B6 CAPITAL ALLOWANCES A1. CURRENT CAPITAL ALLOWANCES RATES FOR PLANT A1. Standard rates With effect from Y/A 2000 (cyb), capital allowances are re-categorised into three classes and the rates of capital allowances are revised as follows: Type of Asset Initial Heavy machinery and motor vehicles Plant and machinery (general) 14% Others 10% Assets with a life span of not exceeding 2 years Replacement basis A2. SPECIAL RATES FOR PLANT Buses using natural gas in business of public transportation and natural gas refuelling equipment in a natural gas refuelling outlet [PU(A) 265/1997]. Imported prescribed heavy machinery used in construction, mining, plantation and timber industries [PU(A) 474/1997]. Machinery and plant (other than imported heavy machinery) used in specific industries [PU(A) 294/1998]: Building and construction Timber Tin mining unless election made in writing. Prescribed equipment and facility used for collecting wastes, limiting pollution of the environment, checking excessive pollution and securing more efficient use of the equipment [PU(A) 295/1998]. Plant and machinery used for recycling of wastes or for further processing of wastes into finished products [PU(A) 505/2000]. Plant and machinery used for the purpose of a qualifying project in respect of a promoted activity [PU(A) 506/2000]. * See section A1 above. Initial 40% 10% 10% 30% 60% 60% / 14%* / 14%* / 14%* / 14%* 40% 40% 40% l 124 l
Qualifying expenditure on private motor vehicles restricted to: RM50,000 RM100,000 applies only to new vehicle with total cost not exceeding RM150,000 purchased on or after 28 Oct 2000. Accelerated capital allowance (ACA) on machinery and equipment (as determined by the Minister of Finance) used in the agricultural sector but exclude forest plantation [PU(A)188/2005]. ACA on the purchase of pre-cast concrete mould used in the production of industrialised building system component [PU(A) 249/2006]. ACA be given to small value assets not exceeding RM1,000 each but not exceeding a total value of RM10,000 per basis period. [The maximum limit of RM10,000 is not applicable to small and medium enterprises (SMEs) with effect from Y/A 2009]. With effect from Y/A 2015, the value of each asset and total value will be increased from: (a) RM1,000 to RM1,300 per asset; and (b) RM10,000 to RM13,000 in total per basis period. [Note: Taxpayers are given the option to either claim the ACA (100%) or the normal CA]. ACA be given to: (i) security control equipment [other than the Global Positioning System (GPS)] incurred by a company [it must be approved under the Industrial Co-ordination Act 1975 (Act 156)] for its factory or by an individual at any building of permanent structure for the purpose of his business; or (ii) any GPS for vehicle tracking for a container lorry of company bearing Carrier Licence A and for a cargo lorry of the company bearing Carrier Licence A or C issued under the Commercial Vehicles Licensing Board Act 1987 (Act 334). (Note: The rules are effective from Y/A 2009 to 2012.) New rules have extended ACA to Y/A 2015 and it is enhanced to include: (a) companies that install security control and surveillance equipment in residential areas; and (b) safety mirrors and panic buttons [PU(A) 4/2013]. ACA be given to new buses used in the business of a bus operator. The bus shall be used for commercial transportation of passengers or conveyance of tourists; locally assembled or constructed, as defined in Motor Vehicles (Registration and Licensing) Rules 1959; and not a reconditioned bus. Bus specified in the Gazette Order are stage bus, charter bus, express bus, mini bus, employees bus, feeder bus, school bus and excursion bus [PU(A) 356/2008]. (Note: The rules are effective from Y/A 2009 to 2011.) Initial 40% 40% 100% 80% 80% 80% l 125 l
SMEs be given ACA on ALL expenses incurred on plant and machinery that qualify for Sch 3 capital allowances [PU(A) 357/2008]. (Note: The rules are effective from Y/A 2009 to 2010.) ACA be given to information and communication technology (ICT) equipment including computer and software [PU(A) 358/2008]. (Note: The rules are effective from Y/A 2009 to 2013.) New rules [PU(A) 217/2014] have: (a) extended ACA from Y/A 2014 to Y/A 2016; (b) clarified that purchase of any ICT equipment includes the installation of such equipment; (c) widened the non-application Rule (#). # PU(A) 284/2015 amends the non-application Rule in PU(A) 217/2014, a person who qualifies for a deduction under any Rules made under S. 154 including statutory audit fees expenditure under PU(A) 129/2006 can also claim the ACA under PU(A) 217/2014 in the same year of assessment as long as the Rules in the PU(A) 217/2014 have been complied with. Where any of the ICT equipment is disposed of with or without consideration at any time within 2 years from the date of the purchase, the allowances will be withdrawn. ACA be given to expenses incurred on renovation or refurbishment of business premises between 10 Mar 2009 to 31 Dec 2010 which are prescribed by the Ministry of Finance. However, the amount of qualifying expenditure is restricted to RM100,000 for the qualifying period. ACA be given to equipment certified by the Ministry of Energy, Water and Communications and used exclusively to control the quality of electric power [PU(A) 87/2005]. ACA be given to prescribed renovation costs incurred on a building located in the Tun Razak Exchange by a Tun Razak Exchange Marquee status company (Note: The rules are effective from 1 January 2014 until 31 Dec 2020) [PU(A) 29/2013]. ACA be given on qualifying plant expenditure incurred for the purpose of carrying out petroleum operations in a marginal field. The Rules come into operation on 30 Nov 2010 and are effective from Y/A 2010 until Y/A 2024 [PU(A) 119/2013 and PU(A) 58/2014]. Note: Please refer to the non-application Rule in the respective Rules. Initial 80% 80% 50% 40% 40% 25% 15% l 126 l
B. CAPITAL ALLOWANCES RATES FOR BUILDING Types of buildings IA AA Industrial buildings (standard rate unless special rates apply) 10% 3% Building constructed and provided as living accommodation for individuals 40% 3% employed in a business where an industrial building is in use and excludes a director, an individual having control or an administrative staff. Capital expenditure on public roads and ancillary structures recoverable 10% 6% through toll collection. Building (constructed or purchased) for the provision of child care facilities (1 Jan 1994 onwards). Building (constructed or purchased) used for providing living accommodation to employees by a person engaged in a: Manufacturing business (1 Jan 1994 onwards) Hotel or tourism business or approved service project (Y/A 1997 onwards). Building (constructed or purchased) used for a school or an educational institution approved by the Minister of Education or any relevant authority or for the purposes of industrial, technical or vocational training approved by the Minister (Y/A 1996 onwards). Building (constructed or purchased) used as warehouse for the storage of goods for export or for the storage of imported goods to be processed and distributed or re-exported (Y/A 1998 onwards). Building constructed pursuant to an agreement entered into with the 10% 6% Government on a build-lease-transfer basis on lease to the Government (Y/A 2000 (pyb) onwards). Building (constructed or purchased) used as an old folks care centre approved by Social Welfare Department (Y/A 2003 onwards) [PU(A) 143/2003]. Building (constructed or purchased) used by a BioNexus status company solely for its new business or expansion project (2 Sep 2006 onwards) [PU(A) 374/2007]. Building (constructed or purchased) in a Cyberjaya Flagship Zone used by a MSC status company or rented to a MSC status company (Y/A 2006 onwards) [PU(A) 202/2006]. Building constructed under a privatisation project and private financing 10% 6% initiatives approved by the relevant authorities (Y/A 2009 onwards) [PU(A) 119/2010]. Building (constructed or purchased) used for the purpose of a kindergarten approved by the Ministry of Education (Y/A 2013 onwards) [PU(A) 1/2013] l 127 l
Types of buildings IA AA Building (constructed or purchased) used for the purpose of a child care centre registered with the Department of Social Welfare (Y/A 2013 onwards) [PU(A) 2/2013]. A commercial building (constructed or purchased) used for the purpose of a specified business by a Tun Razak Exchange Marquee status company in the Tun Razak Exchange (Effective Y/A 2014 for qualifying building expenditure incurred on or before 31 Dec 2020) [PU(A) 27/2013]. C. AGRICULTURE ALLOWANCES RATES Capital expenditure incurred on: (Fraction of Expenditure Incurred) (a) the clearing and preparation of land for the purposes of agriculture 1/2 (b) the planting (but not replanting) of crops on land cleared for planting 1/2 (c) the construction on a farm of a road or bridge 1/2 (d) building for the welfare of persons or as living accommodation for a 1/5 person employed for the working of a farm (e) any other building. 1/10 D. FOREST ALLOWANCES RATES Capital expenditure incurred on the construction in a forest of: (a) a road or building used for the purposes of a business which consists wholly or partly of the extraction of timber from the forest (b) a building provided for the welfare of persons, or as living accommodation for a person, employed for such extraction of timber. (fraction of expenditure incurred) Note: With effect from Y/A 2015, qualifying forest expenditure is restricted to capital expenditure incurred only by a person who has a concession or license to extract timber. 1/10 1/5 l 128 l
E. GUIDELINES FOR NON-APPLICATION OF ACCELERATED CAPITAL ALLOWANCES This Guidelines clarify the non-application paragraphs in the following Rules: Income Tax (Accelerated Capital ) (Plant and Machinery) Rules 2008 [PU(A) 357/2008]; Income Tax (Accelerated Capital ) (Information and Communication Technology Equipment) Rules 2008 [PU(A) 358/2008]; and Income Tax (Accelerated Capital ) (Plant and Machinery) Rules 2009 [PU(A) 111/2009]. Tax treatment: (a) The eligibility of incentives under the PIA 1986, re-investment allowance under Sch 7A of the Income Tax Act 1967 (ITA 1967) or exemption under Para 127(3)(b) or 127(3A) of the ITA 1967 is by reference to a person. If the person decides to claim an incentive under PIA or reinvestment allowance or exemption under Para 127(3)(b) or Para 127(3A), then the person is not eligible for ACA. Only normal capital allowance rates can be claimed on the assets. (b) The ACA rules are not mutually exclusive with deductions that are determined by the Minister under S. 154 of the ITA 1967. A person who qualifies for a special deduction or double deduction approved by the Minister under S. 154 is still eligible for ACA. (c) A person who has claimed capital allowance under Para 19A of Sch 3 of the ITA 1967 (100% for assets valued not more than RM1,000 per asset and subject to a maximum of RM10,000 but the limit is not applicable to a SME company) is still eligible for ACA as the allowance is by reference to an asset and not on a person. (d) If an asset is eligible for a higher rate of initial allowance or annual allowance under any rules, the person cannot claim a lower rate that is provided for in one of the rules for the same asset. (e) Para 71 of Sch 3 of the ITA 1967 applies to all assets including assets for which ACA is claimed if the disposal of the asset is made within 2 years from the date of acquisition. A balancing charge equal to the total allowances given is made except in the case of death of the owner of the asset or, with effect from Y/A 2009, other reasons acceptable to the Director General of Inland Revenue Malaysia. (f) In the case of a controlled transfer within 2 years, Para 71 of Sch 3 of the ITA 1967 would be applicable and be subject to balancing charge. The recipient of the asset can claim capital allowance at normal rates based on the qualifying expenditure incurred. If no payment is made by the recipient, no capital allowance can be claimed. Date issued 9 August 2012 l 129 l
F1. CURRENT CAPITAL ALLOWANCE RATES FOR PETROLEUM INCOME TAX General Initial Qualifying plant expenditure 8% Fixed offshore platform 0% 10% Qualifying building expenditure 10% 3% Secondary Recovery (Note 1) Initial Qualifying plant expenditure 40% 10% Qualifying building expenditure 3% Note 1: Secondary recovery is defined as a project which has as its object the production of quantities of hydrocarbons by the application of external energy to the underground reservoir for the purpose of additional and/or accelerated recovery of those hydrocarbons. F2. SPECIAL CAPITAL ALLOWANCE RATES FOR PETROLEUM INCOME TAX Qualifying plant expenditure incurred on the cost of provision of computer software including the software system and software package used for the purpose of petroleum operations [PU(A) 120/2003]. Qualifying plant expenditure incurred on the cost of provision of computers and information technology equipment used for the purpose of petroleum operations [PU(A) 121/2003]. Qualifying plant expenditure incurred on the provision of equipment and facilities on environmental protection used for the purpose of petroleum operations [PU(A) 397/2004]. Qualifying plant expenditure incurred in the basis period for Y/A 2010 to Y/A 2024 for petroleum operations in a marginal field [PU(A) 119/2013]. Initial 40% 40% 40% 25% 15% l 130 l
G. GOODS AND SERVICES TAX AND CAPITAL ALLOWANCES Amount of qualifying expenditure Goods and services tax (GST) input tax paid or to be paid by a person to be excluded from the amount of qualifying expenditure if the person is: (a) Liable to be registered under the GST Act 2014 (the GST Act) and has failed to do so; or (b) Entitled under the GST Act to credit on that amount as input tax. GST and qualifying expenditure adjustments Any adjustment to the qualifying expenditure of an asset as a result of any adjustment to input tax under the GST Act shall only be made in the basis period for a year of assessment in which the period of adjustment related to the asset as provided under the GST Act ends except in the case of a disposal of asset. In the latter situation, the adjustment shall be made in the year of assessment the disposal has been made. If the above adjustment results in: (a) Additional amount, the relevant amount is included in the qualifying and residual expenditure under Para 68 of Sch 3 of the Income Tax Act 1967 (ITA 1967). (b) Reduced amount, the relevant amount shall be reduced from the qualifying and residual expenditure under Para 68 of Sch 3 of the ITA 1967. (Note:If the amount of allowance exceeds the residual expenditure, the excess shall be part of the statutory income from the business. However, the excess should not exceed the total allowances given). Effective Date Y/A 2015 Y/A 2015 l 131 l