Incentive for Investment Tax Allowance

The Investment Tax Allowance (ITA) is one of the major tax incentives for companies investing in the manufacturing sector. Eligibility for ITA is based on certain priorities including the level of value-added, technology used and industrial linkages.

As an alternative to Pioneer Status, a company may apply for ITA. A company granted ITA is entitled to an allowance of 60% on its qualifying capital expenditure (factory, plant, machinery or other equipment used for the approved project) incurred within 5 years from the date the first qualifying capital expenditure is incurred.

The company can offset this allowance against 70% of its statutory income for each year of assessment. Any unutilised allowance can be carried forward to subsequent years until fully utilised. The remaining 30% of its statutory income will be taxed at the prevailing company tax rate.

For investors in Pahang, which is part of the “Eastern Corridor”, applications received from companies will enjoy an allowance of 100% on the qualifying capital expenditure incurred within a period of 5 years. The allowance can be utilised to offset against 100% of the statutory income for each year of assessment. Applications received by 31 December 2010 are eligible for this incentive.

Applications for ITA should be submitted to the Malaysian Industrial Development Authority (MIDA).