Special Allowances for Small Value Assets

Micro, Small, and Medium Enterprises (SMEs) are entitled to a special allowance of 100% on assets valued at not more than RM2,000 each, with no maximum limit.

To qualify for this allowance, SMEs must meet the following criteria:

1. Ordinary paid up share capital not exceeding RM2.5M; and
2. Having annual gross business income not exceeding RM50 million for the year of assessment (YA)

The Finance (No.2) Bill 2023 introduces amendments to Schedule 3, Paragraph 19A(4)(d) of the Income Tax Act 1967. Under these changes, companies met the following criteria will only be eligible to claim the special allowance of 100% on assets valued not exceeding RM2,000 each, with a maximum cap of RM20,000.

"20% of the paid-up ordinary shares capital of the company at the beginning of the YA 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."
 

In practical terms, if your company has 20% or more foreign shareholdings, the maximum special allowance for small value assets will be capped at RM20,000 per YA. Any small value assets exceeding this limit will be subject to the normal capital allowance rate.

It is crucial for SMEs to be aware of these changes and evaluate their shareholding structure to optimize their eligibility for the special allowance. Staying informed about the evolving tax landscape ensures businesses can make strategic financial decisions that align with regulatory requirements.