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Building Investors’ Trust in Shaping the Nation

UPDATES ON AUTOMATION CAPITAL

ALLOWANCE (AUTOMATION CA)

INCENTIVE JPP Meeting No. 16 / 2018

Strategic Planning & Policy Advocacy (Manufacturing) Division

….. July 2018

Industry Specific Workshop on

Machinery Manufacturing

Innovation Centre (MMIC)

15 November 2019

MAIN FUNCTIONS OF MIDA

• Assist companies in the

implementation & operation of projects

• Facilitate exchange & coordination among institutions

engage in or connected with industrial development

• Advisory services

• Planning for industrial development

• Recommend policies & strategies on industrial promotion and development

• Formulation of strategies, programmes and initiatives for international economic

cooperation

• Manufacturing Licences • Tax Incentives • Expatriate Posts • Duty Exemption • Principal Hub & selected

services

• Foreign Direct Investment • Domestic Investment • Manufacturing &

Selected Services • Business Matching

(eBizMatch)

PROMOTION EVALUATION

MONITORING PLANNING

Main Functions of MIDA

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MANUFACTURING LICENCE (ML)

Approval Criteria • Capital Investment per Employee (C/E) Ratio of at le

ast RM140,000 (since 2016); • Total fulltime workforce of company at least 80% Mal

aysian; (since 2016) and • Managerial, Technical and Supervisory (MTS) Index is

at least 25% or Value-added is at least 40%

Under the Industrial Coordination Act (ICA) 1975, a

company engaging in any manufacturing activity

with:

shareholders’ funds of RM2.5 million and above;

or

employing 75 or more full-time paid employees

to obtain a Manufacturing License

Manufacturing Licence (ML)

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A company with shareholders’ fund not

exceeding RM2.5 million and employing

not more than 75 full-time paid employ

ees, may apply for an exemption from

Manufacturing Licence. OR

ICA10 ML

GOVERNMENT FACILITATION

R&D activities

carried out in Malaysia

Training of

Malaysians

Modernisation / Upgrading facilities &

equipment *

Licensing or Purchase of New / High Technology

Obtaining International Standards /

Certifications

Activities

Domestic Investment Strategic Fund (DISF):

* To undertake manufacturing or services activities for MNCs and Malaysian conglomerates (outsourcing activities)

A matching grant introduced in 2012, to accelerate the shift of Malaysian-owned

companies in targeted industries to higher value added, high technology,

knowledge intensive and innovation-based industries.

Objective

Matching grants (1:1) on reimbursable basis to cater for expenditure incurred

Scope of Fund

Applications received by MIDA from 3 July 2012 until 31 December 2020 are eligible to be considered for this incentive

Effective Date of Application

1. Domestic Investment Strategic Fund (DISF)

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Incorporated under the Companies Act, 1965 / Companies Act, 2016

New companies in the manufacturing and services sectors with Malaysian equity ownership of at least 60% [a subsidiary, associate or sister company (related company)

of an existing company operating in the relevant/related industry with proven track record]

Existing companies in the manufacturing and services sectors with Malaysian equity ownership of at least 60% undertaking reinvestments (expansion / modernization /

diversification)

Companies producing promoted products/engaged in promoted

activities in the following priority sectors can be considered for DISF:

Aerospace Medical Devices

Pharmaceuticals Advanced Electronics

Machinery & Equipment

Renewable Energy

Services Sector

Other industries

2. Domestic Investment Strategic Fund (DISF)

cont’d …

Eligibility Criteria

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CATEGORY 1 CATEGORY 2

* “Incurred” refers to plant and machinery purchased and used for the purpose of the business in the approved Year of Assessment

Labour intensive industries

(rubber products, plastics,

wood, furniture and textiles)

Automation CA of 200%

on the first RM4 million

expenditure incurred*

within 5 years of

assessment from

2015 to 2020.

Other industries

Automation CA of

200% on the first RM2

million expenditure

incurred* within 5

years of assessment

from 2015 to 2020.

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2. Automation Capital Allowances (Automation CA)

Type of Incentives

Manufacturing companies incorporated under the Companies

Act, 1965 and residents in Malaysia

Possess a valid Business Licence from Local Authority and

Manufacturing Licence from MITI (if applicable)

Companies have been in operation for at least 36 months

Requirement for Manufacturing Licence (ML) under

the Industrial Coordination Act (ICA)1975 :

Shareholders’ funds of RM2.5 million and above OR; Employing 75 or more fulltime employees

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2. Automation Capital Allowances (Automation CA)

cont’d …

Eligibility Criteria

Automation equipment adopts technology that is more advanced

than the technology currently used by the company and to be

verified by SIRIM.

Machine should be used at least one (1) month after installation /

commissioning.

For new products, the machine should be in operation for at least

three (3) months after the production of the first batch of that new

product.

Automation equipment should enhance the productivity such as

reducing man hours, reducing workers and increasing volume of

output and to be verified by SIRIM

Automation equipment is used directly in the manufacturing activity

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2. Automation Capital Allowances (Automation CA)

cont’d …

Note: (1) Companies approved with Automation CA must provide copy of documents submitted to SIRIM during the audit by IRB. (2) MIDA will issue approval letter based on the investment projection by companies. Companies are required to declare the expenditure to IRB to enjoy the incentive. 12

2. Automation Capital Allowances (Automation CA)

cont’d …

3. Readiness Assessment (RA)

Comprehensive programme to

help firms assess their

capabilities and readiness

to adopt Industry 4.0

technologies and processes.

*Register for online application : https://www.miti.gov.my/index.php/pages/view/industry4WRD 13

3. Readiness Assessment (RA) cont’d …

Application for other available incentives/grants/soft loans

related to Industry 4.0

MIDA

Existing HIF or DISF

Automation Capital

Allowance

Pioneer Status or Investment

Tax Allowance

Other ministries / agencies, e.g:

1) MIDF's soft loans

2) SME Corp's grants

3) Reinvestment Allowance

Online application for Industry4WRD Readiness Assessment (RA) to MPC

Obtain RA Report from the Assessment Body (AB)

Decision by companies on Industry 4.0

Application for Industry 4.0 Incentives (Budget 2019)

Screening by Technical & Steering Committee

Application for Industry4WRD

Intervention Fund to MPC

Application for Industry4WRD

DISF/HIF to MIDA

Application for other Industry 4.0

incentives

Readiness Assessment (RA) is not

compulsory for application of other

existing incentives

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MIDA HQ – Machinery & Metals Division

MIDA Sentral

No. 5 Jalan Stesen Sentral 5, KL Sentral 50470 Kuala Lumpur Tel: 603 2267 3633 Fax: 603 2274 7970 Email: investmalaysia@mida.gov.my

www.mida.gov.my

Be with us on Social Media / Mobile

:

Visit our Business Information Centre (BIC) at

2nd Floor, MIDA Sentral, KL Sentral

Opening hours: Monday - Friday 8.30 a.m - 5.00 p.m

THANK YOU

URL: @officialMIDA

CONTACT US:

Companies currently claiming Reinvestment Allowance (RA) can opt to

claim the Automation CA provided that only one of these two

incentives is claimed in the same year of assessment. The period of RA

will continue even though the company has opted for this incentive.

However, the company must utilize the full amount of RM4 million

(Category 1) or RM2 million (Category 2) before it continues to claim RA.

If a company decides to claim the Automation CA first before claiming

RA, the incentive period for Category 1 and Category 2 will form part of

the 15-year period of RA.

Company can only make a claim on one of the incentives granted that

include Reinvestment Allowance (RA), Pioneer Status (PS), Investment

Tax Allowance (ITA) or Allowance for Increased Exports (AIE). MUTUALLY

EXCLUSIVE

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Existing Incentives related to Industry 4.0

3. Automation Capital Allowances (Automation CA) cont’d …