1. Subject to this Schedule, where a company which is resident in Malaysia-
[Am. Act 619:s.10]
(a) has been in operation for not less than twelve months; and
[Am. Act 591:13]
(b) has incurred in the basis period for a year of assessment capital expenditure on a factory, plant or machinery used in Malaysia for the purposes of a qualifying project,
[Am. Act 591:13]
(c) [Deleted by Act 591:13]
there shall be given to the company for that year of assessment a reinvestment allowance of an amount equal to sixty per cent of that expenditure:
Provided that such expenditure shall not include capital expenditure incurred on plant or machinery which is provided wholly or partly for the use of a director, or an individual who is a member of the management, or administrative or clerical staff.
[Subs. Act 578:21]
1A. Subject to this Schedule, where a company which has been in operation for not less than twelve months and is resident in Malaysia for the basis year for a year of assessment has incurred in the basis period for that year of assessment, capital expenditure in relation to an agricultural project in Malaysia for the purposes of any qualifying project there shall be given to the company for that year of assessment a reinvestment allowance of sixty per cent of that expenditure.
1B. (1) Subject to subparagraph (2), where a company (in this paragraph referred to as "the acquirer") has incurred capital expenditure in respect of an asset for the purposes of a qualifying project and that asset is acquired from another company (in this paragraph referred to as "the disposer") and at the time of the acquisition—
(a) the acquirer of the asset is a person over whom the disposer of the asset has control;
(b) the disposer of the asset is a person over whom the acquirer of the asset has control;
(c) some other person has control over the acquirer and disposer of the asset; or
(d) the acquisition is effected in consequence of a scheme of reconstruction or amalgamation of companies,
the acquirer shall be deemed to have incurred that capital expenditure on the asset on the first day of the disposer's final period, of an amount equal to the amount of residual expenditure ascertained under sub-paragraph (3).
(2) Where the disposer incurred capital expenditure in relation to the asset referred to in subparagraph (1) on or after the first day of the disposer's final period, the acquirer shall be deemed to have incurred capital expenditure on the asset on the day that disposer incurred capital expenditure, of an amount equal to the amount of capital expenditure incurred by that disposer.
(3) For the purposes of subparagraph (1), residual expenditure in relation to an asset shall be the capital expenditure incurred by the disposer reduced by the amount of allowances on that asset under Schedule 3 that has been made or would have been made to the disposer in the basis period or periods before the first day of the disposer's final period.
(4) In this paragraph—
"asset" means a factory, plant or machinery referred to in paragraph 1, or plant, machinery or building referred to in the definition of "capital expenditure" in paragraph 9;
"control", in relation to a company, means the power of a person to secure, by means of the holding of shares or the possession of voting power in or in relation to that or any other company, or by virtue of any powers conferred by the articles of association or other document regulating that or any other company, that the affairs of the first-mentioned company are conducted in accordance with the wishes of that person;
"the disposer's final period", in relation to the disposal and acquisition of an asset, means the basis period (appropriate to the disposer's business for the purposes of which expenditure has been incurred in relation to the asset) for the year of assessment which coincides with the first year of assessment for which an allowance under Schedule 3 may be made to the acquirer in relation to the asset if it is used for the purposes of a business carried on by the acquirer or as an industrial building.
[Ins. Act 619:s.10]
2. An allowance under paragraph 1 or 1A shall be given in respect of capital expenditure incurred in the basis periods for fifteen consecutive years of assessment beginning from the year of assessment for the basis period in which the capital expenditure was first incurred.
[Subs. Act 578:21; Am. Act 619:s.10]
2A. Where an asset is disposed of at any time within two years from the date of acquisition of that asset, an allowance given under paragraph 1 or 1A in respect of that asset shall be deemed to have not been given to the company to which it would otherwise be entitled.
[Ins. Act 578:21]
3. Where an allowance is given to a company under paragraph 1 or 1A for a year of assessment, so much of the statutory income of that business of that company for that year of assessment as is equal to the amount of the allowance (or to the aggregate amount of any such allowances as the case may be) but not exceeding seventy per cent of the statutory income shall be exempt from tax for that year of assessment:
Provided that where the qualifying project is located within the States of Sabah, Sarawak, the Eastern Corridor of Peninsular Malaysia and such other areas which the Minister may from time to time determine or where the qualifying project has achieved the level of productivity as prescribed by the Minister, the amount to be exempt shall be equal to the allowance (or to the aggregate amount of any such allowances as the case may be) but not exceeding the statutory income for that year of assessment.
[Subs. Act 578:21]
4. Where, by reason of the restriction of the allowance to seventy per cent of the statutory income or of an insufficiency or absence of statutory income from a business of the company for the basis period for a year of assessment, effect cannot be given or cannot be given in full to any allowance or allowances to which the company is entitled under this Schedule for that year of assessment in relation to the source consisting of that business, so much of the allowance or allowances as cannot be given for that year shall be given to the company under this Schedule for the first subsequent year of assessment for the basis period for which there is statutory income from that business, and for subsequent years of assessment until the company has received the whole of the allowance or allowances to which it is so entitled.
[Subs. Act 578:21]
5. (1) In the case of a company as soon as any amount of income has become exempted under paragraph 3, that amount shall be credited to an account to be kept by that company for the purposes of this paragraph (that account and company being in this paragraph and paragraph 6 referred to as the exempt account and the relevant company respectively).
[Am. Act 557:24]
(2) Where the exempt account is in credit at the date on which any dividends are paid by the relevant company out of income which has been exempted under paragraph 3, an amount equal to those dividends or that credit, whichever is the less, shall be debited to the exempt account.
(3) So much of the amount of any dividends debited to the exempt account under subparagraph (2) as is received by a shareholder in the relevant company shall, if the Director General is satisfied with the entries in the exempt account, be exempt from tax in the hands of that shareholder.
(4) Any dividends debited to the exempt account under subparagraph (2) shall be treated as having been distributed to the shareholders (or any particular class of shareholders) of the relevant company in the same proportions as those in which the shareholders in question were entitled to payment of the dividends giving rise to the debit.
(5) Until the Director General is satisfied that there is no further need to maintain the exempt account, the relevant company shall deliver to the Director General a copy of the exempt account made up to a date specified by him whenever it is called upon to do so by notice in writing sent by the Director General to the company's registered office.
(6) Where-
(a) an amount is received by way of dividend from the relevant company by a shareholder;
(b) that amount is exempt from tax under subparagraph (3); and
(c) that shareholder is a company,
any dividends paid by that shareholding company to its shareholders shall, to the extent that the Director General is satisfied that the dividends so paid are paid out of that amount, be exempt from tax in the hands of those shareholders.
(7) Section 108 shall not apply in respect of any dividend or part thereof which is debited to the exempt account or in respect of any dividend or part thereof which is exempt under subparagraph (6).
6. Notwithstanding any other provisions of this Schedule where paragraph 2A applies or, where it appears to the Director General that any income of the relevant company exempted under paragraph 3 or any dividend exempted in the hands of a shareholder under paragraph 5 ought not to have been exempted, he may at any time within six years after the expiration of the year of assessment for which the exemption was given make such assessment or additional assessments upon any person as appears to him to be necessary in order to counteract any benefit obtained from the exemption, or direct the relevant company to debit the exempt account with such amount as the circumstances require.
[Am. Act 578:21]
7. This Schedule shall not apply to a company-
(a) for the period during which the company-
(i) has been granted pioneer status under the Promotion of Investments Act 1986 in respect of any promoted activity or promoted product and which is applying or intends to apply for the grant of a pioneer certificate; or
(ii) has been granted pioneer certificate under the Promotion of Investments Act 1986 in respect of a promoted activity or promoted product and whose tax relief period has not ended or ceased;
(b) for the period prescribed under subsection 29(2), 29A(3), 29B(2), 29C(2) or 29G(2) of the Promotion of Investments Act 1986 in respect of a promoted activity or promoted product for which the company has been granted approval under section 27, 27A, 27B, or 27F of that Act;
[Am. Act 578:21]
(c)(repealed by Act 578:21)
(d) for the period during which that company, notwithstanding the repeal of the Investment Incentives Act 1968-
(i) has been given approval under section 5, 12A or 12B of that Act and whose tax relief period has not ended; or
(ii) has been given approval under section 26 of that Act and incurs capital expenditure which qualifies for investment tax credit;
(e) for the period prescribed under paragraph 31E(2)(b) of the Promotion of Investments Act 1986 in respect of a manufacturing activity or manufactured product for which the company has been granted approval under section 31C of that Act; or
[Ins. Act 544:17]
(f) in respect of qualifying expenditure on an approved agricultural project which has been given a deduction under Schedule 4A.
[Ins. Act 544:17]
8. In this Schedule, "qualifying project" means-
[Am
Act 451:29]
(a) a project undertaken by a company, in expanding, modernising or automating its existing business in respect of manufacturing or processing of a product or any related product within the same industry or in diversifying its existing business into any related product within the same industry;
[Sub Act 578:21]
(b) a project undertaken by a company which is participating in industrial adjustment approved under section 31A of the Promotion of Investments Act 1986, in expanding its existing business or modernising its production techniques or processes; or
[Ins. Act 544:17]
(c) an agricultural project undertaken by a company in expanding, modernising or diversifying its cultivation and farming business.
[Ins. Act 544:17]
9. In this Schedule-
"capital expenditure", in relation to an agricultural project referred to in paragraph 1A, means capital expenditure incurred in respect of-
[Ins. Act 544:17]
(a) the clearing and preparation of land;
(b) the planting of crops;
(c) the provision of irrigation or drainage systems;
(d) the provision of plant and machinery;
(c) the construction of access roads including bridges; or
(f) the construction or purchase of buildings (including those provided for the welfare of persons or as living accommodation for persons) and structural improvements on land or other structures,
[Ins. Act 544:17]
for the purposes of any of the following activities:
(aa) cultivation of rice and maize;
(bb) cultivation of vegetables, tuber and roots;
(cc) cultivation of fruits;
(dd) livestock farming;
(ee) spawning, breeding or culturing of aquatic products; and
(ff) any other activities approved by the Minister;
[Ins. Act 544:17]
"disposed of" means sold, conveyed, transferred, assigned, or alienated with or without consideration;
[Ins. Act 578:21]
"Eastern Corridor of Peninsular Malaysia" means the States of Kelantan, Terengganu, Pahang (not including the Districts of Lipis, Raub, Jerantut and Cameron Highlands except for the industrial areas approved by the State Government), and the District of Mersing in the State of Johore;
[Am. Act 578:21]
"incurred" has the same meaning assigned thereto in paragraphs 46 and 55 of Schedule 3.
[Ins. Act 578:21]
10. Except for paragraphs 1 and 5, this Schedule shall also apply to an agro-based co-operative society (within the meaning assigned to it under the Farmers' Organization Act 1973 [Act 109], an Area Farmers' Association, a National Farmers' Association, a State Farmers' Association (within the meanings assigned to them under the Farmers' Organization Act 1973), an Area Fishermen's Association, a National Fishermen's Association and a State Fishermen's Association (within the meanings assigned to them under the Fishermen's Associations Act 1971 [Act 44]).