INVESTMENT INCENTIVES

Qualifying Capital Expenditure for MSC Status Companies
Income Tax (Promotion of Exports) (Amendment) Rules 2001
Promoted Activities and Promoted Products
Reinvestment Allowance - 100% Exemption of Statutory Income for Achieving Productivity Level
 




1. Qualifying Capital Expenditure for MSC Status Companies

For investment tax allowance (ITA) purposes, the meaning of capital expenditure in Section 29(7) of the Promotion of Investments Act, 1986 provides a broad application to what may constitute qualifying capital expenditure for manufacturing, agriculture, hotel and tourism businesses. To meet the characteristics and peculiarities of certain businesses, a need may arise for the Minister to determine what would specifically form qualifying capital expenditure for the purpose of ITA for these businesses.

Thus, under the Promotion of Investments (Determination of Assets Under Section 29B in respect of MSC Status Companies) Order 2001, which applies to MSC status companies, the Minister has determined that capital expenditure on the following assets are capital expenditure qualifying for ITA :-

a.   multimedia and peripheral equipment (software and hardware) which are used by a MSC status company within the designated Cybercities for the conduct or development of the promoted activity or the production or development of the promoted product;
     
b.   the purchase, construction or renovation of a building, or part of a building, or any combination of those activities, located within the designated Cybercities where the building or part of the building is solely used by a MSC status company for the conduct or development of the promoted activity or the production or development of the promoted product;
     
c.   plant and machinery used by a MSC status company within Malaysia for the conduct or development of the promoted product; or
     
d.   the landscaping and greening of the surrounding premises of the building of a MSC status company within Cyberjaya, where the building is solely used by such MSC status company for the conduct or development of the promoted activity or the production or development of the promoted product, in line with the MSC physical planning guidelines and Cyberjaya urban design guidelines.


For the above Order, "designated Cybercities" means Cyberjaya, Technology Park Malaysia - Phase I, University Putra Malaysia - Malaysia Technology Development Corporation Incubator I and the Petronas Twin Towers.

The Order was gazetted on 1st March, 2001 and is deemed to have effect from 25th October, 1996.

< top >


2. Income Tax (Promotion of Exports) (Amendment) Rules 2001

With effect from 1st January, 2001, "professional fees incurred in packaging design on conditions that the foods are of export quality and the company employs local professional services" have been included as an expense item allowable for double deduction under the above Rules.

< top >


3. Promoted Activities and Promoted Products

The Promotion of Investments (Promoted Activities and Promoted Products) Order 2001, has introduced a new list of products and activities for pioneer status and ITA purposes with effect from 1st January, 2001.

< top >


4. Reinvestment Allowance - 100% Exemption of Statutory Income for Achieving Productivity Level

Manufacturing companies which achieve the level of productivity as prescribed by the Minister are eligible for 100% exemption of statutory income (similar to that given to companies situated within the promoted areas).

The level of productivity as prescribed by the Minister is in relation to the increase in the process efficiency (PE) achieved by a company for a year of assessment as compared to the immediate preceding year of assessment. In this respect, a company is required to show that the PE has increased by at least the same rate as the growth rate of that particular manufacturing subsector provided by the Treasury. The list of growth rates of the manufacturing subsectors issued by the DG for year of assessment 2000 (current year basis) is reproduced as follows :-

Manufacturing Sectors
Growth Rate for Year of Assessment 2000 (Current Year Basis)

NO SUBSECTOR % GROWTH
1. Food 13.9
2. Beverages 6.0
3. Tobacco 75.3
4. Textiles 1.7
5. Wearing Apparel 20.7
6. Footwear 83.9
7. Petroleum Refineries 16.4
8. Industrial Chemical 6.8
9. Other Chemical Products 11.6
10. Plastic Products 27.2
11. Paper and Paper Products 15.0
12. Rubber Products 4.1
13. Wood Products 4.0
14. Non Metallic Mineral Products 21.5
15. Glass and Glass Products 12.6
16. Iron and Steel 20.2
17. Non Ferrous Metal Products 6.5
18. Fabricated Metal Products 33.7
19. Electrical and Electronic Products and Machinery 40.5
20. Professional and Scientific and Measuring and Controlling Equipment 14.6
21. Miscellaneous Product of Coal and Petrol 32.5
  TOTAL MANUFACTURING 25.0

< top >


A service brought to you by MIR Communications Sdn Bhd in cooperation with
Deloitte KassimChan Tax Services Sdn Bhd and Deloitte Touche Tohmatsu Tax Services Sdn Bhd.
© October 2001