TAX317_Investment Incentives_Illustration Kelantan

QUESTION 1

Sutera Sdn Bhd, a manufacturing company located in Sabah, has been in operation since
March 2020. The company manufactures a promoted product of national and strategic
importance to Malaysia and had been granted investment tax allowance incentives under
the Promotion of Investment Act 1986 effective from 1 January 2021.

The forecasted capital expenditure, adjusted income and capital allowances for the three
years are as follows:

Year ended 31 December 2021 2022 2023

RM’000 RM’000 RM’000
Land 180,000 - -
Factory building 90,000 60,000 -
Plant and machinery 30,000 40,000 60,000
Office equipment 8,000 - 10,000
Adjusted income/ (loss) 52,000 (36,000) 80,000
Capital allowances 26,100 33,300 46,300
Rental income 600 600 600

Required:

(a) State the tax relief period for the investment tax allowance incentive available to
Sutera Sdn Bhd.
(2 marks)

(b) For the year of assessment 2021, 2022 and 2023, compute the following:

(i) Chargeable income (if any).

(ii) Amount to be transferred to the exempt income account.
(iii) Amount of unabsorbed business loss to be carried forward to the year of
assessment 2024 (if any)
(12 marks)
TAX317_Investment Incentives_Illustration Kelantan

QUESTION 2

Sinar Sdn Bhd (year ended 30 September annually) is a manufacturing company located in
Penang. The company produces a product which has been listed as a promoted product.
The company had applied and was granted the investment tax allowance incentive for five
years effective from 1 October 2020.

The following expenditures were incurred by the company:

Date incurred Expenditure RM

7 September 2020 Plant and Equipment 80,000
5 September 2021 Building (Note 1) 330,000
4 June 2022 Heavy Machinery 110,000

Note 1:

It has been agreed that RM150,000 of the cost of the building is related to the administrative
office.

The following financial projection has been provided in respect of its manufacturing business:

2021 2022 2023

Year ending 30 September RM’000 RM’000 RM’000
Adjusted income/(loss) (35) 190 272
Capital allowances 25 48 65

Additional information:

i) There were unutilized capital allowances of RM20,000 brought forward from the year of
assessment 2020.

ii) The company received interest of RM15,000 annually from resident companies in
Malaysia.

iii) On 10 October 2021, the company donated RM6,500 to an approved institution.

Required:

For the years of assessment 2021, 2022 and 2013, compute the chargeable income and
amount to be credited to the exempt income account of Sinar Sdn Bhd (show all relevant
workings).
(9 marks)