With property prices in Johor Bahru rising, I often get asked by clients, “Is there any tax deduction for my building purchased?”

Today, I will address this common tax question.

An industrial building in Malaysia includes properties used for manufacturing, processing, storage, or any other similar industrial purposes.

These buildings are pivotal for businesses involved in production and operations, making them eligible for tax deductions through the IBA.

Here’s a more detailed list of the types of buildings that can qualify for IBA, as described in the Public Ruling o 3/2018, 8/2016 and Schedule 3 of the Income Tax Act 1967

➡ Factories : Buildings used primarily for manufacturing or processing goods and materials. This includes all structures used in connection with manufacturing, such as storage facilities for raw materials and finished products if they are on the same site as the factory.

➡Warehouses : Specifically those used in connection with a qualifying industrial activity, such as storage of goods to be processed or manufactured.

➡Workshops : Buildings where goods are produced or repaired, as long as they are part of a larger industrial operation.

➡Buildings used for Research and Development : Buildings used specifically for industrial or scientific research related to the manufacturing process.

➡Buildings housing Industrial Power Generation : Includes buildings that house machinery used for generating power for industrial activity, as long as the power is used for operating the industrial facility.

➡Agricultural Buildings : Includes buildings used for the processing of agricultural produce, such as mills for processing rice or sugar.

➡Buildings used in Mining and Quarrying : Any building used directly in connection with mining operations or the processing of minerals.

Commencing from the year of assessment 2016, the provision under subparagraph 16B(1), Schedule 3 of the ITA clarifies that a person who is eligible to claim IBA must be the owner and business operator of the above-mentioned types of industrial buildings.

A building owner who rents out his building to another person to carry on the business is not eligible to claim IBA on that building although the tenant uses it as an industrial building.

It is important to note that the tenant is eligible to claim IBA in respect of the capital expenditure incurred by him on alteration or renovations on the building that he uses as an industrial building.

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