Agriculture
Agriculture is an important sector in Malaysia’s economy. This industry had been dominated by the palm oil industry, where oil palm was the golden crop of Malaysia for many years. Oil palm was a major contributor to the Gross Domestic Product (GDP) of the agriculture sector in 2017 at 46.6 per cent, followed by other agriculture products, livestock, fishing, rubber and forestry & logging.
Source: Department of Statistics Malaysia: Selected Agricultural Indicators, Malaysia, 2018
Agriculture Sectors
Complexities of the industry from accountancy and tax angles
The agricultural sector has accountancy issues especially in the area of valuation of agricultural assets such as biological assets and agricultural inventories. New planting expenditure incurred on greenfield farms and replanting expenditure are unique costs incurred by plantations. Difficulties may also be encountered in the capitalization of costs for Property Plant & Equipment. Agricultural inventories are perishable and unless the inventories are delivered to processing factories promptly, their value may drop by passage of time.
Surprisingly, the agricultural sector enjoys tax incentives especially those that encourage unique crops which is a Government strategy to diversify its agricultural policy. This sector also has unique tax issues due to the costs and possible losses incurred during the gestation phase of a new plantation.
How can we help?
In addition to performing a statutory audit, we are able to assist companies in the agricultural sector to adopt the correct accounting policies that are appropriate to their circumstances. These policies include those relating to treatment of new planting expenditure, replanting expenditure, valuation of biological assets, impairment of Property Plant & Equipment, revenue recognition, amortisation of leases, deferred taxation due to temporary differences, etc. Internal controls over inventories, spare parts and fertilisers, being assets that can easily be pilfered, warrant attention.
Plantation groups with operations in many parts of Malaysia and overseas will find that our network of 13 branches in Malaysia and 250 Crowe firms throughout the world can greatly facilitate group audits.
For more details of our audit services, please click here
From the tax angle, we can assist to plan and apply for tax incentives. This involves understanding the type of tax incentives that an agricultural company is eligible for and how best to strategise in order to successfully apply for the tax incentive. In this regard, we have extensive experience with outstanding results for our clients. We can also maximize the claim of capital allowances for the capital expenditure incurred which may at times require careful planning. Group relief may also be used to reduce taxes. In the areas of tax compliance including preparation of tax computations and complying with all other tax rules, we have a large team of tax professionals who are able to offer a broad range of specialised services to serve our clients. These services include maximising the claims of operating expenses, planning for submission of tax estimates to the tax authorities, resolving grey tax issues, dealing with the tax authorities, etc. Sales Tax does not feature much in the agriculture industry due to availability of exemptions but our Indirect Tax division is able to advise on Sales Tax and Service Tax in this sector if necessary.
Agriculture companies, being property-based companies, may encounter Real Property Gains Tax and stamp duty on their property transactions. We have extensive experience in advising on these taxes.
For more details of our tax services, please click here
We have a wide variety of specialised consulting services that can assist your corporate growth and enhance your corporate health. You can find more details in the following links:
In the agriculture industry, yield and production outputs are of major concerns. Due to multiple constraints [both controllable (eg: temperature, moisture / water level, mineral additions, etc) and uncontrollable factors (eg: weather, seasons, soil type, epidemic diseases)] affecting crops and live-stocks alike, our consulting division could assist industry players with business engineering concepts that could mitigate or reduce the prevalence of these constraint factors, in return for better yield and higher output levels
We are also experienced with transformation plans to assist companies to transform and adapt to the digital economy, restructure to new models of business, exploit opportunities in a changing economy, harness the capabilities of talent and assist in all aspects of change management.