What is Automation Capital Allowance ?

What is Automation Capital Allowance (ACA) ?

Overview of ACA :

After the opening of international borders, Malaysia is facing a serious manpower situation, thus, Automation machines may become one of the solutions for manufacturing companies to overcome the workforce issue.

The Automation Capital Allowance (Automation CA) was introduced to encourage the adoption of automation among manufacturing companies. In budget 2020, the Government extended the period for the incentive in both categories. The effective date of application is from 1 Jan 2015 until 31 Dec 2023.

Key takeaways:

1. How does the incentive work?

2. Who is eligible to claim?

3. Application procedures

4. Thing to take note

Summary of learnings:

1. What type of incentive?

A. Labour-intensive industries (rubber products, plastics, wood, furniture, and textiles)

- Automation Capital Allowance of 200% on the first RM4 million expenditure incurred within assessment from 2015 to 2023

B. Other Industries

- Automation Capital Allowance of 200% on the first RM2 million expenditure incurred within assessment from 2015 to 2023

2. Who is eligible to claim?

I. Manufacturing companies incorporated under the Companies Act, 1965 / 2016

II. Resident in Malaysia

III. Valid Business License and Manufacturing License

IV. The Company has been in operation as manufacturing activities for 36 months

V. Automation machine/equipment is used directly in the manufacturing activities

3. Application process:

I. Submit the ‘Automation CA Form’ to MIDA

II. MIDA evaluation and SIRIM site visits regarding technical verifications

III. MIDA issues a ‘Consideration Letter’ as approval

4. Things to take note:

A. The incentive is mutually exclusive to other incentives; thus, Company can only enjoy one of the incentives including Automation CA, Reinvestment Allowance (RA), Pioneer Status (PS), Investment Tax Allowance (ITA), or Allowance for Increased Exports (AIE)

B. If Company is claiming RA, it also can opt to claim Automation CA. However, the company must utilize the full amount of Automation CA before it continues to claim RA and the period of RA will continue even if the Company has opted for Automation CA.

Sources:

- Guidelines and Procedures for the application of Automation Capital Allowance

https://www.mida.gov.my/wp-content/uploads/2021/01/GD_ACA_14012021.pdf

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