Akta Penggalakan Pelaburan 1986 - Infrastructure Allowance

Qualifying Capital Expenditure On Infrastructure

Expenditure on construction` reconstruction` extension or improvement of any permanent structure including a bridge` jetty` port or road in respect of a business or businesses in operation in a promoted area but does not include expenditure:-

  • qualifying for investment tax allowance or industrial adjustment allowance;

  • which qualifies for capital allowances under schedule 3 of the Income Tax Act 1967;

  • which qualifies for reinvestment allowance;

  • incurred on plant or machinery used directly or indirectly for the purposes of storage` treatment or disposal of scheduled wastes as defined in the Environment Quality (Scheduled Wastes) Regulations 1989;and

  • incurred on buildings used as living accommodation and on plant and machinery provided for the use of a director or management` administrative or clerical staff member.

Benefits of Infrastructure Allowance

Infrastructure allowance is given at a rate of 100% of capital expenditure incurred on infrastructure for five years from 29.10.1993 to be deducted against the statutory income which is restricted to 85%. The amount arrived at is the exempt income which is 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. Company granted infrastructure allowance can carry forward unabsorbed losses to subsequent years. For pioneer company capital expenditure incurred during the tax relief period are deemed to have been incurred on the day following the end of the tax relief period.

Illustration on the working of Infrastructure allowance (IA)