Promoted Products or Activities
Any company participating or intending to participate in a promoted activity or producing a promoted product may be eligible to apply for ITA. Similar lists of promoted products or activities as applied for pioneer status would also be applied for ITA. ITA and pioneer status are mutually exclusive in respect of the same promoted activity or product. The same activity or product which has been granted pioneer status or ITA previously cannot qualify for pioneer status or ITA again.
Any company participating or intending to participate in a promoted activity or producing a promoted product may be eligible to apply for ITA. Similar lists of promoted products or activities as applied for pioneer status would also be applied for ITA. ITA and pioneer status are mutually exclusive in respect of the same promoted activity or product. The same activity or product which has been granted pioneer status or ITA previously cannot qualify for pioneer status or ITA again.
Capital Expenditures
Qualifying capital expenditure for the various sectors are defined in the PIA 1986.
Benefits of Investment Tax Allowance
The computation of ITA for a Year of Assessment is as follows :
The exempt income is credited to the exempt account from where exempt dividends are distributed to the shareholders of the company. If the shareholders 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.
Companies granted ITA can carry forward unabsorbed losses and capital allowances to subsequent years.
An approvals for ITA may be granted retrospectively from a date which is not earlier than three years (or such dates) from the date of application.
The table below lists out the rate of allowance, years of exemption and restriction to the statutory income for the different categories of companies.
| Companies and other particulars | Period (years) | Rate (% of qualifying expenditure) | Restricted to % of Statutory Income |
|---|---|---|---|
| Project of National and Strategic Importance | 5 | 100 | 100 |
| Project in Promoted Areas | 5 | 80 | 85 |
| High Technology Company | 5 | 60 | 100 |
| Contract R & D Company | 10 | 100 | 70 |
| R & D Company | 10 | 100 | 70 |
| In-House R & D | 10 | 50 | 70 |
| Technical or Vocational Training Company | 10 | 100 | 70 |
| Other Companies | 5 | 60 | 70 |
Example 1
| Years of Assessment 1995 | RM |
|---|---|
| Net Profit | 100,000 |
| Add : Disallowable expenses | 10,000 |
| Adjusted income | 110,000 |
| Less : Capital allowance | 20,000 |
| Statutory income | 90,000 (70% = |
| Less :- ITA @ 60% of 50,000 | 63,000) |
| Chargeable income | 30,000 |
| 60,000 ===== |
Tax payable on 60,000 @ 30% = 18,000 Note : ITA to be fully allowed since the sum is less than the restricted sum of RM63,000 i.e. 70% of Statutory Income (RM 90,000).
Example 2
| Year of Assessment 1996 | |
| Statutory income | 90,000(70% = |
| Less : ITA of 60% of 200,000 = 120,000 (subject to> | 63,000) |
| 70% of 90,000 = 63,000) | 63,000 |
| Chargeable income | 27,000 ===== |
| Unabsorbed ITA c/f to Y/A 1997 (120,000 – 63,000) = RM57,000 | |
| Tax payable on RM27,000 @ 30% | RM8,100.00 ========= |
