BDO Tax Buzz | Issue (4) 2024

In this issue of Tax Buzz, we will highlight the key changes and updates on:

INCOME TAX

Investment Tax Allowance for Manufacturing Sector

Eligibility: Companies in the manufacturing sector, incorporated under the Companies Act 2016, tax resident in Malaysia, and undertaking expansion/diversification projects.
Tax Allowance:
- Tier 1: 100% tax allowance on qualifying capital expenditure (excluding land) incurred in the first 5 years.
- Tier 2: 60% tax allowance on qualifying capital expenditure incurred in the second 5 years.
Conditions: Adoption of 4IR technologies, hiring of Malaysian employees with high-value jobs, and adoption of green technology for Tier 1.
Tax Incentive Period: Available to companies that have previously claimed Reinvestment Allowance (RA) under Schedule 7A of the Income Tax Act 1967.

Automation Capital Allowance (Automation CA)

Eligibility: Companies in manufacturing and services sectors investing in automation machinery/equipment that meets Industry 4.0 standards.
Tax Allowance: 200% allowance on the first RM10 million of qualifying automation expenditure between YA 2023 and YA 2027.
Conditions: Machinery must enhance productivity, use advanced technology (verified by SIRIM), and meet automation requirements (Industry 4.0 elements).
Exclusions: Not eligible if claiming other allowances (e.g., RA or certain tax incentives).

Reinvestment Incentive under NIMP 2030

Eligibility: Companies that have exhausted their RA under Schedule 7A and are undertaking expansion or diversification projects.
Tax Allowance:
- Tier 1: 100% tax allowance on qualifying capital expenditure for the first 5 years.
- Tier 2: 60% tax allowance for the next 5 years.
Conditions: Must adopt 4IR technologies, hire high-value employees, and appoint local suppliers. Tier 1 also requires adopting green technologies.
Access: Applications must be submitted to MIDA before the project starts.

INCENTIVES

Automation Capital Allowance (Automation CA) for Manufacturing & Service Sectors

Eligibility: Companies in Malaysia with automation machinery/equipment that integrates Industry 4.0 technology, approved by MIDA.
Grant Exclusions: If the automation machinery/equipment is purchased through a government grant, only the amount not covered by the grant can claim Automation CA.
Incentives: Encourages investment in advanced machinery and automation to improve productivity, subject to SIRIM verification.

Reinvestment Incentive under NIMP 2030

Eligibility: Companies previously claiming RA under Schedule 7A, involved in expanding or diversifying in the manufacturing sector.
Incentive Details: The incentive allows tax allowances for reinvestment to continue expanding or diversifying operations.
Applications: Companies can only apply once for the incentive, and if a related company has already claimed it, the new application must relate to a different product/activity.

SERVICE TAX

Service Tax Policies (July - August 2024)

Policy 7/2024 (26 July 2024): Service tax treatment for the issuance of virtual credit cards.
Policy 4/2024 (Amendment No. 1) (23 August 2024): Updates on the service tax treatment for logistics services.
Access: Policies are available on RMCD’s MySST website.

Industry Guides (July - August 2024)

Provision of Insurance Policy and Takaful Certificate Services (29 August 2024): Updates the previous guide from 2018 regarding the service tax treatment of insurance and takaful services.
Access: Guides can be found on RMCD’s MySST website.