eKTP 36

Incentives for Capital Allowance to Increase Automation in Labour Intensive Industries


incentives for Capital Allowance to Increase Automation in Labour Intensive Industries

According to The Ministry of International Trade and Industry (MITI) had announced the detailed guidelines for new tax incentives proposed in the 2015 Budget as below:

A. Category Incentives and Implementation Timeline



  • Manufacturing companies incorporated under the Companies Act 1965 and resident in Malaysia.

  • Possesses a valid business license from local authority and manufacturing license from MITI (if applicable).

  • Company has been in operation for at least 36 months.

  • The automation equipment is used directly in the manufacturing activities.

  • The automation equipment should enhance the productivity such as reducing man hours, reducing workers and increasing volume of output and to be verified by SIRIM.

  • The automation equipment adopts technology that is more advanced than the technology currently used by the company and to be verified by SIRIM.

  • Companies currently claiming Reinvestment Allowance (RA) under Schedule 7A, Income Tax Act 1967 can opt to claim this incentive provided that either one of these two incentives is claimed in the same year of assessment. The period of RA will continue even though the company has opted for this incentive. However, the company must utilize the full amount of RM4 million for Category 1 or RM2 million for Category 2 before it continues to claim RA.


The mechanism for this incentive is calculated in the following manner – 

  • For the first 100% automation capital allowance, accelerated capital allowance will be given by way of gazetted Rules under section 154 Income Tax Act 1967.

  • For the second 100% automation capital allowance, it will be given by way of gazetted Income Tax Exemption Order under section 127(3)(b) Income Tax Act 1967.


Please refer to the below link for further details: 

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