Budget 2016: Special reinvestment allowance incentive

A SPECIAL reinvestment allowance incentive (RA) has been proposed to be made available for reinvestments made in a period of three years of assessment.

A company that reinvests for the purpose of expansion, modernisation, automation or diversification is eligible for RA for 15 consecutive years beginning the year of assessment the RA is claimed. 

This incentive, announced during the Budget speech on Friday, is aimed at encouraging reinvestments by companies which have exhausted their eligibility to qualify for RA.

The rate of RA is 60% of the qualifying capital expenditure and will be set off against 70% of statutory income; or 100% of statutory income in that relevant year of assessments the company achieves the productivity level as determined by the Finance Ministry.

The eligible activities are manufacturing activities and selected agriculture activities.

These selected activities are the cultivation of rice and maize, cultivation of vegetables, tuber and roots, cultivation of fruits, livestock farming, spawning, breeding or culturing of aquatic products, and any other activity approved by the ministry.

This is for qualifying capital expenditure incurred from year of assessment 2016 until year of assessment 2018.