2000 BUDGET ISSUE


 

11. Information Technology to Improve Management / Production Processes

Presently, capital expenditure incurred on information technology (IT) equipment for the purpose of improving management and production processes are eligible for capital allowance. However, some operational expenditure such as consultancy fees for improving management and production processes are denied deduction for income tax purposes.

To enhance productivity and efficiency in the production system of the manufacturing, agriculture and services sectors, it is proposed that all operating expenditure including payments to consultants related to the usage of IT to improve management and production processes be allowed as a deduction.

This proposal is to be effective from year of assessment 2000 (current year basis).


12. Double Deduction of Ship Freight Charges

Presently, ship freight charges including those in respect of the transport of goods from Sabah and Sarawak to Peninsular Malaysia qualify for a normal deduction.

In order to increase market potential and enhance trade linkages with Peninsular Malaysia, it is proposed that a double deduction on freight charges be given to all manufacturers who ship their goods from Sabah and Sarawak to Peninsular Malaysia provided they use the ports in Peninsular Malaysia.

This proposal is to have effect from year of assessment 2000 (current year basis) and is expected to be enacted by way of a Ministerial Order.


13. Annual Allowance Rates for Plant and Machinery

An initial allowance of 20% is claimable in respect of qualifying expenditure on plant and machinery. In addition, annual allowances are claimable in accordance with the Income Tax (Qualifying Plant Annual Allowances) Rules 1968 where annual allowance rates vary from 6% to 20% depending on the type of plant and machinery and industry involved.

To simplify the computation of capital allowance in preparation for the self-assessment system for companies which will be implemented in year 2001, it is proposed that the annual allowance be reduced to 3 classes with rates as follows :- 

Type of Asset Annual Allowance Rate Number of Years for Full Tax Relief
Office equipment, furniture and fittings

10%

Plant and machinery (general)

14%

6

Heavy machinery and motor vehicles

20%

4

The rate of 20% for initial allowance is maintained.

Computers and information technology equipment, control equipment and computer software will continue to qualify for accelerated depreciation.

The above proposal is to be effective from year of assessment 2000 (current year basis).





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