If your business is investing in the construction or renovation of office buildings, shopping centres, data centres, or retail outlets, you may be eligible for capital allowance (CA) claims. Effectively claiming CA can help reduce capital expenditure costs, improve tax efficiency, and boost cash flow. 

 

What is Capital Allowance?

In Malaysia, capital allowance is a tax relief that allows businesses to deduct the cost of qualifying fixed assets such as machinery, equipment, and vehicles over time to reduce their taxable income. Since normal depreciation is not tax-deductible under Malaysian tax law, capital allowances serve as a way to account for the wear and tear of business assets. These deductions are governed by Section 42(1) of the Income Tax Act and are regulated by the Inland Revenue Board. Capital allowances are available only to businesses and apply to assets that are capital in nature. Identifying these within complex construction and renovation projects requires specialist expertise.

 

Are You Claiming Your Full CA Entitlement?

Many businesses underclaim or overlook their CA due to the complexities of tax regulations and capital expenditure classifications. Accountants and tax professionals may not always have the technical knowledge to identify hidden qualifying costs embedded in building structures, electrical systems, escalators, facades, and other components.

Without proper documentation, businesses also risk compliance issues and potential tax penalties. A strategic approach ensures accurate tax fillings and maximised claims.

 

Eligible Assets for Capital Allowances

Capital allowances are typically granted for tangible assets that are actively used in the course of business operations. Below are the four most essential asset categories that generally qualify under Malaysia’s Income Tax Act.

 

1. Machinery and Equipment

Industrial machinery, production tools, and factory equipment that are directly involved in manufacturing, processing, or operational activities.

2. Motor Vehicles

Commercial vehicles such as vans, lorries, and company cars used for logistics, deliveries, or employee transport, excluding private or luxury vehicles not used for business.

3. Office Equipment

Computers, printers, photocopiers, and communication devices essential to daily administrative and operational functions.

4. Furniture and Fittings

Work desks, chairs, cabinets, lighting fixtures, and other fittings that equip office or production spaces for business use.

It's important to note that buildings and structures that serve as premises, such as warehouses or office buildings do not qualify, even if used in the business. Similarly, intangible assets like software or intellectual property are also excluded.

 

How BDO Can Assist

Our team of tax specialists and civil engineering experts provides a CA maximisation solution, ensuring businesses fully utilise available CA tax incentives.

Our services include:

• Detailed expenditure analysis and site visit
• Preparation of comprehensive reports
• Documentation and managing tax compliance risks

 

Find Out More

Learn how your business can optimise capital allowance claims and improve financial efficiency. Access our brochure to explore BDO’s expertise and tailored solutions.

 

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