Buy car under company or personal

Tax Opinion of Chai Shi Qing (Audit Semi-Senior of KTP)

It is advised to purchase the passenger car (say Proton X70) under personal name after taking the following considerations.

Contentions: -

(i) Tax perspective:

• Allowable expenses

According to Section 33(1) of Income Tax Act 1967, the expenses which are incurred for business purpose is generally allowable for tax deduction.

Therefore , the related expenses of motor vehicle( such as petrol, road tax and insurance, repair and maintenance) incurred for business purpose is deductible although it is registered under personal name.

• Benefit-in-kind

On the other hand, Section 39 (1)(a) of Income Tax Act 1967 provided that, the expenses incurred for personal use (private element) is not allowed for tax deduction.

However, Public Ruling No.11/2019 clarified that, the private expenses is deductible provided the expenses are treated as benefit-in-kind and reported as gross income of the person that is using the motor vehicle.

• Capital allowance claims

Public Ruling No. 5/2014 stated that the eligibility for capital allowance claims is not restricted to legal owner only, if the entity/person can be proven as the beneficial owner of the asset.

To qualify as a beneficial owner, the following conditions must be fulfilled:

(a) Incurred the qualifying expenditure (QE)

(b) Made the payment for the motor vehicle (Eg: Hire purchases installment, maintenance fee, and etc)

(ii) Commercial view:

• Lower cost

Based on practical experience, the purchase cost, hire purchase interest rate, insurance and road tax charges will be lower if the motor vehicle registered under personal name.

Sources: -

Public Ruling No. 5/2014 Ownership and use of asset for the purpose of claiming capital allowances
Section 33(1) of Income Tax Act 1967
Section 39 (1)(a) of Income Tax Act 1967
Public Ruling No. 11/2019 Benefits in Kind

Authored by Chai Shi Qing (Audit Semi-Senior of KTP).

Source: Chai Shi Qing LinkedIn post

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