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Determining Qualifying Expenditure for Capital Allowances & ”Repair or Upkeep"

Capital Allowances are a complex tax technical area largely governed by case law and precedent.

As illustrated in Fig. below, before calculating the Capital Allowances available in respect of capital expenditure incurred, two criteria must be considered:

  • Is the expenditure expense or capital in nature?

  • If it is capital, is it incurred on qualifying assets – i.e. P&M as per Schedule 3 of the Income Tax Act 1967, Industrial Buildings [also covered under Schedule 3 of the Income Tax Act 1967], or non-qualifying assets?

资本津贴在税收技术领域来说是一个复杂概念,主要受案例法 (Case Law) 和先例的制约。


  • 该支出的性质,究竟是费用还是资本?

  • 如果是资本,它是发生在符合条件的资产上-- 即《1967年所得税法令》附表3规定的P&M,工业建筑 [也是涵盖在《1967年所得税法令》附表3中],还是不符合条件的资产?

Expenses on Repairs and Renewals

In most cases, a person can reduce their overall gross income from a source such as a business or rental property by deducting expenses related to repairs and renewals.

Paragraph 33(1)(c) of the Income Tax Act 1967 ("ITA") allows a deduction for the expenses wholly and exclusively incurred for:

  1. the repair of premises, plant, machinery or fixtures employed in the production of gross income; or

  2. the renewal, repair or alteration of any implement, utensil or article so employed in the production of gross income from that source other than implements, utensils or articles on which the expenditure would be qualifying plant expenditure for the purposes of Schedule 3 of the ITA.

However, the cost of reconstructing or rebuilding:

  • any premises, buildings, structures or works of a permanent nature;

  • any plant or machinery; or

  • any fixtures

are not allowed as a deduction from the gross income in ascertaining the adjusted income from that source.


《1967年所得税法令》("ITA")第 33(1)(c) 段允许扣除完全和专门用于以下方面的费用:-

  1. 修理用于生产总收入的场所、厂房、机器或固定装置;或

  2. 更新、修理或改造用于生产总收入的任何工具、器具或物品;然而就《1967年所得税法令》附表3而言,该支出属于合格设备支出的工具、器具或物品除外。


  • 任何房舍、建筑物、结构或永久性工程。

  • 任何工厂或机器;或

  • 任何固定装置


The ITA does not include a definition for the word "Repair"

The word "repair" is defined as "to restore (a composite, structural, and others) to good condition by renewing or replacing the damaged parts" in The Shorter Oxford English Dictionary On Historical Principles - Third Edition.

In general, the term "repair" refers to the process by which an asset is returned to its initial condition without any component of improvement, addition, or alteration being included in the process.

This can be accomplished by renewing or replacing the parts of the asset that are damaged or inoperable, respectively.

“修复"一词在《牛津英语短词典--第三版》中被定义为 "通过更新或替换损坏的部分,将(复合材料、结构件和其他)恢复到良好状态"。

一般来说,"修复 "一词指的是将资产恢复到其初始状态的过程,在这一过程中不包含任何改进、增强或改造的成分。


When the effectiveness of an asset has decreased from its initial state because it has been employed in the operations of the business for some time, the asset requires some form of maintenance or repair.

In layman's terms, it is an expense that was made purely to put the asset in the state it is currently in, enabling it to perform correctly to the level of efficiency it had previously possessed.

To put it another way, the process of repairing anything should not require the reconstruction or rebuilding of the entire asset or a significant portion of the entire asset.




Implements, utensils or articles with a life span of less than two years

Expenditure incurred on the replacement, repairs and renewal of implements, utensils or articles used in the production of income is allowed as a deduction against gross income on a replacement basis.

Generally, replacing implements, utensils or articles with an expected life span of not more than two (2) years is allowed as a deduction in ascertaining the adjusted income.

Normally, expenditure allowed on a replacement basis is the expenditure on the replacement of small items in terms of size and price.




Examples of implements, utensils or articles that can be allowed as a deduction on a replacement basis include dishes, spoons, forks, knives and pots.

The determination of the life span of an asset will be based on the facts of each case, and a person who wishes to claim a deduction on the asset is responsible for determining its life span.

The tax treatment on replacing implements, utensils or articles with an expected life span of not more than two (2) years applies to all types of business.

可以允许在重置基础上 (replacement basis) 进行直接扣税的器具、用具或物品的例子包括:盘子、勺子、叉子、刀子和锅子。




Restaurant C (RC) has been in operation since 2017.

In 2021, RC incurred expenses of RM2,000 to purchase 200 dinner plates to replace some of the existing chipped and cracked crockeries.

RC can claim those expenses for deduction against gross income on a replacement basis for the year assessment 2021.

However, for expenditure allowed on a replacement basis for implements, utensils or articles used in the production of income, such expenses shall be allowed when incurred for the second time.

Expenses incurred for the first time on the asset are regarded as capital expenditure and are not allowed as a deduction.

The same applies to the estimated provision provided to replace implements, utensils or articles used in the production of income which is not allowed since the expenditure is not incurred.



在2021年,RC 支付了 2,000 令吉的费用购买了200个餐盘,以替换现有的一些有缺口和裂纹的陶器。

在2021年评估年度,RC 可以要求将这些费用按更换基础 (replacement basis) 从总收入中扣除。

然而,对于允许在更换基础 (replacement basis) 上用于生产收入的工具、器具或物品的支出,这些支出需要在第二次产生时才会被允许扣税。也就是说,第一次的第一笔支出,是不能扣税的 [第一次发生在资产上的支出被视为资本支出,不允许扣除]。

同样的情况也适用于为更换用于生产收入的工具、器具或物品而提供的预计拨备 (estimated provision) 经费,由于该支出没有发生,所以不允许扣除。


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