The Automation Capital Allowance (Automation CA) incentive was first introduced in Budget 2015. The main objective of this incentive is to encourage automation in the manufacturing sector.
The Automation CA incentive is segregated into 2 industry categories i.e. labour intensive industries such as rubber, plastic wood, furniture and textile (Category 1) and other industries (Category 2).
In Budget 2020, the scope of Automation CA incentive under Category 2 was expanded to include the services sector. This was to enable service providers to invest in automation equipment in order to achieve greater efficiency and productivity in their service delivery.
The Automation CA incentive is not granted automatically. The qualifying company is required to apply and obtain prior approval from the Malaysian Investment Development Authority (MIDA) and undergo technical verification by the Standard and Industrial Research Institute of Malaysia (SIRIM) before applicants can enjoy the Automation CA incentive.
Furthermore, the Automation CA and other incentives such as Reinvestment Allowance (RA), Pioneer Status, Investment Tax Allowance are mutually exclusive.
In this article, we will discuss the key differences between RA incentive and Automation CA, and the key considerations for manufacturing companies in selecting the best incentive for their investment in automation equipment.
Key eligibility criteria for Automation CA incentive – Manufacturing Sector & Service Sector
Category |
Rates of incentives |
Amount of capital expenditure |
Category 1: Manufacturing companies in the labour intensive industries |
100% accelerated capital allowance (ACA) and 100% income tax exemption (ITE) equivalent to the ACA
|
Up to RM 4 million |
Category 2: Manufacturing companies in other industries and service sector |
100% ACA and 100% ITE equivalent to the ACA
|
Up to RM 2 million
Note: The gazette order for the Automation CA for services sector is still pending as at to-date. |
Read More |