Malaysia’s Inland Revenue Board has issued Public Ruling No. 4/2026, updating guidance on the 100% capital allowance for qualifying small value assets, including annual expenditure limits, eligibility criteria, exclusions, and asset disposal and record-keeping requirements, with specific provisions for micro, small, and medium companies and limited liability partnerships.
Malaysia’s Inland Revenue Board (IRBM) has published Public Ruling No. 4/2026 on 30 September 2026, providing updated guidance on special capital allowances that allow a 100% write-off for small-value assets.
Replacing the previous PR No. 3/2021, this ruling interprets Paragraph 19A of Schedule 3 of the Income Tax Act 1967 (ITA), which permits businesses to claim an immediate 100% capital allowance (full write-off) on qualifying small-value business assets in the year of acquisition.
The key measures are as follows:
Public Ruling No. 4/2026
Core allowance rules & monetary thresholds
From Year of Assessment (YA) 2020 onwards, assets costing no more than MYR 2,000 each may qualify for a 100% special capital allowance. Eligible micro, small, and medium companies (MSMCs) can claim unlimited qualifying plant expenditure (QPE) per YA, subject to statutory conditions. Non-MSMCs and limited liability partnerships (LLPs) are subject to an annual QPE cap of MYR 20,000, with excess expenditure eligible for normal capital allowances.
Key policy updates in PR No. 4/2026
Compared with Public Ruling No. 3/2021, the updated ruling replaces “Small and Medium Companies (SMC)” with “Micro, Small and Medium Companies (MSMCs),” explicitly defines LLPs and confirms their MYR 20,000 annual cap. It also updates ownership control references for MSMC eligibility from YA 2024, aligning with Public Ruling No. 8/2025.
Qualifying criteria & exclusions
- Qualifying assets: Assets must be purchased and used for business purposes, qualify as QPE, cost no more than MYR 2,000 each, and have an expected useful life of at least two years.
- Ineligible assets & entities: The allowance excludes assets acquired through hire purchase, items lasting less than two years, certain investment holding companies, dormant entities or companies without qualifying gross business income, business trusts, and specified securitisation special purpose vehicles. Businesses experiencing temporary losses or operational cessation may still qualify.
Procedure for claiming the 100% special allowance
Taxpayers should identify business assets costing MYR 2,000 or less with a useful life of at least two years, excluding hire-purchase assets. They must apply the relevant annual QPE limits, claim normal capital allowances on ineligible assets or excess expenditure, and apply the 100% special allowance to the remaining qualifying assets.
Disposals, write-offs & record keeping
- Asset disposals: A balancing charge may apply when an asset’s disposal value exceeds its residual value, generally zero after the 100% allowance. The charge is capped at the allowance claimed.
- Asset write-offs: Obsolete or irreparably damaged assets with no market value may be written off without a balancing charge.
- Record-keeping: Under Section 82A of the Income Tax Act, taxpayers must maintain asset registers and supporting records distinguishing special and normal capital allowances for seven years from the end of the relevant YA.
Public Ruling No. 8/2025
Further amendments and updates have been made to align with Public Ruling No. 8/2025, which covers the classification and tax treatment of micro, small, and medium companies (MSMCs) and limited liability partnerships (LLPs).
Basics of MSMC tax treatment in Malaysia
Under Public Ruling No. 8/2025, Malaysia’s Inland Revenue Board outlines the eligibility criteria and preferential tax treatments available to resident Micro, Small, and Medium Companies (MSMCs) and Limited Liability Partnerships (LLPs).
Core qualifying criteria: To qualify for special tax treatment at the start of the basis period for a Year of Assessment (YA), an entity must meet the following conditions:
- Capital threshold: Paid-up ordinary share capital for companies or capital contributions for LLPs must not exceed MYR 2.5 million.
- Gross income threshold: Gross business income from all business sources must not exceed MYR 50 million.
- Shareholding restrictions: No more than 50% of capital may be owned directly or indirectly by a related company with capital exceeding RM2.5 million. From YA 2024, foreign companies and non-Malaysian individuals must not directly or indirectly own more than 20% of the capital.
Key preferential tax incentives
Eligible MSMCs may benefit from the following tax incentives:
- Tiered preferential tax rates: From YA 2023, qualifying entities pay 15% tax on the first MYR 150,000 of taxable income, 17% on income from MYR 150,001 to MYR 600,000, and the standard 24% rate on income exceeding MYR 600,000.
- Unlimited small value asset allowance: Qualifying companies, excluding LLPs, may claim a 100% capital allowance for eligible small value assets costing up to MYR 2,000 per asset, without an overall annual limit.
- Tax rebate for new operations: Businesses established between 1 July 2020 and 31 December 2022 may claim an annual rebate of up to MYR 20,000 for three consecutive YAs against operating and capital expenditure.
- Tax estimation exemption: Newly operating eligible companies are exempt from submitting estimated tax payable through Form CP204 for their first two YAs.
