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11. Information Technology to Improve Management / Production
Processes
Presently, capital expenditure incurred on information technology
(IT) equipment for the purpose of improving management and production processes are
eligible for capital allowance. However, some operational expenditure such as consultancy
fees for improving management and production processes are denied deduction for income
tax purposes.
To enhance productivity and efficiency in the production system of the manufacturing,
agriculture and services sectors, it is proposed that all operating expenditure including
payments to consultants related to the usage of IT to improve management and production
processes be allowed as a deduction.
This proposal is to be effective from year of assessment 2000 (current
year basis).
12. Double Deduction of Ship Freight Charges
Presently, ship freight charges including those in respect
of the transport of goods from Sabah and Sarawak to Peninsular Malaysia qualify for
a normal deduction.
In order to increase market potential and enhance trade linkages
with Peninsular Malaysia, it is proposed that a double deduction on freight charges
be given to all manufacturers who ship their goods from Sabah and Sarawak to Peninsular
Malaysia provided they use the ports in Peninsular Malaysia.
This proposal is to have effect from year of assessment 2000 (current
year basis) and is expected to be enacted by way of a Ministerial Order.
13. Annual Allowance Rates for Plant and Machinery
An initial allowance of 20% is claimable in respect of
qualifying expenditure on plant and machinery. In addition, annual allowances are
claimable in accordance with the Income Tax (Qualifying Plant Annual Allowances)
Rules 1968 where annual allowance rates vary from 6% to 20% depending on the type
of plant and machinery and industry involved.
To simplify the computation of capital allowance in preparation
for the self-assessment system for companies which will be implemented in year 2001,
it is proposed that the annual allowance be reduced to 3 classes with rates as follows
:-
| Type of Asset |
Annual Allowance Rate |
Number of Years for Full Tax Relief |
| Office equipment, furniture and fittings |
10%
|
8
|
| Plant and machinery (general) |
14%
|
6
|
| Heavy machinery and motor vehicles |
20%
|
4
|
The rate of 20% for initial allowance is maintained.
Computers and information technology equipment, control equipment and computer software
will continue to qualify for accelerated depreciation.
The above proposal is to be effective from year of assessment 2000 (current year
basis).
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