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KNOWLEDGE|
(1) |
Legal Basis
Paragraph 19A of Schedule 3 of the Income Tax Act 1967 (hereinafter referred to as “the Act”) provides a special rate of allowance for SVAs, in place of the normal capital allowances under paragraphs 10 and 15 of Schedule 3. The special allowance rate is 100% of the QPE incurred on each small value asset.
To be eligible for claiming the special allowance for SVAs, a person must also meet the general requirements for claiming capital allowances under Schedule 3 of the Act.
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(2) |
Option to Claim
A person may choose to claim either special allowances for SVA or normal capital allowance under Paragraph 10 and 15 of Schedule 3 of the Act. The person is deemed to have elected for special allowances if that person computes the allowance for SVA using the special allowance rate in his tax computation.
If a person has already claimed special allowance for SVA, that person will not be eligible to claim normal capital allowance in respect of the said asset. The person has to consistently apply the capital allowance rate until the total QPE is fully absorbed.
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(3) |
Eligibility to Claim SVA The following persons are not eligible to claim special allowances for small value assets:
(a) a business trust, or a special purpose vehicle established for asset-backed securitization in a securitization transaction approved by Securities Commission.
(b) a person who has elected to claim normal capital allowances under Paragraphs 10 and 15 of Schedule 3 of the Act |
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Tax Treatment |
Value of each asset |
Maximum QPE per YA |
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Micro, small and medium company (MSMC) |
Not exceeding RM2,000 |
Unlimited |
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Non-MSMC and Limited Liability Partnership (LLP) |
Not exceeding RM2,000 |
RM20,000 |
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(1) |
Micro, Small and Medium Companies
Under subparagraph 19A(3), an MSMC may claim special allowances without any limit on total QPE in a YA. The company must be resident and incorporated in Malaysia and must meet the MSMC criteria. From YA2024, the additional ownership conditions in subparagraph 19A(4)(d) also apply. For more information on MSMC, also referred to as MSME, criteria, kindly refer to our previous publication at https://www.kaizencpa.com/Knowledge/info/id/2049.html .
For this purpose, gross income from a business source for a basis period is the full amount of income from that source before any deduction. A company does not qualify for the unlimited claim if it:
(a) is deemed to have no gross income from a business source, such as an investment holding company that is not listed on Bursa Malaysia;
(b) has no gross income from a business source under Section 4(a) of the Act but has other income, such as interest and rent under Section 4(c) and 4(d); or
(c) is a dormant company with no gross income from a business source.
A company that carries on business but receives no gross business income because of a current loss or because of a temporary cessation of operations, is not affected by these exclusions.
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(2) |
Non-MSMC and Limited Liability Partnership (LLP)
Non-MSMCs and LLPs that do not meet the MSMC criteria may still claim special allowances on small value assets, but total QPE is capped at RM20,000 per YA. QPE exceeding RM20,000 does not qualify for the special rate and is eligible for normal capital allowances instead.
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(1) |
Hire Purchase
The special allowance is not applicable where the SVA is acquired on hire purchase. However, taxpayers are still able to claim normal capital allowance on assets acquired on hire purchase.
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(2) |
Disposal Of An Asset That Has Received The Special Allowance
Where the SVA has been given the special allowance and is disposed of in the basis period for a YA, a balancing charge can be made if the disposal value is more than the residual expenditure at the date of disposal in accordance to Paragraph 35, Schedule 3 of the Act.
The balancing charge cannot exceed the total capital allowance claimed on the SVA, in accordance to Paragraph 37 Schedule 3 of the Act.
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(3) |
SVA Written Off
Where a SVA has become obsolete or damaged and can neither be repaired nor sold, it is written off and its market value is taken to be nil.
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Disclaimer All information in this article is only for the purpose of information sharing, instead of professional suggestion. Kaizen will not assume any responsibility for loss or damage. |
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