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    Capital Allowances

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    Ar Bob
    Capital allowances provide tax relief for capital expenditures incurred for business purposes. There are two types of capital allowances - initial allowance of 20% and annual allowance that varies between 10-40% depending on the asset type. Qualifying expenditures include costs of machinery, equipment, and incidental installation costs. Motor vehicles licensed for commercial transportation have no cost limit for capital allowances, while other vehicles are limited to RM100,000.

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    Capital Allowances

    Uploaded by

    Ar Bob
    151 views4 pages
    Capital allowances provide tax relief for capital expenditures incurred for business purposes. There are two types of capital allowances - initial allowance of 20% and annual allowance that varies between 10-40% depending on the asset type. Qualifying expenditures include costs of machinery, equipment, and incidental installation costs. Motor vehicles licensed for commercial transportation have no cost limit for capital allowances, while other vehicles are limited to RM100,000.

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    TAXATION-CAPITAL ALLOWANCES-MAC2017

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    Capital allowances provide tax relief for capital expenditures incurred for business purposes. There are two types of capital allowances - initial allowance of 20% and annual allowance that varies between 10-40% depending on the asset type. Qualifying expenditures include costs of machinery, equipment, and incidental installation costs. Motor vehicles licensed for commercial transportation have no cost limit for capital allowances, while other vehicles are limited to RM100,000.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    151 views4 pages

    Capital Allowances

    Uploaded by

    Ar Bob
    Capital allowances provide tax relief for capital expenditures incurred for business purposes. There are two types of capital allowances - initial allowance of 20% and annual allowance that varies between 10-40% depending on the asset type. Qualifying expenditures include costs of machinery, equipment, and incidental installation costs. Motor vehicles licensed for commercial transportation have no cost limit for capital allowances, while other vehicles are limited to RM100,000.

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    © All Rights Reserved
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    CAPITAL ALLOWANCES

    Introduction
    Capital allowances are allowed to a person/company who
    incurred any capital expenditure for the purpose of his business
    and allow by the tax authority to made a claim in writing in his
    Income Tax Return Form.
    The amount of capital expenditure incurred will be used in the
    computation of initial allowance (IA) and annual allowance
    (AA) under Schedule 3 of the Income Tax Act 1967.

    Types of Qualifying Expenditure [QE]


    cost of plant or machinery
    Incidental expenditure such as alteration of an existing
    building for the purposes of installing plant or machinery
    and other expenditure incurred incidentally to the
    installation and expense incurred on preparing, cutting,
    tunneling or leveling land in order to prepare a site for the
    installation of the plant or machinery provided that the
    expenditure to provide a site does not exceed 10% of the
    aggregate cost of plant or machinery and the cost of
    preparing the site.
    Rates of Capital Allowance

    Capital allowances consist of an initial allowance and


    annual allowance. Initial allowance is fixed at the rate of
    20% based on the original cost of the asset at the time when
    the capital expenditure is incurred.

    While annual allowance is a flat rate given every year


    based on the original cost of the asset. The annual
    allowance is given for each year until the capital
    expenditure has been fully written off, unless the fixed
    asset is sold, scrapped or disposed, in which case a
    balancing allowance or balancing charge will be calculated

    Annual allowance rates vary according to the type of the


    assets and the rates tabulated in the table below.

    Initial Allowance Annual


    Type Of Asset
    (%) Allowance (%)
    Heavy Machinery /
    20 20
    Motor Vehicle
    Plant and Machinery 20 14
    Computer and ICT
    20 40
    Equipment
    Others 20 10
    Heavy Machinery Bulldozers, cranes, ditchers,
    excavators, graders, loaders, rippers, rollers, rooters,
    scrappers, shovels, tractors, vibrator wagons and so on.
    Motor Vehicles All types of motorized vehicles such as
    motorcycles, aeroplanes, ships and so forth

    Plant and Machinery General plant and machinery not


    included under heavy machinery such as air conditioners,
    compressors, lifts, laboratory and medical equipment,
    ovens and so forth.

    Others Office equipment, furniture and fittings.

    In the case of motor vehicles, other than a motor


    vehicle licensed by the appropriate authority for
    commercial transportation of goods or
    passengers, the qualifying plant expenditure
    incurred shall be limited to a maximum of
    RM50,000 only.

    Motor vehicles which are licensed for


    commercial transportation of goods or passengers
    such as lorry, truck, bus, mini bus, van, etc, are
    not included in those restrictions.

    Nevertheless, starting from year of assessment


    2001, the limitation amount for qualifying plant
    expenditure for motor vehicle, other than a motor
    vehicle licensed by the appropriate authority for
    commercial transportation of goods or
    passengers, which is bought on or after
    28/10/2000, has been increased from RM50,000
    to RM100,000 on condition that the motor
    vehicle bought is a new motor vehicle, and the on
    the road purchase price does not exceed
    RM150,000

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