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25 Reinvestment Allowance (RA) - Coggle Diagram
25 Reinvestment Allowance (RA)
Conditions
RIQQM
Co is
I
ncorporated in Msia
R
esident in M'sia
In operations for >= 36
m
onths (RA not for new Co)
Incurred
Q
ualifying
E
xpenditure in Msia
On an approved
Q
ualifying
P
roject
For
Manufacturing Cos
QP:
project under taken in
Expanding, Modernising, Automation, Diversifying (forward integration) EMAD
in manufacturing its products/existing biz
should be :arrow_up: in pdt or :arrow_down: in cost/pdt time as a result of the QP
Manufacturing:
Convert the materials
manually/mechanically into a
new product
Parts assembled into machinery/ products
Materials mixed by
chemical reaction
that change the
structure of the molecule
exclude installation of machine and simple activity which does not need special skills, special machines
:check: treatment of waste for re-use
:green_cross: treatment of waste before discharging from the factory
Agricultural Cos
QP:
agricultural project in
Expanding, Modernizing or Diversifying (EMD)
its cultivation and farming biz (exclude rearing chicken and ducks)
EMAD
Expansion
:arrow_up: pdt capacity, :arrow_up:in pdt output and sales
Modernisation
upgrading of manufacturing equipment and process
greater efficiency in pdt, improvement in quality of product and/or :arrow_down: in costs
Automation
manual operations are substituted by mechanical operations w minimal/reduced human judgement and control
Diversification
project to produce
additional or new related products
relating to the
same industry
the
additional or new related products
should be
related or similar to the existing products
in terms of:
major raw mat
main components
type, range, variety, class, category, group
Tax Mechanism
Manufacturing
Achieve the Process Efficiency (PE) ratio
60% x CAPEX
restricted to 100% x SI
Did not achieve the PE ratio (rare case)
60% x CAPEX
restricted to 70% x SI
Agriculture
60% x CAPEX
restricted to 70% x SI
QE for RA must be incurred for
15 consecutive YAs
commencing from the
1st YA the Co claims RA
ie. YA2010 + 15 - 1 = ends in YA2024
RA: an additional relief
over and above the claim for CA
on the same QCE
Quantum of RA is
60% of the QCA incurred each year within 15 years from the 1st YA the company claimed RA
RA is used to
exempt SI up to max of 70%
Excess RA c/f to subsequent YAs to similarly set off against
70% of SI
,
but RA can only
b/f up to max of 7 YAs upon expiration of the qualifying period
Exempted Y is Cr into exempt acc
IF asset is
disposed within 5 years from date of acquisition
RA will be withdrawn in the
YA of disposal of the asset
amt withdrawn = added to SI of QP in
YA of disposal of asset
no withdrawal if the asset is destroyed by fire, flood
QE
Manufacturing
ie. factory, P&M (excluding replaced asset), vehicle
Portion for QP
floor space of the building/extension for EMAD of the manuf biz
portion of the building used to install machineries
Portion X for QP
floor space not used for QP
portion used for storing raw mat/goods
<= 10% of the total areas: qualify
less than 10% of the total areas: X qualify
X applicable to ITA
Agriculture
CPRAPIO
NOT qualifying
R&D building
building used for staff welfare
(ie. canteen, nursery etc)
asset acquired from overseas
QE= MV of asset at the time of transfer
claim RA when QE is
being incurred
on a building, on the day the construction on the building is
completed
on P&M, on the day P&M is
capable of being used
for the purpose of a
biz
Hire Purchase Qualifying Assets
acquirer eligible for RA on
capital portion of repayment
RA given for each YA where there is
repayment of HP
provided it
does NOT exceed 15 YAs
Lease P&M no RA, not owner, incur REVEX
Intergrated Project
Co carry out manuf + agri activities
2 activities treated as 1 single source
RA ti be set off agnst
combined SI
IF manuf activity invlove usage of
agri produce purchased from 3rd parties
,
SI has to be apportioned based on
cost of sales
Tax treatment for
Control transfer for RA
H Co: X carrying on QP
Subs Co: can claim RA
QE = MV at date of transfer
H Co: carrying on QP, but choose to claim another
mutually exclusive incentive
(ie. export allowance)
Subs Co: rightly X claim CA, but on concession basis, allowed to claim RA
QE = RE of the H Co
H Co: carrying on QP and claim RA
Subs Co: X claim RA
IF Co claiming P/S, ITA, Group loss relief, Co
NOT qualify to claim RA in the same BP
even those incentives are
expiring during the same BP