Reinvestment Allowance (RA) on Factory

Reinvestment Allowance (RA) on Factory
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The Myths on Reinvestment Allowance (RA)

What is RA?

The allowance is given for 15 years from the first year of claim. The allowance is computed at 60% of QCE incurred and can be utilised against 70% of statutory income.

The allowance will be withdrawn if the asset for which the allowance is granted is disposed of within five years

Definition of factory

Factory means “portion of the floor areas of a building or an extension of a

the building used for the purposes of a qualifying project to place or install plant or machinery or to store any raw materials, or goods or materials manufactured prior to sale:

1/10 ruling on factory

Provided that in respect of the portion of the building or extension of the building used for the storage of raw materials, or goods or materials, or both, it shall not be more than one-tenth of the total floor areas of the building or the

extension to that building;”

Tax planning tip

The restriction on warehouse/storage issues which taxpayers may not agree.

There are others tax incentive available in Malaysia namely Pioneer Status or Investment Tax Allowance from MIDA which is more business friendly.

Past KTP blog on RA

Read our past blog posting on RA

1. RA part 1 dated 26/02/21

https://www.ktp.com.my/blog/ra-part1/26feb2021?rq=reinvestment%20allowance

2. RA part 2 dated 04/03/21

https://www.ktp.com.my/blog/special-ra-part2/04march2021?rq=reinvestment%20allowance

3. RA part 3 dated 11/03/21

https://www.ktp.com.my/blog/special-ra-part3/11march2021?rq=reinvestment%20allowance

Source


IRB Practice Note 1/2022 - EXPLANATION IN RELATION TO THE DEFINITION OF FACTORY FOR THE PURPOSE OF REINVESTMENT ALLOWANCE CLAIM UNDER SCHEDULE 7A, INCOME TAX ACT 1967

https://phl.hasil.gov.my/pdf/pdfam/PN_1_2022.pdf

PS : Why opt for RA when there are others tax incentives available in Malaysia?

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