Update: The Ismail Sabri Government Budget is no longer applicable.
Malaysia's national budget for 2023 was re-tabled again in February 2023; for more info, please visit - https://www.ccs-co.com/post/budget-2023-malaysia-madani.
This tax incentive included in Budget 2023, tabled in Parliament on 7 October 2022, was not included in Budget 2023 (Re-tabled) on 24 February 2023.
Response from MOF (Ministry of Finance): The incentive is still under study.Current Position
Under Schedule 7A of the Income Tax Act of 1967, the manufacturing industry and certain agricultural sectors are eligible for the Reinvestment Allowance (RA) on:
expansion,
diversification,
modernisation; and
automation.
The RA is granted at a rate of 60% on qualified capital expenditures for a period of 15 consecutive years, and it can be set off against 70% of statutory income.
This RA can be claimed via the Income Tax Return Form, making it easier for businesses to take advantage of tax incentives.
Under ITA 1967, the services sector is not eligible for a reinvestment allowance.
Proposal [This tax incentive included in Budget 2023, tabled in Parliament on 7 October 2022, was not included in Budget 2023 (Re-tabled) on 24 February 2023]
It is suggested that a new schedule for reinvestment of hotels and selected tourism projects under ITA 1967 be introduced and given RA at 60% on qualifying capital expenditure for 5 years consecutively, to be set off against 70% of statutory income, to revive the services sector, particularly tourism affected by the COVID-19 pandemic.
The following renovation, expansion, and modernisation activities are eligible for this tax incentive:
1 to 5-star hotels registered with the Ministry of Tourism, Art and Culture (MOTAC); and
selected tourism projects, namely theme parks and convention centres with a capacity of at least 3000 participants and registered with MOTAC.
This RA can be claimed through the Income Tax Return Form.
Effective Date
From the year of assessment 2023 until the year of assessment 2027.
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