What You Need to Know About the Tax Incentive on Assets During This Pandemic?

Overview

On 09.06.2021, The Minister issue a gazette order Income Tax (Accelerated Capital Allowance) (Machinery and Equipment Including Information and Communication Technology Equipment) Rules 2021 that allows higher Capital Allowance (“CA”) rate.

Key takeaway

You will understand the:

· Accelerated Capital Allowance (ACA)

· Information and communication technology equipment (“ICT Equipment”)

· Rate of claiming ACA

· Effect for year of assessment

What is Accelerated Capital Allowance (ACA)?

The Accelerated Capital Allowance (ACA) is a tax incentive scheme that allowed taxpayer to claim a higher rate in the purchase of information and communication technology equipment (“ICT Equipment”).

What is information and communication technology equipment (“ICT Equipment”)?

ICT Equipment means information and communication technology equipment as specified in the following:

ü Access control system;

ü Banking systems;

ü Barcode equipment;

ü Bursters / decollators;

ü Cables and connectors;

ü Computer Assisted Design (CAD);

ü Computer Assisted Manufacturing (CAM);

ü Computer Assisted Engineering (CAE);

ü Card readers;

ü Computers and components;

ü Central Processing Units (CPU);

ü Storages;

ü Screens;

ü Printers;

ü Scanners / readers;

ü Accessories; and

ü Communication and networks

Accelerated Capital Allowance allowed taxpayer to claim the ICT Equipment as follow:

a. Initial allowance: 20% of the QE incurred

b. Annual allowance: 40% of the QE incurred (Normal CA rate is at range of 10% to 20%)

* Qualifying expenditure (“QE”) means amount incurred on purchase of plant or machinery used for the purpose of a business with an expected useful life of more than two (2) years that can claim capital allowance.

Effect for the year of assessment:

These rules are effective from the year of assessment 2020 with incurred the qualifying expenditure from 1 March 2020 until 31 December 2021.

Source:

Income Tax (Accelerated Capital Allowance) (Machinery and Equipment including Information and Communication Technology Equipment) Rules 2021

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