Malaysia Ministry of Finance published two regulations in the Official Gazette on 30 October 2024 – the Income Tax (Accelerated Capital Allowance) (Information and Communication Technology Equipment) Rules 2024 and the Income Tax (Capital Allowance) (Development Cost for Customized Computer Software) Rules 2024 – aiming to raise the initial allowance on qualifying capital expenditures for purchasing information and communication technology (ICT) equipment and the development costs of customised software from 20% to 40%.
This initiative was first proposed in the 2024 Budget. The rules will be effective from the 2024 assessment year.
Income Tax (Accelerated Capital Allowance) (Information And Communication Technology Equipment) Rules 2024
Accelerated capital allowance
- A person who is a resident of Malaysia and has incurred capital expenditure in the basis period for a year of assessment from a source consisting of his business in relation to the purchase of any information and communication technology equipment specified in the Schedule for the use of his business may claim for an accelerated capital allowance under these rules.
- For the purposes of these rules, the purchase of any information and communication technology equipment shall include the installation of the equipment.
Initial allowance
The person is qualified to claim for an initial allowance as provided for in paragraph 10 of Schedule 3 to the Act, which is equivalent to two-fifths of the capital expenditure incurred for the purchase of any information and communication technology equipment specified in the Schedule.
Annual allowance
The person is qualified to claim for an annual allowance as provided for in paragraph 15 of Schedule 3 to the Act, which is equivalent to one-fifth of the capital expenditure incurred for the purchase of any information and communication technology equipment specified in the Schedule.
Income Tax (Capital Allowance)(Development Cost For Customised Computer Software) Rules 2024
Interpretation
In these rules, “development cost for customised computer software” means any consultation fee, payment for rights of software ownership and incidental fee relating to the development of customised computer software.
Capital allowance
- A person who is a resident of Malaysia and has incurred a development cost for customised computer software in the basis period for a year of assessment from a source consisting of his business may claim for a capital allowance under these Rules in accordance with the initial allowance under rule 4 and annual allowance under rule 5.
- For the purposes of these Rules, the development cost for customised computer software incurred in the basis period for a year of assessment or any relevant year of assessment shall be deemed to be incurred by the person in the basis period for a year of assessment in which the customised computer software is capable of being used for the purposes of his business.
Initial allowance
The person is qualified to claim for an initial allowance as provided for in paragraph 10 of Schedule 3 to the Act which is equivalent to two-fifth of the development cost for customised computer software incurred.
Annual allowance
The person is qualified to claim for an annual allowance as provided for in paragraph 15 of Schedule 3 to the Act which is equivalent to one-fifth of the development cost for customised computer software incurred.
