Pioneer Status Investment Tax Allowance Reinvestment Allowance

Tax Law Promotion of Investment Acts 1986 Sch. 7A Income Tax Act 1967

Industry Manufacturing, Agricultural, Tourism

Only record claim in RA claim form, can claim for many qualifying
Application Malaysian Investment Development Authority (MIDA) projects

Approval Ministry of International Trade and Industry (MITI) -

1. Resident company:
PARTICIPATE in promoted activity
- Manufacturing/Agriculture
Conditions - Operation not < 36 months
PRODUCE promoted product - Incurred QCE on factory, plant, machinery used in Malaysia
- Used for qualifying project
Fail to apply for pioneer cerificate within 24 months (MITI)
Withdrawal of Status - -
Fail to comply pioneer letter (MIDA)
Date of Commencement of
Claim On "Production Day" from pioneer certificate issued by MITI Date of Approval by MIDA Date where company commences biz of manufacturing/agicultural

Tax incentive/relief period 5 years from production day (pioneer certificate) Within 5 years from date of approval Given on company basis. 15th years consecutive, NO extensions

60% on QCE incurred (full/amount paid), restricted to 60% claim on capital expenditure incurred, restricted to 70% of SI
Tax incentive rate Abatement of statutory income 70% 70% of SI. on biz in respective of project
Other 30% is deemed total income, taxed at prevailing rate. Other 30% is deemed total income, taxed at prevailing Other 30% is deemed total income, taxed at prevailing rate. (RS =
(RS = 17%+24%; NRS = 24%) rate. (RS = 17%+24%; NRS = 24%) 17%+24%; NRS = 24%)
Cannot be set-off by: RA can claim 100% if achieve level of productivity prescribed by
Chargeable income
- Any unabsorbed PB loss Minister
- CY NPB biz loss
- Approved gov donation
Form of tax abatement Allowance Allowance
On QCE On capital expenditure incurred
What is …? Directly in use in Malaysia Industrial buildings, plant & machinery
For purposes of promoted activity/product Directly in Use
Industrial buildings (exclude land cost & related expenses), plant & machinery For purposes of qualifying project
Amount of statutory income abated after deducting: Credited into exempt income account
- Pioneer loss b/f Dividends can be distributed from exempt income account and corporate shareholders can declare 2-tier tax-exempt
- Non-pioneer loss dividends
Exempt Income Account Credited into exempt income account
Dividends can be distributed from exempt income account
and corporate shareholders can declare 2-tier tax-exempt
dividends
Tax treatment (Biz Losses) Pioneer Biz Non-Pioneer Biz

- Pre-pioneer - C/f to post pioneer

Not allowed to set off

against NPB Step 1: Deduct against abated
statutory income from PB
before credit to exempt
No allowed to set off against income account
AI from all sources (PB/NPB) Step 2: Set off against AI from
all sources during the year
- Pioneer Period Must be carried forward -
within pioneer period & Step 3: Any unabsorbed
deduct against abated business loss c/f to subsequent
statutory income (PB) YA, deducted against ASI from
all sources
Credit excess abated
statutory income to exempt
income account

- Post-pioneer Unabsorbed biz loss c/f (limit - -

to 7 YA), utilize against ASI
from all sources. (Deemed
Nil after 7 YA)
Capital Allowance/ Industrial
Building Allowance
Unabsorbed CA/IBA c/f into pioneer period QCE for CA
- Pre
Can be deducted against AI from PB QBE for IBA
QCE for CA
- Relief period
Deduct CA/IBA from AI to arrive at SI during pioneer period QBE for IBA
Unabsorbed CA/IBA c/f into post-pioneer period QCE for CA
- Post
Can be deducted against AI from same biz only QBE for IBA
Investment Tax Allowance
- Pre -
QCE for ITA @ 60%
-
- Relief period QBE for ITA @ 60%
Unabsorbed ITA b/f & c/f
- Post Unabsorbed ITA b/f & c/f indefintely
CA/IBA Only utilised by same biz till full ITA can be c/f and utilised until full If due to &0% restriction/insufficient SI, c/f to subsequent years.
Unabsorbed ... at end of relief Unabsorbed RA can be c/f & utilized up til 15th YA
period After 15th YA, bal of unabsorbed RA c/f max 7 YA (after deemed
Nil)
Withdrawal of tax incentive No provision to withdraw an exemption of statutory income Any ITA given is withdrawn If manufacturing activity ceases, RA withdrawn = RA claimed in
from PB Amount treated as part of SI in disposal YA preceding years, unabsorbed RA b/f cannot be deducted from SI
Can change to ITA or RA
Changing status? - -
Conditions for co. to consider: Conditions for co. to consider: Conditions for co. to consider:
1. Biz profit during relief period must be substantial 1. Biz profit during relief period must be insignificant 1. Biz profit during 15 YA must be insignificant
2. Not capital intensive 2. Capital intensive and long gestation period 2. Capital intensive and long gestation period
3. Not have pioneer loss (affects future YA ASI) before credit 3. After relief period, unabsorbed ITA c/f indefinitely 3. After relief period, unabsorbed ITA c/f within 7 years
Tax planning to exempt income account 4. CY biz loss utilised to set off AI from all sources, 4. CY biz loss utilised to set off AI from all sources, unabsorbed biz
4. Not have NPB & PB in same co. unabsorbed biz loss c/f to set off SI from all biz loss c/f to set off SI from all biz
5. Group structure of companies to maximise 2-tier tax 5. Co. has more than one biz 5. Co. has more than one biz
exempt dividends to corporate shareholders 6. Group structure of companies to maximise 2-tier tax 6. Group structure of companies to maximise 2-tier tax exempt
exempt dividends to corporate shareholders dividends to corporate shareholders
Mutual Exclusiveness Yes.
Work done in 2-Oct 2-Nov 2-Dec 2-Jan 2-Feb
Received in 2-Nov 2-Dec 2-Jan 2-Feb 2-Mar
Gross salary 4100 4100 4100 4100 4100
EPF 450 450 450 450 450
Wifi 100 100 100 100 100
Personal phone bill 100 100 100 100 100
Makan 700 700 700 700 700
Insurance 200 200 200 200 200
Car 760 760 760 760 760
1790 1790 1790 1790 1790
Cash in hand 700 3440 5230 7020 8810
M2U 700
PBB 250
3440 5230 7020 8810 10600
2-Mar 2-Apr 2-May 2-Jun 2-Jul 2-Aug 2-Sep 2-Oct
2-Apr 2-May 2-Jun 2-Jul 2-Aug 2-Sep 2-Oct 2-Nov
4100 4100 4100 4100 4100 4100 4100 4100
450 450 450 450 450 450 450 450
100 100 100 100 100 100 100 100
100 100 100 100 100 100 100 100
700 700 700 700 700 700 700 700
200 200 200 200 200 200 200 200
760 760 760 760 760 760 760 760
1790 1790 1790 1790 1790 1790 1790 1790
10600 12390 14180 15970 17760 19550 21340 23130

12390 14180 15970 17760 19550 21340 23130 24920