Update special allowance for small value assets 2021

Overview special allowance for small value assets 2021 :

Special allowances at special rates for small value assets have been introduced from the year of assessment (YA) 2006. A person is eligible to claim the special allowance if qualifying plant expenditure (QPE) has been incurred on such assets which are used for the purposes of his business.

From YA 2006 to YA 2020, there have been changes in the value of the assets referred to as small value assets.

In addition, the limitation in respect of the maximum amount of QPE that can be claimed as special allowances for small value assets in a YA has also been amended.

However, such limitations are only applicable for certain companies depending on the paid-up capital of the ordinary shares, the gross income from a business and the indirect or direct shareholding of the relevant company.

The Small Value Assets (SVA) have been increased from RM1,300 to RM2,000 each in YA2020. On 21st July 2021, Inland Revenue Board of Malaysia (IRBM) has issued a public ruling to further clarified on this allowance.

Key takeaways:

1. Additional criteria on Small and Medium Company (SMC)

2. Tips and tricks when claiming SVA

Summary of learnings:

1. Additional criteria on Small and Medium Company (SMC)

On top of the normal definition of SMC, which are less than 2.5m share capital, now the Company must have gross income not exceeding RM50m in a year in order to be defined as SMC.

For non-SMC, you can only claim this allowance limited to RM20,000 for each year, this is not applicable to SMC.

2. Tips and tricks when claiming SVA

Is worth taking note that you may opt to claim the asset at a normal rate instead of 100%.

What will be the situation, when claiming at a normal rate is a better choice?

Well, the answer is when you need more “profits” to be taxed in the earlier years.

Here are some of the situations: -

When the company is

Enjoying tax incentives, such as pioneer status or investment tax allowances.
Enjoying tax rebate of RM20,000 as introduced in Short-term Economic Recovery Plan (Penjana)
Continuing making loss, so you can utilize the business loss faster. (Losses can only be carried forward for a maximum of seven years)

Source:

Refer Public Ruling No. 3/2021 - SPECIAL ALLOWANCES FOR SMALL VALUE ASSETS

http://phl.hasil.gov.my/pdf/pdfam/PR_03_2021.pdf

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