The document discusses Malaysia's reinvestment allowance (RA), which provides tax deductions for companies reinvesting in qualifying projects like expansion, modernization, automation, and diversification. It covers RA criteria, eligible activities, deduction rates, a recent court case on RA eligibility, and special RA deductions introduced in Budget 2016 to encourage continued reinvestment. Key details include RA providing a 60% deduction on capital expenditures, deduction rates of 70-100% depending on location and efficiency targets, and the court ruling that RA can apply to factory upgrades in addition to plant and machinery.

1. Reinvestment allowance
●Public ruling 6/2012
● RA Court case
●Budget 2016 Special deduction on RA
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2. • Manufacturing activity – resident company
 Manufacturing / Agricultural ONLY.
 Agricultural activity– resident person ( Individual or
company)
Reinvestment allowance (RA)
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Contents of this presentation are adapted from the current of legislation at the time of presentation. No person should rely on the
content of this publication without first obtaining professional advice. We, KTP or THK, shall expressly disclaim all and any
liability and responsibility to any person in reliance in whole or any art of this contents.

3.  With effect from the 2009, a company / person has to be in
operation for not less than 36 months.
Reinvestment allowance
Criteria
 15 consecutive ‘YAs’’ on company basis not project basis.
 Must be qualifying project
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Contents of this presentation are adapted from the current of legislation at the time of presentation. No person should rely on the
content of this publication without first obtaining professional advice. We, KTP or THK, shall expressly disclaim all and any
liability and responsibility to any person in reliance in whole or any art of this contents.

4. • Expansion
• Modernization
Contents of this presentation are adapted from the current of legislation at the time of presentation. No person should rely on the
content of this publication without first obtaining professional advice. We, KTP or THK, shall expressly disclaim all and any
liability and responsibility to any person in reliance in whole or any art of this contents.
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• Automation
• Diversifying
Qualifying project

5. • Definition : increase of a product capacity (of same product or related
product within the same industry or expansion of factory area)
• Example :
Expansion project
Contents of this presentation are adapted from the current of legislation at the time of presentation. No person should rely on the
content of this publication without first obtaining professional advice. We, KTP or THK, shall expressly disclaim all and any
liability and responsibility to any person in reliance in whole or any art of this contents.
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Original activity/product New activity/Products.
rubber gloves cotton gloves, woolen gloves

6. • Definition : upgrading of manufacturing equipment and processes.
• Example :
Company T, a manufacturer of rubber gloves, installs new machines to its
existing production line which cut down on the number of processes,
time of production and labour costs and improves on the quality of
the products.
Modernization project
Contents of this presentation are adapted from the current of legislation at the time of presentation. No person should rely on the
content of this publication without first obtaining professional advice. We, KTP or THK, shall expressly disclaim all and any
liability and responsibility to any person in reliance in whole or any art of this contents.
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7. • Definition:
Process whereby manual operations were replaced by mechanical
operations with minimal or reduced human intervention.
Automation project
Contents of this presentation are adapted from the current of legislation at the time of presentation. No person should rely on the
content of this publication without first obtaining professional advice. We, KTP or THK, shall expressly disclaim all and any
liability and responsibility to any person in reliance in whole or any art of this contents.
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8. • Definition:
Enlarge or vary the range of product of a company related to the same
industry.
• Only Forward integration is allowed:-
Diversifying project
Allowed √
Contents of this presentation are adapted from the current of legislation at the time of presentation. No person should rely on the
content of this publication without first obtaining professional advice. We, KTP or THK, shall expressly disclaim all and any
liability and responsibility to any person in reliance in whole or any art of this contents.
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9. • Backward integration is not allowed :-
Not allowed X
Contents of this presentation are adapted from the current of legislation at the time of presentation. No person should rely on the
content of this publication without first obtaining professional advice. We, KTP or THK, shall expressly disclaim all and any
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Diversifying project

10. • RA given to a qualifying company or person is
equivalent to 60% of CAPEX incurred in the
basic period for a YA.
Activity of
company/person
% of SI to be decuted.
Non-Promoted area
/Promoted area
Manufacturing
PE not
achieved
PE achieved
70% 100%
Agriculture 70% Not applicable
• But restricted to 70% or 100 % of the SI.
And calculate by PE (Process Efficiency)
Reinvestment allowance
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Contents of this presentation are adapted from the current of legislation at the time of presentation. No person should rely on the
content of this publication without first obtaining professional advice. We, KTP or THK, shall expressly disclaim all and any
liability and responsibility to any person in reliance in whole or any art of this contents.

11. Case study
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Contents of this presentation are adapted from the current of legislation at the time of presentation. No person should rely on the
content of this publication without first obtaining professional advice. We, KTP or THK, shall expressly disclaim all and any
liability and responsibility to any person in reliance in whole or any art of this contents.

12. Case study
X 70%
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Contents of this presentation are adapted from the current of legislation at the time of presentation. No person should rely on the
content of this publication without first obtaining professional advice. We, KTP or THK, shall expressly disclaim all and any
liability and responsibility to any person in reliance in whole or any art of this contents.

13. Court case
• Latest Court case of reinvestment allowance in Year 2016
• Ketua Pengarah Hasil Negeri vs Marigold Industries
(Appellant) (Respondent)
• The respondent in the business of manufacturing and selling
rubber gloves.
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Contents of this presentation are adapted from the current of legislation at the time of presentation. No person should rely on the
content of this publication without first obtaining professional advice. We, KTP or THK, shall expressly disclaim all and any
liability and responsibility to any person in reliance in whole or any art of this contents.

14.  For the YA 2001 to 2006, the taxpayer claimed RA on
qualifying project amounting RM5,388,385.00
 In 2009, the IRB conducted a tax audit and disallowed
the taxpayer’s RA claim on the SAP system.
 IRB argue that under proviso of para 1 sch 7A, he is
not eligible for RA if the plant and machinery is
wholly or partly for the use of a director,
management, administrative or clerk.
Facts and issue
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Contents of this presentation are adapted from the current of legislation at the time of presentation. No person should rely on the
content of this publication without first obtaining professional advice. We, KTP or THK, shall expressly disclaim all and any
liability and responsibility to any person in reliance in whole or any art of this contents.

15. • The SAP system help to eliminate human errors which are
caused by manual entries of records with the help of barcode
scanning.
• But the tax lawyers argues this restriction is limited to
reinvestment allowance on plant and machinery ONLY and does
not include factory.
Respondent’s appeal
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Contents of this presentation are adapted from the current of legislation at the time of presentation. No person should rely on the
content of this publication without first obtaining professional advice. We, KTP or THK, shall expressly disclaim all and any
liability and responsibility to any person in reliance in whole or any art of this contents.

16. • The High court was satisfied the SAP system was not for the use of a
director, or an individual who is member of the management and
added IRB failed to adduce sufficient evident.
Court’s decision
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Contents of this presentation are adapted from the current of legislation at the time of presentation. No person should rely on the
content of this publication without first obtaining professional advice. We, KTP or THK, shall expressly disclaim all and any
liability and responsibility to any person in reliance in whole or any art of this contents.

17.  A company be entitled to made a claim for special RA for another 3 YAs
(YA2016 to 2018) to encourage reinvestments by company that have
exhausted their eligibility to RA claim.
15 consecutive YAs of RA
Ended in:-
YA 2016 YA 2017 YA 2018
YA 2015 √ √ √
YA 2016 X √ √
YA 2017 X X √
Contents of this presentation are adapted from the current of legislation at the time of presentation. No person should rely on the
content of this publication without first obtaining professional advice. We, KTP or THK, shall expressly disclaim all and any
liability and responsibility to any person in reliance in whole or any art of this contents.
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Special deduction on RA (Budget 2016)

18. © copyright of KTP & THK
Contents of this presentation are adapted from the current of legislation at the time of presentation. No person should rely on the
content of this publication without first obtaining professional advice. We, KTP or THK, shall expressly disclaim all and any
liability and responsibility to any person in reliance in whole or any art of this contents.