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Agriculture Allowance

Agriculture Allowance. Introduction. Agriculture allowance applies to agriculture business. Agriculture business means any form of cultivation of crops, animal farming, aquaculture, inland fishing and any other agricultural or pastoral pursuit. Agriculture Allowance.

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Agriculture Allowance

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  1. Agriculture Allowance

  2. Introduction • Agriculture allowance applies to agriculture business. • Agriculture business means any form of cultivation of crops, animal farming, aquaculture, inland fishing and any other agricultural or pastoral pursuit.

  3. Agriculture Allowance • Qualifying Agriculture Expenditure (QAE) • Rate of Allowance • Conditions for Agricultural Allowance (para 25) • Disposal of Asset (para 52)

  4. QAE • Clearing and preparation of land (50%) • New planting (not replanting) (50%) • Road and bridges (50%) • Building: Living accommodation (20%) - “little or no value” Other building (10%) Note: Land and P&M are excluded

  5. Rules on Claiming Allowance • A portion (according to the rates) in year of acquisition and subsequent years up to exhaustion of QE. • Allowance is set off against adjusted income from that business to arrive at statutory income. • No initial allowance. • Only annual allowance available.

  6. Rules for Claiming AA • Used in business at the end of basis period; and • Ownership at end of bp OR • Not in use within one month before the transfer

  7. Disposal Rules– in use within one month before transfer • In year of disposal, allowance is time apportioned up to date of transfer or sale, if the qualifying expenditure was in use within one month before the transfer. • Apportion allowance between transferor and transferee: • Transferor: Days owned before transfer/ 365 - Transferee the remaining

  8. Rules on Disposal Transferor Transferee • Can claim allowance up to date of disposal in YA of disposal if asset was in use one month before disposal. • Can only claim remaining agriculture allowance due to transferor. • If YA of acquisition=YA of disposal, claim part of allowance only in YA of acquisition.

  9. Rules on Disposal • Taxpayer can elect to have the agriculture charge assessed over the YA’s for which the allowances were made rather than the year of disposal. • Conditions: permanently ceased • Deemed disposed in that (permanently ceased) basis period • Make election for spread back: • Within 3 months from beginning of YA following the first mentioned YA • Where a grant becomes payable, an agriculture charge equal to the grant amount shall be computed.

  10. Rules on Disposal • Where disposal of qualifying agriculture expenditure took place within 6 years from incurring such expenditure, agriculture allowance previously claimed would be withdrawn as agriculture charge.

  11. AC Facts: • Roads: RM 50,000 incurred in 15.3.02 • AA: YA 2002 : 25,000 : YA 2003 : 25,000 Disposed on 30.6.05 (< 6 years) AC : YA 2005 = 50,000

  12. AC Same Facts: Disposed on 30.6.09 (> 6 years) Plantation permanently ceased 14.3.08 (< 6) AC : YA 2008 = 50,000

  13. AC Same Facts: Disposed on 30.6.09 (> 6 years) Plantation permanently ceased 14.3.08 Para 27 election AC : YA 2002 : 25,000 : YA 2003 : 25,000

  14. Forest Allowance (Schedule 3 Allowance)

  15. Qualifying Expenditure • Construction in a forest of: • Road or building used for the purposes of a business which consists wholly or partly of the extraction of timber from the forest. • A building provided by him for the welfare of persons or as living accommodation for a person, employed in or in connection with such extraction.

  16. Rules on Allowance • No initial allowance. • Annual allowance at the following rates: • Road or building used for the purposes of a business - 10%. • A building provided by him for the welfare of persons or as living accommodation for a person, employed in or in connection with such extraction - 20%.

  17. Rules on Claiming Allowance • Full year’s allowance in YA of incurring expenditure & subsequent years up to YA of disposal or YA of permanent cessation. • In case of permanent cessation, in relevant YA, the remaining residual expenditure will be given as an allowance.

  18. Rules on Disposal • On disposal of forest, there will be a forest charge. • Forest charge = Allowance Clawback. • If forest disposed off after YA of cessation, the disposal shall be deemed to have been made in YA of cessation. • Can elect to spread the forest charge over the past years of assessment, for which the allowances were made.

  19. Rules on Disposal Transferor Transferee • Will not get any forest allowance upon acquiring the forest expenditure from the disposer. • Forest allowance given on new QE incurred.

  20. Questions • Compare and contrast agriculture and forest allowance in respect to claiming of capital allowance and balancing charge on disposal • State the uniqueness of approved agricultural projects from a tax perspective. 20 Minutes

  21. AA FA 1st Year Allowance Full Full Allowance in YA of cessation N/A RE b/f cessation Allowance in YA disposal Time-Based** None Charge in YA of disposal Yes Yes Amount of charge Clawback*** Clawback*** BA in YA of disposal N/A N/A Note: * Only in case of operator commencing its first mining business. ** Up to date of disposal if used one-month before disposal. *** Clawback of allowances granted.

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