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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

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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.

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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.