Tag: Budget 2020

  • Automation Capital Allowance for Automation Equipment in Manufacturing, Services & Agriculture

    Automation Capital Allowance for Automation Equipment in Manufacturing, Services & Agriculture

    Updated on 15 July 2023- Dialogue between MOF, LHDNM, and CTIM [21/6/2023]

    Update: The Ismail Sabri Government Budget is no longer applicable. Malaysia’s national budget for 2023 was re-tabled again in February 2023.

    To Download Revised Budget 2023 Speech and some other related publications – https://www.ccs-co.com/post/budget-2023-malaysia-madani

    Current Position

    Automation Capital Allowance (ACA) is a tax incentive introduced in Budget 2015 to encourage manufacturers to engage in innovative and productive activities, expedite the adoption of automation, especially for labour-intensive industries, and further spur automation initiatives.

    The incentive is split into 2 categories of industries i.e.

    • Category 1: High Labour-intensive Industries (Rubber products, plastics, wood, furniture and textiles); and
    • Category 2: Industries Other than Category 1

    It was proposed in Budget 2020 that the existing Automation Capital Allowance (ACA) incentive for Category 2 of the manufacturing sector be expanded to the services sector to boost productivity and efficiency in labour-intensive industries.

    Manufacturing and services companies which incur qualifying capital expenditure on automation equipment are given tax incentives as follows:

    Category 1: Labour-Intensive Industry (rubber, plastic, wood and textile products)

    • ACA of 100% for automation equipment on the first RM4 million for Qualifying Capital Expenditure incurred and can be utilised within 1 year.

    Category 2: Industries other than Category1 including the services sector

    • ACA of 100% for automation equipment on the first RM2 million for qualifying capital expenditure incurred and can be utilised within 1 year.

    Both categories are eligible for income tax exemption equivalent to 100% of qualifying capital expenditure incurred for automation equipment. Thus, eligible capital expenditure that can be absorbed is 200%within a year.

    The tax incentive is for applications received by the Malaysian Investment Development Authority (MIDA) until 31 December 2023.

    Guideline and Procedure for the Application of Automation Capital Allowance (Automation CA) for Services Sector – for an existing company only.

    173.1-Guideline-and-Procedure-for-the-application-of-Automation-Capital-Allowance-Automation-CA-for-Services-Sector-–-for-existing-company-onlyDownload

    Effective Date

    To further drive productivity and improve efficiency through automation, it is proposed the ACA for automation equipment be enhanced as follows:

    • scope of automation to include the adaptation of Industry 4.0 elements;
    • scope of tax incentives is expanded to include the agriculture sector; and
    • capital expenditure threshold for categories 1, 2 and agriculture be aligned and increased to RM10 million.

    For applications received by MIDA and the Ministry of Agriculture and Food Security (MAFS) from 1 January 2023 until 31 December 2027.

    Updated on 15 July 2023- Dialogue between MOF, LHDNM, and CTIM [21/6/2023]

    CTIM proposed the mutually exclusive rules to be applied on an asset basis instead of a company basis.

    MOF’s Feedback:

    The proposal was duly noted.

    Further studies will be conducted regarding the mutually exclusive clause to ensure its suitability for implementation.

    For assets under hire purchase, kindly confirm there is no requirement for the hire purchase instalments to commence and end within the qualifying period from 1 January 2023 until 31 December 2027 to qualify for the accelerated capital allowance (“ACA”) claim.

    In essence, as long as it is a qualifying asset, the incentive applies to the whole capital expenditure incurred.

    LHDNM’s Feedback:

    The ACA incentive also applies to assets acquired through hire-purchase agreements.

    The eligible capital expenditure for hire-purchased assets is the principal amount incurred during the basic period of a particular assessment year for assets acquired between 1 January 2023 and 31 December 2027.

    Therefore, principal payments made outside the incentive period are not eligible to enjoy this incentive.

    ACA on capital expenditure up to RM10 million is welcomed.

    Still, there should be clarity on whether it is a 200% allowance like in the past (i.e. 100% accelerated capital allowance plus 100% automation capital allowance) or just a 100% accelerated capital allowance.

    LHDNM’s Feedback:

    This extended Accelerated Capital Allowance (ACA) incentive refers to the incentive under ACA (Automation Enhancement).

    This incentive should be read and applied with the income tax order that provides an exemption equal to 100% of the ACA (Automation Enhancement) amount.

    This exemption applies to statutory income from eligible projects but is limited to 70%.

    The characteristics of the incentive are the same as the original incentive.

    This matter will be clarified in the relevant subsidiary legislation.

    MOF’s Feedback:

    The characteristics of the incentive will be the same as the original incentive.

    Disclaimer:

    The articles, templates, and other materials on our website are provided only for your reference.

    While we strive to ensure that the information presented is current and accurate, we cannot guarantee the completeness, reliability, suitability, or availability of the website or its content, including any related graphics. Consequently, any reliance on this information is entirely at your own risk.

    If you intend to use the content of our videos and publications as a reference, we recommend that you take the following steps:

    1. Verify that the information provided is current, accurate, and complete.
    2. Seek additional professional opinions, as the scope and extent of each issue, may be unique.

    免责声明：

    我们网站上的文章、模板和其他材料只供参考。

    虽然我们努力确保所提供的信息是最新和准确的，但我们不能保证网站或其内容，包括任何相关图形的完整性、可靠性、适用性或可用性。因此，您需要承担使用这些信息所带来的风险。

    如果你打算使用我们的视频和出版物的内容作为参考，我们建议你采取以下步骤：

    1. 核实所提供的信息是最新的、准确的和完整的。
    2. 寻求额外的专业意见，因为每个问题的范围和程度，可能是独特的。

    Keep in touch with us so that you can receive timely updates

    请与我们保持联系，以获得即时更新。

    1. Website ✍️ https://www.ccs-co.com/ 2. Telegram ✍️ http://bit.ly/YourAuditor 3. Facebook ✍

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  • Extension of Tax Incentive for Intellectual Property Development

    Extension of Tax Incentive for Intellectual Property Development

    Update: The Ismail Sabri Government Budget is no longer applicable.

    Malaysia’s national budget for 2023 was re-tabled again in February 2023; for more info, please visit – https://www.ccs-co.com/post/budget-2023-malaysia-madani.

    This tax incentive included in Budget 2023, tabled in Parliament on 7 October 2022, was not included in Budget 2023 (Re-tabled) on 24 February 2023.

    Response from MOF: MOF is currently reviewing off-budget items.

    The phrase “MOF is currently reviewing off-budget items” typically refers to the Ministry of Finance (MOF) conducting an evaluation or examination of expenses or financial matters that are not included in the official budget. Off-budget items are expenditures or revenue sources not directly accounted for in the regular budgeting process.

    Governments often create budgets to allocate funds for various programs, projects, and expenses. However, certain financial activities may fall outside the scope of the official budget. These off-budget items could include emergency spending, special funds, grants, subsidies, or other financial transactions not explicitly accounted for in the regular budgeting process.

    When the MOF reviews off-budget items, they are scrutinising these financial activities to assess their impact, legality, appropriateness, or potential risks. This review aims to ensure transparency, fiscal responsibility, and effective financial management within the government. It helps identify discrepancies, assess the necessity and effectiveness of off-budget items, and make informed decisions regarding their continuation or modification.

    Current Position

    The government proposed in Budget 2020 that qualifying intellectual property (IP)-generated income derived from the development of patents and copyright software be given a 100% income tax exemption for up to 10 years.

    In response to the proposal presented above, the Malaysian Investment Development Authority (MIDA) has published, with an effective date of January 1, 2020, the Guidelines on Incentives for Intellectual Property (IP) Development.

    For tax exemption computation, the income that qualifies for the exemption will be calculated based on the Modified Nexus Approach (MNA).

    Eligible applicants

    New/existing companies own the rights of the qualifying IPs and are receiving income from the qualifying IP activities related to the promoted activities/list prescribed under the Promotion of Investments Act 1986 (PIA) and the Income Tax Act 1967 (ITA).

    Qualifying IP asset types

    • Patent or utility innovation
    • Copyrighted software
    • Family of qualifying IPs

    Qualifying IP income types

    • Royalty
    • Licensing Fees

    Eligibility criteria

    • R&D activities must be conducted in Malaysia, where such activities lead to the development, improvement, modification or creation of the Qualifying Asset.
    • Adequate operating expenditure incurred annually to support the company in conducting its business operation in Malaysia.
    • The company must have at least 30% of science and technical staff have a degree or diploma with a minimum of five years of experience from related fields.

    Qualifying R&D expenditure

    • Eligible R&D expenditure for MNA calculation will align with the eligible expenditure types under s 34A of the ITA.
    • Includes expenditure under cost-sharing agreements, provided that the cost of payable R&D is clearly stated in the agreement.
    • Qualifying expenditure can be backdated up to three years from the date the IP is registered/filed.

    The incentive will apply to applications received by MIDA between 1 January 2020 and 31 December 2022. Three sets of the application are to be submitted to the following:

    • Chief Executive Officer
    • Malaysian Investment Development Authority (MIDA)
    • MIDA Sentral
    • No. 5, Jalan Stesen Sentral 5
    • Kuala Lumpur Sentral
    • 50470 Kuala Lumpur

    (Attention: Advanced Technology and Research & Development Division (ATRD) Division)

    Proposal [This tax incentive included in Budget 2023, tabled in Parliament on 7 October 2022, was not included in Budget 2023 (Re-tabled) on 24 February 2023]

    To further encourage R&D activities and IP registration in Malaysia, the proposed tax incentive will be extended for 3 years.

    Effective Date

    For applications received by MIDA from 1 January 2023 until 31 December 2025.

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    16
  • Green Investment Tax Allowance (GITA) & Green Income Tax Exemption (GITE)

    Green Investment Tax Allowance (GITA) & Green Income Tax Exemption (GITE)

    Updated on 15 July 2023 - Dialogue between MOF， LHDNM， and CTIM [21/6/2023]

    Malaysia’s national budget for 2023 was re-tabled again in February 2023; for more info, please visit – https://www.ccs-co.com/post/budget-2023-malaysia-madani.

    The Ismail Sabri Government Budget is no longer applicable. Therefore, these tax incentives included in Budget 2023, tabled in Parliament on 7 October 2022, were not included in Budget 2023 (Re-tabled) on 24 February 2023.

    The good news is that based on the response from MOF (Ministry of Finance), these incentives will be reviewed during Budget 2024.

    Current Position

    There are currently incentives for green technology, including:

    • the Green Investment Tax Allowance for qualifying green activities, and
    • the Green Investment Tax Exemption for qualifying green services and solar leasing activities.

    In Budget 2020, green technology tax incentives have been extended until 31 December 2023.

    Meanwhile, in Budget 2022, Rainwater Harvesting Systems (RHS) are included within Qualifying Green Services and Qualifying Green Assets.

    1. Green Investment Tax Allowance (GITA)

    • Investment Tax Allowance (ITA) of 100% on capital expenditure for qualifying green activity for 3 years.
    • This allowance can be set off against 70% of statutory income.

    2. Green Income Tax Exemption (GITE)

    • income tax exemption of 70% on statutory income for qualifying green services activities for 3 years of assessment; and
    • income tax exemption of 70% on statutory income for up to 10 years for solar leasing activities.

    The tax incentive is for applications received by the Malaysian Investment Development Authority (MIDA) from 1 January 2020 until 31 December 2023.

    The proposal under Ismail Sabri Government Budget [But these tax incentives included in Budget 2023, tabled in Parliament on 7 October 2022, were not included in Budget 2023 (Re-tabled) on 24 February 2023.]

    As a continuous support for green technology development initiatives in line with the Green Technology Master Plan 2017-2030, it is proposed tax incentives for qualifying green activities under GITA and GITE be reviewed based on tiering approach as follows:

    1. ITA of 60% for solar activity; and ITA of 100% for activity other than solar, including Battery Energy Storage System (BESS);
    2. tax incentive period be extended from 3 years to 5 years for selected projects; and
    3. application period for tax incentives is extended for two years.

    The details of tiering approach for GITA and GITE, as in SCHEDULE 1, as below:-

    Effective Date

    These tax incentives included in Budget 2023, tabled in Parliament on 7 October 2022, were not included in Budget 2023 (Re-tabled) on 24 February 2023. Therefore, it is no longer relevant.

    For applications received by MIDA from 1 January 2024 until 31 December 2025.

    Updated on 15 July 2023- Dialogue between MOF， LHDNM， and CTIM[21/6/2023]

    CTIM would like to know when the government will issue the Income Tax Exemption Order (GITE) so that the taxpayers can claim the tax incentive.

    LHDNM’s Feedback:

    The draft exemption order is currently in the process of being gazetted.

    Update on the status: Green Investment Tax Allowance (“GITA”)

    On the extension of 100% Investment Tax Allowance to the YA 2023 on qualifying capital expenditure incurred for green technology activities.

    LHDNM’s Feedback:

    Various technical and legal parties are reviewing the draft exemption order, namely MOF, AGC, LHDNM, MGTC, and MIDA.

    A discussion was held on 18 April 2023 between MOF, AGC, and LHDNM to address issues and questions raised by AGC regarding the draft GITA Asset.

    The drafts for GITA Asset, GITA Project, and GITA Green Building are currently in the process of being gazetted with AGC.

    Update on the status: Green Income Tax Exemption (“GITE”)

    • Extension of income tax exemption of 70% of statutory income for qualifying green technology services to the YA 2023; and
    • Income tax exemption of 70% of statutory income up to 10 years of assessment for solar leasing companies certified by the Sustainable Energy Development Authority (“SEDA”).

    LHDNM’s Feedback:

    The draft exemption order is currently in the process of being gazetted with AGC.

    Update on the status: Extension of the list of qualifying assets from nine to forty in the MyHIJAU directory for green investment tax allowance (“GITA”).

    LHDNM’s Feedback:

    A discussion was held on 18 April 2023 between MOF, AGC, and LHDNM to address issues and questions raised by AGC regarding the draft GITA Asset.

    The draft exemption order is currently in the process of being gazetted with AGC.

    MOF’s Feedback:

    Various technical and legal parties are currently reviewing the draft exemption order, namely MOF, AGC, LHDNM, and MGTC.

    Update on the status: Investment tax allowance for the purchase of green technology equipment and tax exemption on the use of green technology systems be granted

    LHDNM’s Feedback:

    A discussion was held on 18 April 2023 between MOF, AGC, and LHDNM to address issues and questions raised by AGC regarding the draft GITA Asset.

    The draft exemption order is currently in the process of being gazetted with AGC.

    MOF’s Feedback:

    Various technical and legal parties are reviewing the draft exemption order, namely MOF, AGC, LHDNM, and MGTC.

    Disclaimer:

    The articles, templates, and other materials on our website are provided only for your reference.

    While we strive to ensure that the information presented is current and accurate, we cannot guarantee the completeness, reliability, suitability, or availability of the website or its content, including any related graphics. Consequently, any reliance on this information is entirely at your own risk.

    If you intend to use the content of our videos and publications as a reference, we recommend that you take the following steps:

    1. Verify that the information provided is current, accurate, and complete.
    2. Seek additional professional opinions, as the scope and extent of each issue, may be unique.

    免责声明：

    我们网站上的文章、模板和其他材料只供参考。

    虽然我们努力确保所提供的信息是最新和准确的，但我们不能保证网站或其内容，包括任何相关图形的完整性、可靠性、适用性或可用性。因此，您需要承担使用这些信息所带来的风险。

    如果你打算使用我们的视频和出版物的内容作为参考，我们建议你采取以下步骤：

    1. 核实所提供的信息是最新的、准确的和完整的。
    2. 寻求额外的专业意见，因为每个问题的范围和程度，可能是独特的。

    Keep in touch with us so that you can receive timely updates

    请与我们保持联系，以获得即时更新。

    1. Website ✍️ https://www.ccs-co.com/ 2. Telegram ✍️ http://bit.ly/YourAuditor 3. Facebook ✍

    4. Blog ✍ https://lnkd.in/e-Pu8_G 5. Google ✍ https://lnkd.in/ehZE6mxy

    6. LinkedIn ✍ https://www.linkedin.com/company/74734209/admin/

    23