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Amendment of Schedule 3 of the ITA 1967: Special Allowances for Small Value Assets

Updated: Dec 8, 2023

Paragraph 19A of Schedule 1 of the Income Tax Act 1967, titled 'Special Allowances for Small Value Assets,' is read as follows:


Para 19A(1)

Where in the basis period for a year of assessment, a person for the purposes of a business of his incurred qualifying plant expenditure in relation to an asset or assets, the value of each asset being not more than two thousand ringgit, and at the end of the basis period he was the owner of the asset and it was in use for the purposes of the business, there shall be made in lieu of the amount of the allowance which would otherwise fall to be made to him under paragraph 10 or 15, an allowance equal to the amount of that expenditure for that year of assessment:


Provided that where the total qualifying plant expenditure in respect of such asset for each year of assessment exceeds the amount of twenty thousand ringgit, the total allowance that shall be made in respect of that expenditure under this paragraph shall be equal to such amount.


Para 19A(2) Allowance under paragraph 10 or 15 in respect of the qualifying plant expenditure referred to in subparagraph (1)—


(a) shall be made a person if that person has not made a claim in respect of that expenditure under that subparagraph; or


(b) shall not be made to that person in respect of that expenditure which has been given allowance under that subparagraph.


Para 19A(3) The proviso to subparagraph (1) shall not apply to a company resident and incorporated in Malaysia which has a paid up capital in respect of ordinary shares of two million and five hundred thousand ringgit and less at the beginning of the basis period for a year of assessment and gross income from source or sources consisting of a business not exceeding fifty million ringgit for the basis period for that year of assessment.


Para 19A(4) A company referred to in subparagraph (3) shall not include a company where more than—


(a) fifty per cent of the paid up capital in respect of ordinary shares of the second mentioned company is directly or indirectly owned by a related company;


(b) fifty per cent of the paid-up capital in respect of ordinary shares of the related company is directly or indirectly owned by the second-mentioned company; or


(c) fifty per cent of the paid-up capital in respect of ordinary shares of the second mentioned company and the related company is directly or indirectly owned by another company.


Para 19A(5) For the purpose of subparagraph (4), “related company” means a company which has a paid-up capital in respect of ordinary shares of more than two million and five hundred thousand ringgit at the beginning of the basis period for a year of assessment.


"Para 19A - Special Allowances for Small Value Assets" provides a tax benefit for businesses that incur qualifying plant expenditure on small assets. Here's a breakdown:


Qualifying Conditions:

  • If, during the basis period for a tax year, a person incurs qualifying plant expenditure related to an asset (or assets), each having a value not exceeding two thousand ringgit.

  • At the end of the basis period, the person owns the asset, and it is in use for the business.


Special Allowance:

  • Instead of the regular allowances (under paragraph 10 or 15), the person is entitled to a special allowance equal to the total qualifying plant expenditure for that year of assessment.

  • However, there's a limit: If the total qualifying plant expenditure for the asset exceeds twenty thousand ringgit, the allowance is capped at that amount.


Impact on Regular Allowances:

  • If the person hasn't claimed the special allowance under subparagraph (1), they are eligible for allowances under paragraph 10 or 15.

  • If the special allowance has been claimed, no further allowances under paragraph 10 or 15 are applicable for the same expenditure.


Exceptions for Certain Companies:

  • The special allowance's limit does not apply to a specific category of companies:

    • resident companies incorporated in Malaysia with a paid-up capital of two million and five hundred thousand ringgit or less; and

    • gross income not exceeding fifty million ringgit.

  • However, there are additional conditions for these companies, including ownership percentages and related company criteria.


Definition of "Related Company":

  • A "related company" is one with a paid-up capital exceeding two million and five hundred thousand ringgit at the beginning of the basis period for a year of assessment.

Para 19A encourages businesses, especially smaller ones, to invest in small-value assets by providing a special allowance that replaces standard allowances for qualifying plant expenditure. The conditions and exceptions ensure that this benefit is targeted appropriately.




This amendment to Subparagraph 19A(4) of Schedule 3 introduces changes regarding the ownership of a company's paid-up capital. The key modifications are as follows:

  1. In sub-subparagraph (b), the word "or" at the end is deleted.

  2. In sub-subparagraph (c), the full stop at the end is replaced with the words "; or."

  3. After sub-subparagraph (c), a new sub-subparagraph (d) is added. This new addition states that if more than 20% of the paid-up capital in respect of ordinary shares of the company at the beginning of the basis period for a year of assessment is directly or indirectly owned by one or more companies incorporated outside Malaysia or by one or more individuals who are not citizens of Malaysia, certain conditions or rules may apply.

The tax impact of this amendment implies that companies meeting the criteria outlined in sub-subparagraph (d) will no longer be eligible for the special allowances for small-value assets, as defined in Paragraph 19A of Schedule 1 of the Income Tax Act 1967.


To illustrate, if a company's paid-up capital aligns with the conditions in sub-subparagraph (d), it could affect the application of special allowances for small-value assets, potentially altering the company's tax implications for the given year of assessment.

Example:

Suppose Company XYZ has 21% of its paid-up capital owned by foreign entities or non-Malaysian citizens at the beginning of the basis period for a year of assessment. In that case, it falls under sub-subparagraph (d) conditions.


As a result, the application of special allowances for small-value assets is not applicable, influencing the calculation of allowances and impacting the company's tax position for that specific year.



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