Plant is currently defined in Paragraph 70A, Schedule 3 of the Income Tax Act 1967 as follows:
“An apparatus used by a person for carrying on his business but does not include a building, an intangible asset, or any asset used and that functions as a place within which a business is carried on.”
Finance Act 2023
However, Paragraph 70A, Schedule 3 of the Income Tax Act 1967 is amended by Finance Act 2023 (Act 845), s. 17(b), effective for the year of assessment 2023 and subsequent years of assessment, by deleting “, an intangible asset” after “a building”.
Therefore, plant is now redefined as follows:
“An apparatus used by a person for carrying on his business but does not include a building, or any asset used and that functions as a place within which a business is carried on.”
The Minister is also empowered (via PU Order) to prescribe any other assets as assets excluded from the definition of “plant”.
You might be wondering now is there any asset that the Government plans to specifically exclude as ‘Plant’ by way of PU Order?
The Inland Revenue Board of Malaysia (LHDNM) has completed a study on intangible assets and has submitted it to the Ministry of Finance (MOF) on 2nd June 2023 for further action. The latest discussion between MOF and LHDNM was held on 4th July 2023.
Chartered Tax Institute Of Malaysia (CTIM) proposed to LHDNM that any asset to be gazetted via the PU Order should have a prospective effective date.
For example, any basis period which begins on or after the date of the coming into operation of the PU Order.
LHDNM takes note of it. However, the implementation is subject to policy decisions.
Conclusion The removal of the exclusion of intangible assets from the plant definition in the Income Tax Act 1967 would simplify the taxation of cases where courts have ruled that databases can be considered qualifying plant.
Malaysia – Landmark Tax Decision By Court Of Appeal Confirming That Databases Constitute “Plant” And Qualify For Capital Allowances.
However, there is a possibility that the range of assets eligible for classification as “plant” may become narrower because the Minister now has the power to specify which assets should be excluded from the plant definition.
Further studies regarding the treatment of capital allowance on intangible assets are still under review and study by the Ministry of Finance (MOF).
We will update you accordingly.
Reference:
- Back to Basic: The Capital Allowance in Malaysia, Is Horse a Plant?
- Capital Allowance: Is Book a Plant?
- Capital Allowance: Is Ceilings a Plant?
- Capital Allowance: Is Lamps a Plant?
- Taxation of Partnerships – Capital Allowance
- Capital Allowance: Is a Swimming Pool a Plant?
- Capital Allowance: Is Silo for Temporary Storage a Plant?
- Capital Allowance: Are Sanitary and Pipeline Fittings a Plant?
- Capital Allowance: Is Acoustic Ceilings and Electrical Installations a Plant?
- Capital Allowance: When a setting is Plant – Moveable Partitions
- Capital Allowance: Is Canopy over Petrol Filling Station a Plant?
- Capital Allowance: Whether Car Wash enclosures constitute Plant
- Capital Allowance: Premises Test, Functional Test & Business Use Test
- Capital Allowance: Whether a Ship used as a Restaurant constitutes Plant
- Determining Qualifying Expenditure for Capital Allowances & ”Repair or Upkeep”
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