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Relief for capital expenditure - part 2 - Coggle Diagram
Relief for capital expenditure - part 2
Qualifying building expenditure
Capital expenditure incurred on the construction or purchase of a building after the construction or purchase of IBA
Items that do not qualify for qualifying expenditure
Cost of land
Cost of clearing site
Can qualify if the new building is situated precisely on the site occupied by the old one and provided the old one was not used as a IBA
Legal charges
The 10% rule
Any part of the IB is provided as canteen, restroom, recreation room, lavatory, bathhouse, bathroom or washroom for persons employed in the business, the whole building shall be treated as an IB
If part of the IB is not used as IB, and the proportion is not more than 1/10 of the capital expenditure incurred on construction of the whole building/extension, then it shall be treated as IB
If it exceeds 10%, then notional annual allowance needs to be computed to reduce the whole amount not qualified
The 75% rule
Items that should be treated as QBE if they satisfy the 75% rule
Capital expenditure on machinery or plant
If the below exceeds the total
Capital expenditure on preparing, cutting, tunneling, levelling land for the purpose of installation of that machinery or plant
Special class of building
For the provision of childcare facilities for their employee
10% for ten years of assessment
No initial allowance
Accommodation of employees in the manufacturing, hotel, tourism or approved service project business
10% for ten years of assessment
No initial allowance
Employees exclude director, and individual having control and individual who are member of management, admin, clerical staff
Building for educational purposes, such as school or institution of higher learning, provided that such establishment is approved by the MoE /MoHE/any relevant authorities
10% for ten years of assessment
No initial allowance
Building used for industrial, technical, vocational training approved by the Ministry
10% for ten years of assessment
No initial allowance
Building used as an elderly care center approved by the Social Welfare Department
Annual allowance is given equal to one tenth of the expenditure
New building occupied by MSC-Status companies in Cyberjaya
Completed buildings that are yet to be occupied are not eligible
10%r for ten years of assessment
Deeming provision
The day on which the expenditure was being incurred is the day on which the construction of the building is completed
Where a person is about to commence a business, the expenditure shall be deemed incurred on the day when they commence to carry on business
10% initial allowance is given
3% annual allowance is given when the person is the owner of the asset and he remains to be the owner at the end of the period, and he used the building for business purposes
Initial allowance
10%/ 40%
40% is given to the building that is currently being in use and there are construction of that building and the purpose is for living accommodation for the employees of the person
Criteria
If at the end of the basis period, he is the owner of the asset AND it was used for business purposes, or
If at the end of the period, he is still the owner of the asset, AND the building is about to be used as an industrial building
Annual allowance
3% or 6%
Refer to the table in page 276 for rate
Purchased building
The purchase price of the building shall be taken as the qualifying building expenditure for the purpose of industrial building allowance
Relevant interest for industrial building allowance leased to tenant
If the lessee use the building as industrial building, then the IBA should be given to the lessor
Disposal of a building
A building is disposed, or deemed disposed of
The sale, transfer, or assignment of the relevant interest in the building
Where the relevant interest depends on the duration of concession, the coming to an end of the concession
In the case of a leasehold interest, the entitlement by a person on acquiring the reversion
Demolition or destruction of the building, or on the building ceasing to be used as an industrial building