Malaysia's rental payment rules let companies deduct EV lease, insurance, and processing costs through 2027, but the Director General can trim any claim that looks padded, and nothing here stacks with a claim under Schedule 3.
Malaysia’s Ministry of Finance has gazetted Income Tax (Deduction For Rental Payments) (Electric Motor Vehicles) Rules 2026 on 26 June 2026. These rules provide specific tax incentives for Malaysian companies that lease electric motor vehicles.
Established by the Minister of Finance, these regulations permit businesses to claim tax deductions on rental costs, insurance, and administrative fees. The incentive was previously announced as part of the 2024 Budget.
The total cumulative deduction is capped at MYR 300,000 and applies to new, non-commercial electric cars used between the 2023 and 2027 assessment years. To qualify, the vehicles must not have been previously utilised and must be leased by locally incorporated, resident companies.
Other key features of the Income Tax (Deduction for Rental Payments) (Electric Motor Vehicles) Rules 2026 are:
Director General’s discretion
A notable provision of these rules is that the Director General holds the authority to review these claims. If the claimed deduction exceeds what is reasonably expected to be incurred in the ordinary course of business, the Director General may disallow the excess amount.
Qualifying expenditures
The expenditures that qualify for this deduction are broad enough to cover the actual rental payments for the electric motor vehicles, as well as the insurance payments and processing fees directly related to the rental process.
Prohibition on double deductions
To prevent double dipping, the rules state that if a company claims a deduction for these EV rental expenditures under these specific Rules, it cannot make another claim for the same expenses under paragraph 39(1)(k) or Schedule 3 of the Income Tax Act 1967.
Strict vehicle criteria
The electric motor vehicle (which takes its meaning from section 2 of the Road Transport Act 1997) must satisfy three specific conditions to qualify:
- It must be an entirely new electric motor vehicle.
- It must not have been previously used by anyone for any purpose before it was rented to the company.
- It must not be licensed for the commercial transportation of goods or passengers by the relevant authorities.
