Industrial Adjustment Allowance (IAA)

Promotions of Investments Act 1986 - Industrial Adjustment Allowance (IAA)

Promoted Sub-Sectors

IAA is given to manufacturing companies which undertake approved industrial activities in the following sub-sectors:

machinery and engineering industry;

    • wood-based industry:

    • textile industry:

    • oil palm refineries restructuring their operations by converting from Thermal Heating Oul (THO) High Pressure Steam (HPS).
Criteria for granting Industrial Adjustment Allowance

Any company participating in an industrial adjustment activity and not enjoying pioneer status or ITA for similar activity (or product) and undertaking industrial adjustment in the following form may be granted Industrial Adjustment Allowance :

    • modernization with the use of modern and up to date production processes and plant and equipment;

    • consolidation in particular` liquidation` amalgamation or mergers of companies;

    • restructuring of the capital ownership and structure of the industry;

    • rationalization - expansion and diversification of activities into related industries;

    • mergers of companies;

    • relocation of production facilities to a more economic location.
Benefit of Industrial Adjustment Allowance

The workings of IAA is similar to ITA but it is deducted against the adjusted income. The exempt income is credited to the exempt account where 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. Companies granted IAA can carry forward unabsorbed losses and capital allowances to subsequent years. Approval for IAA may be granted retrospectively from a date which is not earlier than the date of application.