The document discusses the 75% rule for determining qualifying plant expenditure (QPE) and qualifying building expenditure (QBE) under Malaysian tax law. The 75% rule states that if the cost of preparing land for machinery installation exceeds 75% of total cost, the total cost is treated as a building. The document provides an example where the land preparation cost exceeds 75% of total cost, so the machinery is deemed a building and the total cost qualifies as QBE. In the second example, land preparation cost does not exceed 75% of total cost, so only the machinery cost qualifies as QPE.
The document discusses the 75% rule for determining qualifying plant expenditure (QPE) and qualifying building expenditure (QBE) under Malaysian tax law. The 75% rule states that if the cost of preparing land for machinery installation exceeds 75% of total cost, the total cost is treated as a building. The document provides an example where the land preparation cost exceeds 75% of total cost, so the machinery is deemed a building and the total cost qualifies as QBE. In the second example, land preparation cost does not exceed 75% of total cost, so only the machinery cost qualifies as QPE.
The document discusses the 75% rule for determining qualifying plant expenditure (QPE) and qualifying building expenditure (QBE) under Malaysian tax law. The 75% rule states that if the cost of preparing land for machinery installation exceeds 75% of total cost, the total cost is treated as a building. The document provides an example where the land preparation cost exceeds 75% of total cost, so the machinery is deemed a building and the total cost qualifies as QBE. In the second example, land preparation cost does not exceed 75% of total cost, so only the machinery cost qualifies as QPE.
The document discusses the 75% rule for determining qualifying plant expenditure (QPE) and qualifying building expenditure (QBE) under Malaysian tax law. The 75% rule states that if the cost of preparing land for machinery installation exceeds 75% of total cost, the total cost is treated as a building. The document provides an example where the land preparation cost exceeds 75% of total cost, so the machinery is deemed a building and the total cost qualifies as QBE. In the second example, land preparation cost does not exceed 75% of total cost, so only the machinery cost qualifies as QPE.
Where capital expenditure incurred on preparing, cutting, tunnelling or levelling land in order to prepare a site for the installation of machinery or plant (installation cost) exceeds 75% of the aggregate cost (cost of plant and machinery + cost of installation), that total cost is treated as expenditure on a building.
RM Cost of plant and machinery P Cost of prepare, cut, tunnel and levelling land (in order to prepare a site for L the installation of that plant and machinery) Total Cost E
Conclusion: If L ≤ 75% of E, then QPE is P If L > 75% of E, then QBE is E
Note: When P > L => Use 10% Rule (Refer C3, Part 3) When P < L => Use 75% Rule When P = L => QPE = P
Example 2
A Sdn. Bhd. (year ending 30 June) purchased plant and machinery and incurred cost of preparing site on 1/11/2019 as follows:
(i) (ii) RM RM Cost of plant and machinery [P] 10,000 10,000 Cost of preparing site [L] 90,000 25,000 Total cost [E] 100,000 35,000
Required:
Identify and explain the amount of qualifying plant expenditure and qualifying building expenditure.
Answer (i) Plant and machinery (deemed industrial building) RM Cost 100,000 RM Cost of plant and machinery 10,000 Cost of preparing site 90,000 Qualifying Building Expenditure 100,000
C6 - 1 ABFT2033 TAXATION II
75% rule will be used since the cost of plant and machinery (RM10,000) is lower than cost of preparing site (RM90,000). Since the cost of preparing site RM90,000 exceeds 75% of the total cost (RM100,000), the plant and machinery is deemed to be an industrial building. Thus, all the cost (RM100,000) will qualify as qualifying building expenditure for the purpose of computing industrial building allowances. [IBA = RM100,000 × (10% + 3%) = RM13,000]
(ii) Plant and machinery
RM Cost 35,000 RM Cost of plant and machinery 10,000 Cost of preparing site Nil Qualifying Plant Expenditure 10,000
75% rule will be used since the cost of plant and machinery (RM10,000) is lower than cost of preparing site (RM25,000). Since the cost of preparing site RM25,000 does not exceed 75% of the total cost (RM35,000), only the cost of plant and machinery (RM10,000) will qualify as qualifying plant expenditure for the purpose of computing capital allowances. The cost of preparing site (RM25,000) does not qualify. [CA = RM10,000 × (20% + 14%) = RM3,400]
