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Akta Penggalakan Pelaburan 1986 - Pioneer Status

Promoted Products or Activities

Pioneer status may be granted to all companies participating in a promoted activity or producing a promoted product. The power to determine any product or activity lies with the Minister of International Trade and Industry. Presently, gazetted lists for the promoted products or activities are as follows :-

  1. promoted products or activities (including the promoted area);

  2. promoted products or activities for small scale companies;

  3. promoted products or activities for high-technology companies.

The list of promoted products or activities originally covers four main sectors but subsequent amendments to the Promotion of Investments Act 1986 have expanded the scope to include other sectors.

The Original Sectors are :-

  1. Manufacturing

  2. Agricultural

  3. Hotel

  4. Tourism

And also certain commercial sectors connected to manufacturing.

Additional Sectors are :-

  1. Research and Development;

  2. Technical or vocational training.

Benefits of Pioneer Status

The most important advantage of acquiring pioneer status is the total or partial exemption from income tax for a period of five years. The exempt income are credited to the exempt account from which exempt dividends are distributed to the shareholders of the company. If the shareholder is a company any dividends paid by that shareholding company to its shareholders out of that amount shall also be exempt from tax in the hands of those shareholders.

Total Exemption From Income Tax

Eligibility

Tax Relief

Application for pioneer status received prior to 1.1.1991

Tax exemption of adjusted income for five years.

Tax relief period may be extended for a further 5 years for certain manufacturing activities.

Unabsorbed losses to be carried forward to post-pioneer period.

Capital expenditure incurred on assets acquired during tax relief period deemed incurred on the day following the end of tax relief period.

Application for pioneer status received on or after 1.1.1991 but before 1.11.1991

Tax exemption of statutory income for five years.

Tax relief period may be extended for a further 5 years for certain manufacturing activities.

Unabsorbed losses not to be carried forward to post-pioneer period.

Unabsorbed capital allowances not to be carried forward to post-pioneer period.

Approval of pioneer status by a company producing a product or participating in an activity of national and strategic importance to Malaysia.

Tax exemption of statutory income for 10 years.

Unabsorbed losses not to be carried forward to post-pioneer period.

Unabsorbed capital allowances not to be carried forward to post-pioneer period.

Approval of pioneer status to a high-technology company

Tax exemption of statutory income for 5 years. Unabsorbed losses not to be carried forward to post-pioneer period. Unabsorbed capital allowances not to be carried forward to post-pioneer period.

Approval of pioneer status to a contract R & D company

Tax exemption of statutory income for 5 years. Unabsorbed losses not to be carried forward to post-pioneer period. Unabsorbed capital allowances not to be carried forward to post-pioneer period.

Partial Exemption

Eligibility

Tax Relief

Application for pioneer status received on or after 1.11.1991

Tax exemption restricted to 70% of statutory income for 5 years.

No extension of tax relief period for a further 5 years.

Unabsorbed losses not to be carried forward to post-pioneer period.

Unabsorbed capital allowances not to be carried forward to post-pioneer period.

Approval of pioneer status to a company to be located in a "promoted area"

Tax exemption restricted to 85% of statutory income for 5 years.

No extension of tax relief period for a further 5 years.

Unabsorbed losses not to be carried forward to post-pioneer period.

Unabsorbed capital allowances not to be carried forward to post-pioneer period.


Example: Tax computation during tax relief period.

Co. ABC which is located in Sabah has been granted pioneer status on 1.4.1994 in respect of a promoted product. The tax relief period of 5 years commenced on 1.10.1994 and accounts are made up to 31 December annually.

Given in Year of Assessment 1995 the following :-

Pioneer Business (P)
Statutory Income (1.10.1994 - 31.12.1994)


RM58,500

Non Pioneer Business (NP)
Adjusted Loss (up to 31.12.1994)


(RM22,000)

Other Income

NIL

The restriction to the statutory income of the pioneer company in respect of its pioneer business for purposes of exemption and the computation of the total income of its pioneer business for purposes of taxation is as follows :-

Pioneer Business

Y/A 1995 (1.10.1994 - 31.12.1994)
Statutory pioneer income
(Restricted to 85% of statutory income RM58,500)

RM49,725

Less : Non Pioneer Loss

(RM22,000)

Exempted Pioneer Income

RM27,725



Non Pioneer Business

Statutory Income from Non Pioneer Business

NIL

Other Income

NIL

Aggregate Income

NIL

Add : Total Income from Pioneer Business (15% of RM58,500)

RM8,775.00

Total Income Taxable @ 30%

RM2,632.50

Note :-
The Unabsorbed losses of pioneer business cannot be carried forward and offset against the post pioneer income of the pioneer company (Section 25(2)).



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