Reinvestment allowance
17 important questions on Reinvestment allowance
What are the conditions for a company to qualify for Reinvestment Allowance (RA)?
- In operations for ≥ 36 months
- Resident in Msia
- Company is incorporated in Msia
- Co is carrying on manufacturing or agricultural activity
- Incurred qualifying expenditure in Msia
- Embark on an approved qualifying project
What are the qualifying projects for manufacturing companies under reinvestment allowance?
- Expanding
- Modernising
- Automating
- Diversifying (must be forward integration, not backward diversification)
What qualifies as a portion for the qualifying project in manufacturing?
- The floor space of the building/extension for EMAD qualifies.
- The portion of the building used to install machineries qualifies.
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What is the RA in relation to capital allowances and qualifying capital expenditure?
- RA is an additional relief over and above the claim for capital allowances.
- Quantum of RA is 60% of the QCE.
- Incurred each year within 15 years from the 1st YA the company claimed RA.
What does not qualify for the qualifying project in manufacturing?
- Floor space not used for the qualifying project does not qualify.
- Portion for storing raw materials/goods: >10% does not.
What is the tax treatment of RA for manufacturing that achieves the process efficiency ratio?
- 60% x capital expenditure
- Restricted to 100% x statutory income
How is the RA used in relation to statutory income (SI)?
- RA is used to exempt the SI up to a maximum of 70%.
- Excess RA carried forward to subsequent YAs.
- Set off up to a max of 7 YAs from end of the tax relief period.
What activities are included in agricultural qualifying expenditure?
- Clearing & preparation of land
- Planting of crops
- Access roads + bridges
- Living accommodation for workers
- Plant & machinery
- Provision of irrigation + drainage system
What are the qualifying projects for agricultural companies under reinvestment allowance?
- Expanding
- Modernising
- Diversifying
What is the tax treatment of RA for agricultural activities that do not achieve the process efficiency ratio?
- 60% x capital expenditure
- Restricted to 70% x statutory income
What happens to the exempted income from RA?
- The exempted income is credited into the exempt accounts.
- Used to distribute 2 tier tax exempt dividend.
What is not considered qualifying for reinvestment allowance?
- R&D building
- Building used for staff welfare i.e., canteen, nursery, living accommodation, sports & recreation
What is an example of a forward integration project in manufacturing?
How long must the qualifying expenditure for RA be incurred?
What occurs if an asset is disposed within 5 years from the date of acquisition?
- RA will be withdrawn in the YA of disposal.
- Amount withdrawn added to statutory income of qualifying project.
- No withdrawal if asset is destroyed by fire, flood, etc.
What is an example of a backward integration project in manufacturing?
When does the RA period end if the 1st claimed RA is in YA 2025?
- 1st claimed RA: YA 2025
- Ends in YA: YA 2039
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