Section 199: optional 25% tax rate for manufacturing domestic companies

The option and its conditions

A domestic company may, at its option, have its total income for a tax year taxed at a flat 25%, subject to Parts A, B and E of this Chapter and to this Part (other than sections 200 and 201), provided:

• The company has been set up and registered on or after 1 March 2016;
• The company is not engaged in any business other than manufacture or production of an article or thing, and research relating to, or distribution of, such article or thing manufactured or produced by it; and
• Its total income has been computed without deduction under section 45(2) or 47(1)(b), without deduction under Chapter VIII-C (other than section 146), and without deduction under the sections listed in section 205(1)(a) to (g); and without setting off any loss carried forward from an earlier tax year that is attributable to those disallowed deductions.

Loss treatment and how the option is exercised

A loss that cannot be set off because it is attributable to a disallowed deduction is deemed to have been given full effect to, so no further deduction for that loss is allowed in any later year.

The option must be exercised in the prescribed manner on or before the due date under section 263(1) for furnishing the first of the returns of income the company is required to furnish; once exercised, it applies to all subsequent tax years.

Once exercised for any tax year, the option cannot be withdrawn for that year or any other year, except where the company instead exercises the option under section 200.

Frequently asked questions