Upkeep of motor vehicle tax treatment

Issue

For the purchase of a new non-commercial motor vehicle for a company, specifically, a lorry, is initial insurance and road tax-deductible as expenses or need to add back as capital in nature?

Fact

1. According to PR 6/2015 #5.2, Expenditure in respect of the vehicle which does not qualify for capital allowance claim is as follows:

(i) road tax, insurance and hire purchase interest does not qualify for capital allowance as the expenditures are recurring expenses which allowable as expenditures under subsection 33 (1) of the ITA.

2. Under subsection 33(1) of the ITA, an expense wholly and exclusively incurred in the production of gross income from a source is allowable as a deduction against gross income from that source. As long as the lorry is used for business purposes wholly and exclusively, the expenses incurred are tax deductible.

Tax opinion

Road tax and insurance do not qualify for capital allowance. However, they can be deductible as expenses as this is recurring expenses which is allowable as expenditure under subsection 33(1) of the ITA.

Source

1. Public Ruling No. 6/2015 : Qualifying expenditure and computation of capital allowances

https://phl.hasil.gov.my/pdf/pdfam/PR_6_2015.pdf

2. Income Tax Act 1967 – Section 33(1) Adjusted income generally

https://phl.hasil.gov.my/pdf/pdfam/Act_53_20190101.pdf

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