INCOME TAX ACT 1967 (ACT 53)




SCHEDULE 7A - Reinvestment Allowance


1. Subject to this Schedule, where a company which is resident in Malaysia-
[Am. Act 619:s.10]
[Am. Act 591:13]
[Am. 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.
[Ins. Act 544:17, Am. Act 578:21; Am. Act 619:s.10]

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—


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]
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-

[Am. Act 578:21]
[Ins. Act 544:17]
[Ins. Act 544:17]

8. In this Schedule, "qualifying project" means-
[Am Act 451:29]
[Sub Act 578:21]
[Ins. Act 544:17]
[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]
[Ins. Act 544:17]

for the purposes of any of the following activities:
[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]).
[Ins. Act 557:24]

Related reading:
[Act 619:s.10]


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