Against the backdrop of an economic crisis, a back to basic step of encouraging more local food production is wise. Apart from promoting commercial crops such as rubber, oil palm and cocoa, the Government now encourages the corporate sector to undertake large-scale food production through a proposal to grant group relief effective year of assessment 2000.

Group relief is accorded to in respect of an approved food production project (AFPP) which is defined as an agricultural project which is approved by the Minister of Agriculture for the cultivation of maize for animal feed, cattle farming or any other activities as may be prescribed by the Minister of Finance. In relation to an AFPP :

a. the application for approval must be made on or before December 31, 1999;

b. the project must commence within one year from the date of approval; and

c. at least 80% of the sales, if any, of the produce are made within Malaysia.

In accordance with the proposed new Schedule 4C of the Income Tax Act, 1967 (the Act), a Malaysian-resident company may surrender its adjusted loss, in respect of an AFPP fully or partially to one or more related Malaysian-resident claimant companies. Any loss not surrendered in any year of assessment cannot be surrendered in a subsequent year of assessment. The amount surrendered is deductible by any claimant company from its aggregate income. In this connection, the loss claimed is treated on the same footing as the current year business loss of the claimant.

Where the basis period of the surrendering company does not coincide with that of the claimant company, the loss surrendered is prorated by reference to the coincident period on the assumption that the loss accrued evenly over the basis period of the former.

A surrendering company is considered as being related to a claimant company if at the end of the basis period for a year of assessment at least 70% of the issued share capital of :

a. the surrendering company is directly owned by the claimant company or vice versa; or

b. the surrendering company and claimant company are directly owned by another company.
   



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