Agriculture

Allowance
 Agriculture Allowance
 Qualifying Agriculture Expenditure (QAE)
 Rate of Allowance
 Conditions for Agricultural Allowance (para 25)
 Disposal of Asset (para 52)
 Agriculture charge
Introduction

 Agriculture allowance applies to agriculture

business.
 Agriculture business means any form of
cultivation of crops, animal farming, aquaculture,
inland fishing and any other agricultural or
pastoral pursuit.
 QAE and its rate
 Clearing and preparation of land (50%)
 New planting (not replanting) (50%)
 Road and bridges (50%)
 Building:
 Living accommodation (20%)
- “little or no value”
 Other building (10%)

Note:
 Cost of Land and Plant &Machinery (P&M)are excluded
 Cost of P&M would be given normal capital allowance
 Conditions for AA
 Used in business at the end of basis period; and
 Ownership at end of basis period, or
 Must be in use within one month before the transfer
 The transferee/Purchaser would claim the remaining part irrespective of his basis
period and purchase consideration
 Example 26.1 page 540

5
Rules on Claiming Allowance
 A portion (according to the rates) in year of
acquisition and subsequent years up to
exhaustion of QE.
 Allowance is set off against adjusted income
from that business to arrive at statutory income.
 No initial allowance.
 Only annual allowance available.
Disposal Rules
– in use within one month before transfer

 In year of disposal, allowance is time apportioned up to date of

transfer or sale, if the qualifying expenditure was in use within
one month before the transfer.

 Apportion allowance between transferor

and transferee:
 Transferor:
Days owned before transfer/ 365
- Transferee the remaining
Rules on Disposal

Transferor Transferee
• Can claim allowance up • Can only claim remaining
to date of disposal in YA agriculture allowance due to
of disposal if asset was transferor.
in use one month before
disposal.
Agriculture Charge
(example 26.4 page 543)

 Just like a balancing charge.

 It is the withdrawal of agriculture allowance
previously given when disposal of assets is made
within 6 years
 Taxpayer can elect to have the agriculture charge
assessed over the YA’s for which the allowances
were made rather than the year of disposal.
 Election for spread back-write notice to DG to
spread bank the AC to the past YAs
 Agriculture Charge (AC)
Facts:
 Roads: RM 50,000 incurred in 15.3.07
 AA:
 YA 2007 : 25,000
 YA 2008 : 25,000
Disposed on 30.6.10 (< 6 years)
 AC : YA 2010 = 50,000
 Agriculture Charge (AC)
Same Facts:
 Roads: RM 50,000 incurred in 15.3.07
 AA: YA 2007 : 25,000
 YA 2008 : 25,000

Disposed on 30.6.12 (> 6 years)

Plantation permanently ceased 14.3.11 (< 6)
AC : YA 2011 = 50,000
 Agriculture Charge (AC)
Election for spread back

Same Facts:
 Roads: RM 50,000 incurred in 15.3.07
 AA: YA 2007 : 25,000
 YA 2008 : 25,000
Disposed on 30.6.12 (> 6 years), Plantation permanently ceased
14.3.11

Para 27 election
AC : YA 2007 : 25,000
: YA 2008 : 25,000
Forest Allowance
 Forest Allowance
 Qualifying Forest Expenditure (QFE)
 Rules on Allowance
 Disposal of Asset (para 52)
 Agriculture charge
 Transferee
Qualifying Expenditure

 Construction in a forest of:

 Road or building used for the purposes of a
business which consists wholly or partly of the
extraction of timber from the forest.
 A building provided by him for the welfare of
persons or as living accommodation for a person,
employed in or in connection with such extraction.
Rules on Allowance
 No initial allowance.
 Only Annual allowance at the following rates:
 Road or building used for the purposes of a business - 10%.
 A building provided by him for the welfare of persons or as living
accommodation for a person, employed in or in connection with such extraction -
20%.
Rules on Claiming Allowance

 Full year’s allowance in YA of incurring expenditure &

subsequent years up to YA of disposal or YA of permanent
cessation.
 In case of permanent cessation, in relevant YA, the
remaining residual expenditure will be given as an
allowance.
Rules on Disposal

 On disposal of forest, there will be a forest charge.

 Forest charge = Allowance Clawback.
 If forest disposed off after YA of cessation, the disposal
shall be deemed to have been made in YA of cessation.
 Can elect to spread the forest charge over the past years
of assessment, for which the allowances were made.
Rules on Disposal

Transferor Transferee

• Will not get any forest

allowance upon acquiring the
forest expenditure from the
disposer.
• Forest allowance would only
given on new QE incurred by
the transferee
 Questions
• Compare and contrast agriculture and forest allowance in
respect to claiming of capital allowance and balancing
charge on disposal
• State the uniqueness of approved agricultural projects
from a tax perspective.

20 Minutes
 AA FA

1st Year Allowance Full Full

Allowance in YA of cessation N/A RE b/f cessation
Allowance in YA disposal Time-Based** None
Charge in YA of disposal Yes Yes
Amount of charge Clawback*** Clawback***
BA in YA of disposal N/A N/A

Note:
* Only in case of operator commencing its first mining business.
** Up to date of disposal if used one-month before disposal.
*** Clawback of allowances granted.