Reinvestment Allowance (RA) is an incentive given to Malaysian resident companies involved in the manufacturing sector and selected agricultural sector to incentivise these companies to reinvest and grow their businesses.
In order to qualify for the RA incentive, such companies must have been in business operations (i.e. manufacturing or agricultural) for at least 36 months. In addition, these companies must have incurred capital expenditure in carrying out relevant qualifying RA projects such as expansion, modernisation, automation and / or diversification in order to qualify for RA incentives in the relevant year of assessment (YA).
RA incentive is available for a period of 15 consecutive YAs beginning from the YA in which the capital expenditure was first incurred.
An additional 3 consecutive years of RA period from YA 2016 to YA 2018 (i.e. Special RA) has been provided under the Finance Act 2016 for companies which have exhausted the initial 15 years of RA period.
Furthermore, the Special RA was reintroduced in the National Economic Recovery Plan (i.e. PENJANA) and was enacted through the Finance Act 2020. The Special RA period provided in the Finance Act 2020 is from YA 2020 to YA 2022. Effective from YA 2019, any unabsorbed RA can only be carried forward to be absorbed for a maximum period of seven (7) consecutive YAs after the expiry of the qualifying period for RA.
In this article, we will discuss the latest updates on the RA incentive and issues in claiming RA for manufacturing activities in the recent years.