cold chain facilities and services for perishable agricultural produce are eligible for the following incentives:

i. Pioneer Status with a tax exemption of 70% on the increased statutory income arising from the reinvestment for a period of five years. Unabsorbed capital allowances as well as accumulated losses incurred during the pioneer period can be carried forward and deducted from the post pioneer income of the company; or
ii. Investment Tax Allowance of 60% on the additional qualifying capital expenditure incurred within a period of five years. The allowance can be offset against 70% of the statutory income in each year of assessment. Any unutilised allowances can be carried forward to subsequent years until fully utilised.
Applications should be submitted to MIDA.

(ix) Double Deduction on Freight Charges for Export of Rattan and Wood-based Products
Manufacturers who export rattan and wood-based products (excluding sawn timber and veneer) qualify for double deduction on freight charges.a