(Translation from the original Bahasa Malaysia text) Public Ruling No. 2/200 !

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1.0

T$. '$) This Ruling applies in respect of the computation of annual allowances for plant and machinery under paragraph 15, Schedule 3, %ncome Tax $ct /01 and the %ncome Tax (2ualifying Plant $nnual $llo3ances) Rules 2000 [P.U.(A) 52/2000] . This Ruling is effecti e for year of assessment !000 "current year #asis$ and su#se%uent years of assessment.

!.0

T,* $PP'%!$T%"N "& T,%+ R#'%N4 This Ruling considers& !.1 The implications of the reclassifying of plant and machinery into the 3 main categories under the %ncome Tax (2ualifying Plant $nnual $llo3ances) Rules 2000 [hereinafter referred to as the new Rules ] with effect from year of assessment !000 "current year #asis$ [hereinafter referred to as ' /A 2000 (CY) ]( and !.! The computation of initial allowances [)*] and annual allowances [**] for new assets and annual allowances for e+isting assets for ',* !000 "-'$ and su#se%uent years of assessment.

3.0

,") T,* T$. '$) $PP'%*+

3.1 !lassification of $ssets 3.1.1 3 main categories .nder the new Rules, assets that %ualify for annual allowances under paragraph 15, Schedule 3 of the )ncome

Ta+ *ct [the Act] are classified into 3 main categories with effect from ',* !000 "-'$. The main categories and the prescri#ed rates of ** for them are as follows& Assets Rates /ea y machinery, motor !0 0 ehicles 1lant and machinery 12 0 3thers 10 0

5or the year of assessment [Y/A ] in which %ualifying plant e+penditure [QE ] is incurred, )* at the rate of !00 of the 67 "unless otherwise specified& see paragraph 3.1.3 $ is also to #e allowed in addition to **. 3.1.! New assets The prescri#ed rates in paragraph 3.1.1 a#o e [hereinafter referred to as the new rates] are to #e applied to any asset [ ther than an asset t wh!ch paragraph 3.1.3 appl!es] ac%uired in the #asis period for the ',* !000 "-'$ and su#se%uent years of assessment [hereinafter referred to as a new asset ], irrespecti e of the type of industry or the nature of the #usiness in which the asset is used. 3.1.3 Assets for which special Rules or special rates apply 5or a new asset that is to #e dealt with under any of the following Rules [hereinafter referred to as the spec!al Rules ] or an e+isting asset already so dealt with in a prior ',*, the person ma8ing the claim must ensure that the asset is dealt with "or continues to #e dealt with$ under the rele ant special Rules and the rates of )* and , or ** as set out under those special Rules [hereinafter referred to as the spec!al rates ] are applied instead of the new rates under paragraph 3.1.1& *. )ncome Ta+ "6ualifying 1lant *llowances$ "Scheduled 9astes$ Rules 1::5 [ P.U.(A) 33"/1""5 ]( ;. )ncome Ta+ "6ualifying 1lant *llowances$ Rules 1::< [ P.U.(A) 2#5/1""$ ]( -. )ncome Ta+ "6ualifying 1lant *llowances$ "=o. !$ Rules 1::< [ P.U.(A) %$%/1""$ ]( >. )ncome Ta+ "6ualifying 1lant *llowances$ "-omputers and )nformation Technology

7. 5. @.

7%uipment$ Rules 1::? [P.U.(A) 1&$/1""& ]( )ncome Ta+ "6ualifying 1lant )nitial *llowances$ Rules 1::? [ P.U.(A) 2"%/1""& ]( )ncome Ta+ "6ualifying 1lant *llowances$ "-ontrol 7%uipment$ Rules 1::? [ P.U.(A) 2"5/1""& ]( or )ncome Ta+ "6ualifying 1lant *llowances$ "-ost of 1ro ision of -omputer Software$ Rules 1::: [P.U.(A) 2$2/1""" ].

3.1.2

Classifying or reclassifying an asset )n classifying or reclassifying an asset, the following should #e noted& *. ABotor ehiclesA generally include all forms of transport which use motors to operate. [ E'a(ples& motorcycle( aircraft( ship( motoriCed #icycle, etc.] ;. A/ea y machineryA is determined generally #y the nature of its usage. [ E'a(ples & #ulldoCer( crane( ditcher( e+ca ator( grader( loader( ripper( roller( rooter( scraper( sho el( tractor( i#rator( wagon( etc.] [) te* + r !(p rte, hea-. (ach!ner. use, !n the + ll w!ng !n,ustr!es/ !.e. 0u!l,!ng 1 c nstruct! n/ plantat! n/ (!n!ng an, t!(0er/ see paragraph 3.1.3.C a0 -e]( -. A1lant and machineryA include general plant and machinery not falling under the category Ahea y machinery, motor ehiclesA. [ E'a(ples& air conditioners( compressors( ele ators( medical and la#oratory e%uipment( o ens( etc.] >. A3thersA refer to office e%uipment and furniture D fittings.

3.1.5

Assets with life span not exceeding 2 years: replacement basis 7+penditure on assets that ha e an e+pected life span of not more than ! years "implements, utensils and articles$ is to #e dealt with on a replacement #asis. This means that no )* or ** is to #e allowed, as the cost of purchase of such assets is not regarded as 67. /owe er, the cost of replacing

such assets is to #e allowed as deducti#le e+penditure under section 33"1$"c$ of the *ct in determining the adEusted income of the #usiness. *ny amount reco ered from the disposal of the replaced assets will #e treated as income of the #usiness. [ E'a(ples & #edding D linen( croc8ery D glassware( cutlery D coo8ing utensils "other than stainless steel or sil er$( loose tools( accessories.] [ 2ee als E'a(ple 1 !n paragraph 3.3.1 0el w .]

3.! !laims for initial an5 annual allo3ances

3.!.1

Claims to be made in the return and in writing

*.

;.

-laims for )* and ** must #e made in writing in the return for the -/$ . The details of the claim should #e shown in a certified statement in the ta+ computation. *fter one of the alternati e approaches under paragraph 3.3.!.; has #een applied, re iew or reconsideration of that decision "e+cept in cases of mista8es or errors$ should #e a oided.

3.!.!

Conditions to be satisfied To %ualify for )* and,or ** for a ',* in respect of an asset, the person ma8ing the claim must satisfy all the following conditions&

*. ;.

he was carrying on a #usiness during the #asis period( in respect of that asset, he has incurred 67 in that #asis period "to %ualify for )*$, or has incurred 67 in that #asis period and , or a pre ious #asis

-. >.

period "to %ualify for **$( that asset was in use for the purpose of the #usiness( and at the end of that #asis period, he was the owner of the asset and the asset was in use.

[ 3hese c n,!t! ns an, ther c ns!,erat! ns !n respect + the wnersh!p + the asset are ,!scusse, !n ,eta!l !n Pu0l!c Rul!ng ) . 1/2001 .]

3.3 !om6utation of ca6ital allo3ances for y/a 2000 (!-) ( subse7uent -/$

3.3.1

New assets The amount of ** is a percentage of the 67 incurred on the asset, calculated according to the rates prescri#ed in the new Rules. E'a(ple 1 * company "which has #een in #usiness for a num#er of years$ purchases a refrigerator for RB5,000 on 1!.02.!000 and uses it in its restaurant #usiness. !00 pieces of dinner plates are purchased for RB!,000 on 15.0<.!000 to replace some of the e+isting croc8ery that is chipped, crac8ed or discoloured "disposed of for RB!00$. The assets are included in the #alance sheet of the #usiness, for which accounts are prepared for the financial year ended 30.0:.!000. 4 r Y/A 2000 (CY)/ 5A an, AA can 0e cla!(e, as + ll ws &

Asset Refrigerator

QE 5,000

A !2"#$ 1,000

AA <00 [120]

%otal 1,<00

6Cap!tal all wances cann t 0e cla!(e, !n respect + the ,!nner plates as the e'pen,!ture + R72/000 !s n t regar,e, as QE8 h we-er/ !t can 0e ,e,ucte, + r ta' purp ses as c st + replace(ent + cr c9er.. 3he R7200 rece!-e, +r ( the ,!sp sal + the replace, cr c9er. !s t 0e !nclu,e, as gr ss !nc (e. 3hese a,:ust(ents sh ul, 0e (a,e !n the ta' c (putat! n.; E'a(ple 2 * #usinessman installs a telephone system "inclusi e of a fa+ machine$ in the office of his stationery retail #usiness, incurring e+penditure of RB2,000 on 30.0F.!000. * secondhand an is later ac%uired in Guly !000 for RB!5,000. The assets are included in the #alance sheet of the #usiness in the accounts prepared for the year ended 31.1!.!000. 4 r Y/A 2000 (CY)/ 5A an, AA can 0e cla!(e, as + ll ws &

Asset Telephone system Han

QE 2,000 !5,000

A !2"#$

AA

%otal 1,!00

?00 200 [100] 5,000

5,000 10,000 [!00]

3.3.!

Existing assets

*.

Assets + r wh!ch spec!al Rules / spec!al rates ha-e 0een appl!e, 5or assets ac%uired #efore the #asis period for ',* !000 "-'$ [i.e. in the #asis period for -/$ !000 "preceding year #asis$ and prior years of assessment] for which #oth )* and ** ha e #een allowed according to the spec!al rates under any of the spec!al Rules mentioned in paragraph 3.1.3 a#o e, the new Rules and the new rates are not to #e applied, and the rele ant special Rules and special rates must continue to #e applied for ',* !000 "-'$ and su#se%uent years of assessment until all the

remaining #alance of the 67 [i.e., the residual e+penditure or RE ] in respect of each asset has #een completely a#sor#ed. ;. Assets + r wh!ch the l, Rules r l, rates ha-e 0een appl!e, 5or assets ac%uired #efore the #asis period for ',* !000 "-'$ for which #oth )* and ** ha e #een allowed according to the e+isting rates i.e., the rates prescri#ed under the %ncome Tax (2ualifying Plant $nnual $llo3ances) Rules /08 [ <.). 15%/1"#& ] "as amended #y the %ncome Tax (2ualifying Plant $nnual $llo3ances) ($men5ment) Rules /80 [P.U. (A) 3%# / 1"&0] [hereinafter referred to as the l, rates and the l, Rules ], any one of the following 3 alternati e approaches may #e adopted& Alternati&e ': )ew rates appl!e, (all e'!st!ng assets) * person can apply the new rates to all e+isting assets for ',* !000 "-'$ and su#se%uent years of assessment until all the R7 in respect of each asset has #een completely a#sor#ed. E'a(ple 1 *n indi idual has the following assets&

9etails of assets 67 'ear incur red 3ld rate =ew rate

(otor &an <5,000 1::<

)ffice e*uipment !!,000 1::F

+urniture 10,000 1::F

!00 !00

1!0 100

?0 100

3he cap!tal all wance c (putat! n sh ul, 0e as + ll ws*

4 QE Y/A 1""$ 5A AA RE Y/A 1""&

(otor &an 4 1:;000 4 4 4 4 4 4 4 4 4 4 4

)ffice e*uipment 4 22;000 4 2,200 !,F20 4 4 4 4 4 4 4 4 4 4 <,020 <;/00 4 4 !,F20 2;=20 4 !,F20 /;080 4

+urniture 4 4 !,000 ?00 4 4 4 4 4 4 4 4 4 0;000 4 4 !,?00 1;200 4 4 ?00 0;<00 4 ?00 :;000 4

5A 15,000 RE Y/A 1""" AA RE

AA 15,000 30,000 4 <:;000 4 4 4 15,000 4 =0;000

Y/A 2000 (prece,!ng .ear 0as!s) 4 4 AA RE Y/A 2000 (CY) AA 6new rates; RE Y/A 2001 AA RE 4 15,000 4 4 :;000 4 4 4 4 10= 4 4 4 4

!,F20 1;0<0 4 !,!00 <;8<0 4 !,!00 2;0<0

4 4 4 10= 4 4 4 4

?00 <;800 4 1,000 =;800 4 1,000 2;800

20= 15,000 4 4 4 4 Nil 4 4 4

E'a(ple 2 * company has the following assets&

9etails of assets 67 'ear incurre d 3ld rate =ew rate

(achinery 1?0,000 1::2

Air conditioners ?,000 1::F

+urniture 10,000 1::2

100 120

1!0 120

?0 100

3he cap!tal all wance c (putat! n sh ul, 0e as + ll ws*

4 QE Y/A 1""5 5A AA RE Y/A 1""# AA RE Y/A 1""$ 5A AA RE Y/A 1""& AA RE Y/A 1""" AA RE

(achinery 4 4 3F,000 1?,000 4 4 4 4 4 4 4 4 4 4 4 4 4 4 80;000 4 4 52,000 20;000 4 1?,000 08;000 4 4 1?,000 /0;000 4 1?,000 12;000 4 1?,000 :<;000

Air conditioners 4 4 4 4 4 4 4 4 4 1,F00 :F0 4 4 4 4 4 4 4 8;000 4 4 4 4 4 4 4 4 4 !,5F0 :;<<0 4 :F0 <;<80 4 :F0 =;:20

+urniture 4 4 !,000 ?00 4 4 4 4 4 4 4 4 4 4 4 4 4 4 0;000 4 4 !,?00 1;200 4 ?00 0;<00 4 4 ?00 :;000 4 ?00 <;800 4 ?00 <;000

Y/A 2000 (prece,!ng .ear 0as!s) 4 4 4 AA RE Y/A 2000 (CY) AA 6new rates; RE Y/A 2001 AA RE 4 4 4 1%= 4 4 4 4 1?,000 =0;000 4 !5,!00 0;800 4 I10,?00 Nil 4 4 4 1%= 4 4 4 4

:F0 2;:00 4 1,1!0 ;<<0 4 1,1!0 =20

4 4 4 10= 4 4 4 4

?00 =;200 4 1,000 2;200 4 1,000 ;200

> AA 25/200 restr!cte, t the a( unt + RE Alternati&e 2: ?l, rates appl!e, (all e'!st!ng assets $ * person can continue to apply the old rates for all e+isting assets for ',* !000 "-'$ and su#se%uent years of assessment until all the R7 in respect of each asset has #een completely a#sor#ed. E'a(ple 3 )f the company in E'a(ple 2 "paragraph 3.3.!.; a#o e$ had decided not to apply the new rates #ut to continue applying the old rates to all its e+isting assets to a oid complications, then the computation of capital allowances would ha e #een& 6C (putat! n + r Y/A 1""% t 2000 (prece,!ng .ear 0as!s)* as per E'a(ple 2 a0 -e;

4 RE Y/A 2000 (CY)

(achinery 4 4 =0;000 4

Airconditioners 4 4 2;:00 4

+urniture 4 4 =;200 4

AA 6 l, rates; RE Y/A 2001 AA RE

10= 4 4 4 4

1?,000 8;000 4 1?,000 Nil

12= 4 4 4 4

:F0 ;000 4 :F0 0<0

&= 4 4 4 4

?00 2;<00 4 ?00 ;000

J4

Alternati&e 3 > )ew rates appl!e, t s (e e'!st!ng assets an, l, rates appl!e, t thers * person can apply the new rates for some of his e+isting assets "for which the new rates are higher than the old rates$ and continue to apply the old rates for the rest of his e+isting assets "for which the old rates are higher than the new rates$ for ',* !000 "-'$ and su#se%uent years of assessment. E'a(ple % )f the indi idual in E'a(ple 1 "paragraph 3.3.!.; a#o e$ had decided to apply the new rates in respect of some assets and to continue applying the old rates in respect of others so as to ta8e ad antage of the higher rates in #oth instances, then the computation of capital allowances would ha e #een& 6C (putat! n + r Y/A 1""$ t 1"""* as per E'a(ple 1 a0 -e;

4 RE AA RE Y/A 2000 (CY) AA

(otor &an 4 4 4 4 20= 6 l,; =0;000 15,000 :;000 4 15,000 Y/A 2000 (prece,!ng .ear 0as!s)

)ffice e*uipment 4 4 4 4 12= 6 l,; !,F20 /;080 4 !,F20 1;0<0

+urniture 4 4 4 4 4 10= 6new; 1,000 :;000 4 ?00 <;800

RE Y/A 2001 AA RE Y/A 2002 AA RE

4 4 4 4 4 4 4

Nil 4 4 4 4 4 4

4 4 4 4 4 4 4

<;<00 4 !,F20 ;100 4 I1,<F0 Nil

4 4 4 4 4 4 4

=;800 4 1,000 2;800 4 1,000 ;800

> AA 2/#%0 restr!cte, t the a( unt + RE

2.0

%NT*RPR*T$T%"N 5or the purpose of this Ruling& 2. A*ssetA means plant or machinery used for the purpose of the #usiness on 1 which %ualifying plant e+penditure has #een incurred. 2. A1ersonA includes a company, a co4operati e society, a partnership, a clu#, ! an association, a /indu Eoint family, a trust, an estate under administration and an indi idual, #ut e+cludes a unit trust to which section F3* of the *ct applies. 2. A6ualifying plant e+penditureA [67] means capital e+penditure incurred 3 on the pro ision, construction or purchase of plant or machinery used for the purpose of a #usiness [other than assets that ha e an e+pected life span of not more than ! years "see paragraph 3.1.% a0 -e $]. 2. AResidual e+penditureA [R7] at any date in respect of an asset means the 2 una#sor#ed #alance of the %ualifying e+penditure [67], arri ed at #y deducting from the total 67 incurred #efore that date, the aggregate amount of&

2.2.1 2.2. ! 2.2.3

any initial allowance [)*] made for any ',*( any annual allowance [**] made for any ',* #efore that date( and any notional annual allowance "i.e., annual allowances that would ha e #een made if it had #een claimed or could ha e

#een claimed$ made or should ha e #een made #efore that date.

2. ATa+ computationA means the wor8ing sheets, statements, schedules, 5 calculations and other supporting documents forming the #asis upon which an income ta+ return is made that are re%uired to #e su#mitted together with the return or maintained #y the person ma8ing the return. 2. 9here a person incurs capital e+penditure under a hire purchase F agreement on the pro ision of plant or machinery for the purpose of a #usiness of his, the %ualifying plant e+penditure incurred #y him in the #asis period for a year of assessment is ta8en to #e the aggregate of the capital portion of the instalment payments and any down payment made #y him under that agreement in that period. (9ate of issue> 8 ?anuary 200 )