The major tax incentives for companies investing in the manufacturing sector are the Pioneer Status and the Investment Tax Allowance.

Eligibility for Pioneer Status and Investment Tax Allowance is based on certain priorities, including the level of value-added, technology used and industrial linkages. Eligible activities and products are termed as "promoted activities" or "promoted products". (See List of Promoted Activities and Products - General)

(i)Pioneer Status

A company granted Pioneer Status enjoys a 5-year partial exemption from the payment of income tax. It pays tax on 30% of its statutory income*, with the exemption period commencing from its Production Day (defined as the day its production level reaches 30% of its capacity).

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.

* Statutory Income is derived after deducting revenue expenditure and capital allowances from the gross income.

Applications for Pioneer Status should be submitted to the Malaysian Industrial Development Authority (MIDA).

(ii) Investment Tax Allowance

As an alternative to Pioneer Status, a company may apply for Investment Tax Allowance (ITA). A company granted ITA is entitled to an allowance of 60% on its qualifying capital expenditure (factory, plant, machinery or other equipment used for the approved project) incurred within five years from the date the first qualifying capital expenditure is incurred.

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

Applications should be submitted to MIDA.

A high technology company is a company engaged in promoted activities or in the production of promoted products in areas of new and emerging technologies (See List of Promoted Activities and Products - High Technology Companies).

A high technology company qualifies for:

i. Pioneer Status with income tax exemption of 100% 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 qualifying capital expenditure incurred within five years from the date the first qualifying capital expenditure is incurred. The allowance can be utilised to offset against 100% 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.

The high technology company must fulfil the following criteria:

i. The percentage of local R & D expenditure to gross sales should be at least 1% on an annual basis. The company has three years from its date of operation or commencement of business to comply with this requirement.

ii. Scientific and technical staff having degrees or diplomas with a minimum of 5 years experience in related fields should comprise at least 7% of the company's total workforce.

Strategic projects involve products or activities of national importance. They generally involve heavy capital investments with long gestation periods, have high levels of technology, are integrated, generate extensive linkages, and have significant impact on the economy. Such projects qualify for:

i. Pioneer Status with income tax exemption of 100% of the statutory income for a period of ten 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 100% on the qualifying capital expenditure incurred within five years from the date the first qualifying capital expenditure is incurred. This allowance can be offset against 100% 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.

Small and Medium Enterprises(SMEs)

Effective from the year assessment of 2009, for the purpose of imposition of income tax and tax incentives, the definition of SMEs is reviewed as a company resident in Malaysia with a paid up capital of ordinary shares of RM2.5 million or less at the beginning of the basis period of a year of assessment whereby such company cannot be controlled by another company with a paid up capital exceeding RM2.5 million.

SMEs are eligible for a reduced corporate tax of 20% on chargeable incomes of up to RM500,000. The tax rate on the remaining chargeable income is maintained at 25%.

Small Scale Manufacturing Companies

Small scale manufacturing companies incorporated in Malaysia with shareholders' funds not exceeding RM500,000 and having at least 60% Malaysian equity are eligible for the following incentives:

i. Pioneer Status with income tax exemption of 100% 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 qualifying capital expenditure incurred within five years. This allowance can be offset against 100% of the statutory income for each year of assessment. Any unutilised allowances can be carried forward to subsequent years until fully utilised.

A sole proprietorship or partnership is eligible to apply for this incentive provided a new private limited/limited company is formed to take over the existing production/activities. To qualify for the incentive, a small-scale company has to comply with one of the following criteria:

i. The value-added must be at least 15%; or
ii. The project contributes towards the socio-economic development of the rural population.
The company shall carry out the manufacture of products or participate in activities listed as promoted products and activities for small-scale companies (See List of Promoted Activities and Products - Small Scale Companies)

Applications should be submitted to MIDA.

5.1 Incentives for the Production of Selected Machinery and Equipment

Companies undertaking activities in the production of selected machinery and equipment, namely, machine tools, plastic injection machines, plastic extrusion machinery, material handling equipment, packaging machinery, robotics and factory automation equipment, specialised/process machinery or equipment for specific industries, and parts and components of the mentioned machinery and equipment, are eligible for:

i. Pioneer Status with income tax exemption of 100% of the statutory income for a period of ten 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 100% on the qualifying capital expenditure incurred within five years from the date the first qualifying capital expenditure is incurred. This allowance can be offset against 100% 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.

5.2 Additional Incentives for the Production of Heavy Machinery

Existing locally-owned companies that reinvest in the production of heavy machinery such as cranes, quarry machinery, batching plant and port material handling equipment, are eligible for the following incentives:

i. Pioneer Status with income tax exemption of 70% on the increased statutory income arising from the reinvestment projects 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 for each year of assessment. Any unutilised allowances can be carried forward to subsequent years until fully utilised.

5.3 Additional Incentives for the Production of Machinery and Equipment

Existing locally-owned companies that reinvest in the production of machinery and equipment, including specialised machinery and equipment and machine tools, are eligible for the following incentives:

i. Pioneer Status with income tax exemption of 70% on the increased statutory income arising from the reinvestment projects 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 for each year of assessment. Any unutilised allowances can be carried forward to subsequent years until fully utilised.

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6.1 Incentives for Automotive Component Modules or System

New and existing companies that undertake design, R&D and production of qualifying automotive component modules or systems are eligible for:

i. Pioneer Status with income tax exemption of 100% 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 qualifying capital expenditure incurred within five years from the date the first capital expenditure is incurred. The allowance can be offset against 100% of the statutory income for each year of assessment. Any unutilised allowances can be carried forward to subsequent years until fully utilised.

The qualifying modules or systems are front corner modules, rear corner modules, instrument panel modules, struts and absorbers and spring assembly modules, bumper modules, front cross member modules, function integrated door modules, fuel tank modules, seat modules, pedal modules, door trim modules, floor console modules, tyre and wheel modules, wiper systems, exhaust systems, audio systems, heater ventilation air-conditioning systems, power and signal distribution systems, alarm systems, seat belt systems, exterior lighting systems, body in white modules, engine management systems, safety systems, telematics, navigational systems, engine fuel injection systems,brake systems, airbag systems and vehicle intelligence systems.

6.2 Incentives for the Manufacture of Critical and High Value-added Parts and Components for the Automotive Industry

Companies undertaking the manufacture of selected critical and high value-added parts and components for the automotive industry are eligible for:

i. Pioneer Status with income tax exemption of 100% of the statutory income for a period of ten 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 100% on the qualifying capital expenditure incurred within five years from the date the first qualifying capital expenditure is incurred. This allowance can be offset against 100% of the statutory income for each year of assessment. Any unutilised allowances can be carried forward to subsequent years until they are fully utilised.

The qualifying critical and high value-added parts and components for the automotive industry are as follows:

•tranmission systems;
• brake systems;
• airbag systems; and
• steering systems.

The qualifying critical parts and components supporting the manufacturing of hybrid and electric vehicles are:

• electric motors;
• electric batteries;
• Battery Management System;
• inverters;
• electric air conditioning; and
• air compressors.

Applications recived by 31 December 2014 are eligible fo these incentives.

Applications should be submitted to MIDA.

6.3 Incentives for the Assembly or Manufacture of Hybrid and Electric Vehicles

Companies undertaking the assembly or manufacture of hybrid and electric vehicles are eligible for:

• 100% Investment Tax Allowance or Pioneer Status of 10 years
• Customized training and R&D grants
• 50% exemption on excise duty for locally assembled/manufactured vehicle or provision under Industrial Adjustment Fund (IAF)

Companies that utilise oil palm biomass to produce value-added products such as particleboard, medium density fibreboard, plywood, and pulp and paper are eligible for the following incentives:

(i) New Companies

a. Pioneer Status with income tax exemption of 100% of the statutory income for a period of ten 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 100% on the qualifying capital expenditure incurred within a period of five years. The allowance can be offset against 100% of the statutory income for each year of assessment. Any unutilised allowances can be carried forward to subsequent years until fully utilised.

(ii) Existing Companies that Reinvest

a. Pioneer Status with income tax exemption of 100% of the increased statutory income arising from the reinvestment for a period of ten 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 100% on the additional qualifying capital expenditure incurred within a period of five years. The allowance can be offset against 100% of the statutory income for each year of assessment. Any unutilised allowances can be carried forward to subsequent years until fully utilised.

(i) Reinvestment Allowance

Reinvestment Allowance (RA) is given to companies engaged in manufacturing*, and selected agricultural activities that reinvest for the purposes of expansion, automation. modernisation or diversification of its existing business into any related products within the same industry on condition that such companies have been in operation for at least 36 months effective from the year of assessment 2009.

The RA is given at the rate of 60% on the qualifying capital expenditure incurred by the company, and can be offset against 70% of its statutory income for the year of assessment. Any unutilised allowance can be carried forward to subsequent years until fully utilised.A company can offset the RA against 100% of its statutory income for the year of assessment if the company attains a productivity level exceeding the level determined by the Ministry of Finance. For further details on the prescribed productivity level for each sub-sector, please contact the Inland Revenue Board (see Useful Addresses - Relevant Organisations)

The RA will be given for a period of 15 consecutive years beginning from the year the first reinvestment is made. Companies can only claim the RA upon the completion of the qualifying project, i.e. after the building is completed or when the plant/machinery is put to operational use. With effect from the year of assessment 2009, company purchasing an asset from a related company within the same group where RA has been claimed on that asset is not allowed to claim RA on the same asset.

Assets acquired for the reinvestment cannot be disposed off within a period of five years from the time of the reinvestment and effective from the year of assessment 2009.

Companies that intend to reinvest before the expiry of its tax relief period, can surrender their Pioneer Status or Pioneer Certificate for purpose of cancellation and be eligible for RA.

Applications for RA should be submitted to the Inland Revenue Board (IRB), while applications for the surrender of Pioneer Status or Pioneer Certificate for RA should be submitted to MIDA.

*With effect from year of assessment 2009, manufacturing activities will be given a more specific and clear definition under Schedule 7A, Income Tax Act 1967.

(ii) Accelerated Capital Allowance

After the 15-year period of eligibility for RA, companies that reinvest in the manufacture of promoted products are eligible to apply for Accelerated Capital Allowance (ACA). The ACA provides a special allowance, where the capital expenditure is written off within three years, i.e. an initial allowance of 40% and an annual allowance of 20%.

Applications should be submitted to the IRB accompanied by a letter from MIDA certifying that the companies are manufacturing promoted products.

SMEs are eligible for the following incentives:

• ACA on expenses incurred on plant and machinery acquired in the year of assessment 2009 and 2010. This allowance is to be claimed within one year that is in the year of assessment the asset is fully acquired. This incentive is effective for the year of assessment 2009 and 2010; and
• SMEs are not subject to the maximum limit of RM10,000 for capital allowance on small value assets effective from the year of assessment 2009.

Applications for ACA should be submitted to the Inland Revenue Board (IRB).

(iii) Accelerated Capital Allowance on Equipment to Maintain Quality of Power Supply

In order to reduce the cost of doing business companies which incur capital expenditure on equipment to ensure the quality of power supply, are eligible for Accelerated Capital Allowance (ACA) for a period of two years which allows the companies to write off the capital expenditure within two years, i.e. an initial allowance of 20% and an annual allowance of 80%.

Only equipment determined by the Ministry of Finance is eligible for the ACA.

Applications should be submitted to IRB.

(iv) Accelerated Capital Allowance on Security Control Equipment

Accelerated Capital Allowance (ACA) is given on security control equipment installed in the factory premises of companies licensed under the Industrial Coordination Act 1975. This allowance is eligible to be claimed within one year.Effective from the year of assessment 2009, this allowance is extended to all business premises. Security control equipment which are eligible for the allowance are:

• Anti-theft alarm system;
• Infra-red motion detection system;
• Siren;
• Access control system;
• Closed circuit television;
• Video surveillance system;
• Security camera;
• Wireless camera transmitter; and
• Time lapse recording and video motion detection equipment.

Applications submitted to the IRB from the year of assessment 2009 to 2012 are eligible for this allowance.

(v) Incentive for Industrialised Building System

Industrial Building System (IBS) will enhance the quality of construction, create a safer and cleaner working environment as well as reduce the dependence on foreign workers. Companies which incur expenses on the purchase of moulds used in the production of IBS components are eligible for Accelerated Capital Allowances (ACA) for a period of three years.

Applications should be submitted to IRB.

(vi) Tax Exemption on the Value of Increased Exports

To promote exports, manufacturing companies in Malaysia qualify for:

• A tax exemption on statutory income equivalent to 10% of the value of increased exports, provided that the goods exported attain at least 30% value-added; or
• A tax exemption on statutory income equivalent to 15% of the value of increased exports, provided that the goods exported attain at least 50% value-added.

To further encourage the export of Malaysian goods, a locally-owned manufacturing company with Malaysian equity of at least 60% is eligible for:

• A tax exemption on statutory income equivalent to 30% of the value of increased exports, provided the company achieves a significant increase in exports;
• A tax exemption on statutory income equivalent to 50% of the value of increased exports, provided the company succeeds in penetrating new markets;
• A full tax exemption on the value of increased exports, provided the company achieves the highest increase in export in its category.
Claims should be submitted to IRB.

(vii) Group Relief

Group relief is provided under the Income Tax Act 1967 to all locally incorporated resident companies. Effective from the year of assessment 2009, group relief is increased from 50% to 70% of the current year's unabsorbed losses to be offset against the income of another company within the same group (including new companies undertaking activities in approved food production, forest plantation, biotechnology, nanotechnology, optics and photonics) subject to the following conditions:

a. The claimant and the surrendering companies each has a paid-up capital of ordinary shares exceeding RM2.5 million;
b. Both the claimant and the surrendering companies must have the same accounting period;
c. The shareholding, whether direct or indirect, of the claimant and the surrendering companies in the group must not be less than 70%;
d. The 70% shareholding must be on a continuous basis during the preceding year and the relevant year;
e. Losses resulting from the acquisition of proprietary rights or a foreign-owned company should be disregarded for the purpose of group relief; and
f. Companies currently enjoying the following incentives are not eligible for group relief:

•Pioneer Status

•Investment Tax Allowance/Investment Allowance

•Reinvestment Allowance

•Exemption of Shipping Profits

• Exemption of Income Tax under section 127 of the Income Tax Act 1967; and

• Incentive Investment Company

With the introduction of the above incentive, the existing group relief incentive for approved food production, forest plantation, biotechnology, nanotechnology, optics and photonics will be discontinued. However, companies granted group relief incentive for the above activities shall continue to offset their income against 100% of the losses incurred by their subsidiaries.

Claims should be submitted to the IRB.

(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.

(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