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    Chapter 2 - Industrial Building Allowance

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    NURKHAIRUNNISA
    (1) Industrial Building Allowance (IBA) provides an initial allowance of 10% and an annual allowance of 3% for capital expenditures on construction or purchase of buildings used for manufacturing, processing, research and development, hotels, airports, and other approved industrial purposes. (2) To qualify for IBA, non-industrial portions of a building like offices cannot exceed 10% of the total building area. Machinery and equipment costs must exceed 75% of total capital costs. (3) Rented or leased buildings do not qualify except for renovation costs, which are eligible for IBA.

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    Chapter 2 - Industrial Building Allowance

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    NURKHAIRUNNISA
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    (1) Industrial Building Allowance (IBA) provides an initial allowance of 10% and an annual allowance of 3% for capital expenditures on construction or purchase of buildings used for manufacturing, processing, research and development, hotels, airports, and other approved industrial purposes. (2) To qualify for IBA, non-industrial portions of a building like offices cannot exceed 10% of the total building area. Machinery and equipment costs must exceed 75% of total capital costs. (3) Rented or leased buildings do not qualify except for renovation costs, which are eligible for IBA.

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    Company Taxation

    Original Title

    Chapter 2 | Industrial Building Allowance

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    (1) Industrial Building Allowance (IBA) provides an initial allowance of 10% and an annual allowance of 3% for capital expenditures on construction or purchase of buildings used for manufacturing, processing, research and development, hotels, airports, and other approved industrial purposes. (2) To qualify for IBA, non-industrial portions of a building like offices cannot exceed 10% of the total building area. Machinery and equipment costs must exceed 75% of total capital costs. (3) Rented or leased buildings do not qualify except for renovation costs, which are eligible for IBA.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    328 views3 pages

    Chapter 2 - Industrial Building Allowance

    Uploaded by

    NURKHAIRUNNISA
    (1) Industrial Building Allowance (IBA) provides an initial allowance of 10% and an annual allowance of 3% for capital expenditures on construction or purchase of buildings used for manufacturing, processing, research and development, hotels, airports, and other approved industrial purposes. (2) To qualify for IBA, non-industrial portions of a building like offices cannot exceed 10% of the total building area. Machinery and equipment costs must exceed 75% of total capital costs. (3) Rented or leased buildings do not qualify except for renovation costs, which are eligible for IBA.

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    of 3

    KOLEJ POLY-TECH MARA, KUALA LUMPUR

    TAX370 Business Taxation


    Chapter 2

    Industrial Building Allowances (IBA)

    Introduction
    Industrial Building Allowance (IBA) is granted to companies incurring capital expenditure on construction or
    purchase of a building which is used for specific purposes. In this regard, companies are eligible for an initial
    allowance of 10% and an annual allowance of 3% from the QBE.
    Factory :
    (i)

    A building used in the manufacture of any product or the subjection of goods or materials to any
    process or the generating of power used for the purposes of that manufacture or process

    (ii) A building used incidental to the manufacturing business a workshop used for the repair or servicing
    of goods (prior to the sales)
    (iii) A building used for storage of any materials for the manufacture of that product (within the same
    cartilage) 1

    Industrial building

    Construction building

    QBE =
    (i) Architects fess
    (ii) Construction cost
    (iii) Cost of preparing plans obtaining the
    approval from local authority
    (iv) Cost of clearing old site/demolition cost *
    (v) Incidental cost drainage, installation of
    water and electricity
    (vi) Legal charges, stamp duty connected with
    acquisition of building
    (vii) Interest expense on loan borrowed to
    construct the building till its completion

    Purchase building

    QBE = Purchase Price

    NOTE :
    The cost of land, legal fees relating to the acquisition of land and legal expenses on loan borrowed to construct the
    building - would not qualify for IBA

    within the same cartilage : a building attached or adjacent to or within the same enclosure as the factory building

    2
    Industrial Building

    Building

    Non Industrial Building

    IBA is granted to an industrial building and approved buildings used for the following purposes:
    IA (%)
    (a)

    Factory

    (b)

    Building used for staff welfare canteen, toilet, masjid/surau,

    AA (%)

    rest room etc.


    (c)

    Private hospital, maternity home, nursing home licensed under


    any written law for the registration of private hospital,
    maternity home or nursing home

    (d)

    R & D approved by the Minister

    (e)

    Hotel building which has been registered with the Ministry of


    Culture, Arts and Tourism

    (f)

    Airport

    (g)

    Motor racing circuit

    (h)

    Business of construction, reconstruction or improvement of any


    public road and ancillary structures - an agreement with the
    government

    (i)

    Business of construction of a building on a build-lease-transfer agreement with the government

    (j)

    Warehouse buildings which are used for storing goods for


    exports and re-export;

    (k)

    Approved industrial training, technical or vocational training


    and education;

    (l)

    Accommodation of employees :
    (i)

    ________________________________________

    (ii)

    ________________________________________

    (m)

    Providing child care facilities to employees

    (n)

    School or an educational institutions

    (o)

    Old folks care centre

    (p)

    MSC status company

    * A warehouse of a RETAIL shop would not qualify since the retailer does not manufacture goods.

    3
    10% Rule :
    Area of Non Industrial Building (NIB)
    Level

    10
    9
    8
    7
    6
    5
    4
    3
    2
    1

    - Used as an office

    A. If the area of NIB is 10% or less from the whole building NIB considered/treated as IB
    B. If the area of NIB is more than 10% from the whole building differentiate between IB and NIB
    Level

    10
    9
    8
    7
    6
    5
    4
    3
    2
    1

    - Used as an office
    - Used as meeting room

    75% Rule :
    Plant and machinery
    Cost of machinery
    Preparing site for installation cost
    Total cost

    A
    B
    C

    A. If the B/C is 75% or less Plant and Machinery would not be QUALIFIED as IBA
    B. If the B/C more than 75% Plant and Machinery qualified as IBA (proceed with calculation of IBA)
    Rented building/Leased Building
    not qualify as IB, except renovation cost (incurred on such rented IB (not owned) shall be granted.

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