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Automation Capital Allowance

The Automation Capital Allowance (Automation CA) incentive for the manufacturing sector was introduced in the National Budget 2015. Subsequently, the Automation CA for Category 2 of the manufacturing sector has been expanded to the services sector in the National Budget 2020.

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Categories of ACA incentive

i. Category 1 – Labour-intensive industries (rubber products, plastics, wood, furniture and textiles):
➢ Automation Capital Allowance of 200% on the first RM4 million expenditure incurred1 within the year of assessment from 2015 to 2023; and


ii. Category 2 - Other Industries including Services Sector:
➢ Automation Capital Allowance of 200% on the first RM2 million expenditure incurred within the year of assessment from 2015 to 2023 (for the services sector commencing from the year of assessment 2020).​

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TYPE OF INCENTIVE

The Automation Capital Allowance of 200% on the first RM10 million expenditure incurred within the year of assessment from 2023 to 2027. The scope of automation includes adaptation of Industry 4.0 elements.

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ELIGIBLE APPLICANTS

  • A company that has applied the incentive commencing from the year 2023.

  • A Company that has been approved for Automation CA prior to the year 2023 is also eligible for the incentive.

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ELIGIBILITY CRITERIA

  • Companies incorporated under the Companies Act, 2016 and resident in Malaysia.

  • Companies have been engaged in manufacturing / services activities for at least of 36 months.

  • Companies must possess the following documents:

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For companies engaged in manufacturing activities - a Manufacturing Licence (ML) from MITI or Confirmation Letter for Exempted from Manufacturing Licence from MIDA (whichever is applicable).

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For companies engaged in services activities – a permit / licence / registration / accreditation / certificate / approval letter from the relevant Ministry / Agency / Regulator (whichever is applicable) in relation to the company’s services activities.

Main objectives of the ACA incentive

• To encourage companies to engage in innovative and productive activities;
• To encourage quick adoption of automation specifically for labour-intensive industries;
• To spur automation initiatives; and
• To enhance productivity in the manufacturing and services sector.

ELIGIBLE MACHINERY / EQUIPMENT

The automation machinery / equipment including machinery / equipment with an adaptation of Industry 4.0; The automation machinery / equipment including machinery / equipment with an adaptation of Industry 4.0;

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The machinery / equipment / Industry 4.0 software / system should enhance productivity such as reducing man hours, reducing the number of workers/operators involved in the operation, reducing the defect rate or increasing the volume of output which is to be verified by SIRIM.

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For automation machinery / equipment, the technology utilised must be more advanced than the technology currently used by the company and to be verified by SIRIM. The machinery / equipment must fulfill at least one of the category areas of automation / automated equipment and has at least one of the automation components (as listed in the SIRIM Info Sheet);

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For machinery / equipment / software / system with an adaptation of Industry 4.0, the technology utilised must have at least one of the following Industry 4.0 elements:


i. Big Data Analytics
ii. Cloud Computing
iii. Augmented Reality
iv. Cybersecurity

v. Artificial Intelligence
vi. Additive Manufacturing
vii. System Integration
viii. Simulation
ix. Internet of Things (IoT)
x. Autonomous Robots
xi. Advanced Materials

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The machinery / equipment / Industry 4.0 software / system should be used at least one (1) month after installation / commissioning for existing products/services activities;

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For machinery / equipment / Industry 4.0 software / system used in producing new products/services activities, the machinery / equipment / Industry 4.0 software / system must be in operation for at least three (3) months after the production of the first batch of the new product / commencement of the services activities; and

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The machinery / equipment / Industry 4.0 software / system purchased through the grant from the government is eligible for the Automation CA incentive. The qualifying expenditures for the Automation CA incentive are based on the amount that is not covered under the respective grant.
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INCENTIVE TREATMENT
  • The company must incur expenditures in relation to automation machinery / equipment including machinery / equipment / software / system with an adaptation of Industry 4.0.
  • The eligible amount of Automation CA is RM10 million.
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The company must incur expenditures for at least one (1) machinery / equipment / software / system with an adaptation of Industry 4.0 within the eligible amount of RM10 million. A company currently claiming Reinvestment Allowance (RA).

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REQUIRED DOCUMENTS

🟢A copy of the Business Licence (mandatory requirement).

🟢A copy of the Manufacturing Licence (ML)4 or Confirmation Letter for Exempted from the Manufacturing Licence (whichever is applicable) for manufacturing company.

🟢A copy of permit / licence / registration / accreditation / certificate / approval letter from the relevant Ministry / Agency / Regulator (whichever is application) in relation to the company’s services activities.

🟢A copy of tax incentive approval letter(s) (if applicable).

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The following documents must be certified by an External Auditor:
• List of purchased and installed machinery/equipment;
• Invoices/Purchased Orders and Delivery Orders for the machinery/equipment; and
• Proof of documents to indicate that the entire cost of the machinery/equipment has been paid.

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