Public Ruling No 3 2021 Special Allowances for Small Value Assets

Public Ruling No. 3/2021 – Special Allowances for Small Value Assets

The IRB has recently issued PR No. 3/2021: Special Allowances for Small Value Assets, dated 21 July 2021. This new 22-page PR replaces PR No. 10/2014, which was issued on 31 December 2014 and subsequently amended on 11 May 2016 (see Tax Alerts No. 2/2015 and No. 12/2016). The new PR comprises the following sections and sets out nine examples:

1.0          Objective

2.0          Relevant provisions of the law

3.0          Interpretation

4.0          Introduction

5.0          Application of the relevant provisions of the law

6.0          Option to claim special allowances for small value assets (SVAs)

7.0          Tax treatment prior to the year of assessment (YA) 2020

8.0          Tax treatment effective from YA 2020

9.0          Steps to claim special allowances

10.0       Tax treatment in relation to the special allowances for small and medium companies

11.0       Tax treatment in relation to the special allowances for non-small and medium companies

12.0         Maximum limit of special allowance claims for small and medium companies

13.0         Person not eligible to claim special allowances

14.0         Hire purchase of SVAs

15.0         Disposal of SVAs

16.0        Record-keeping

17.0         Updates and amendments

18.0         Disclaimer

The contents of the new PR are broadly similar to the earlier PR. Some of the key changes are as outlined below:

• The PR has been updated mainly to explain and provide examples to reflect the following legislative changes which were enacted via the Finance Act 2019:

(a)   Effective from YA 2020, taxpayers are eligible for a special capital allowance claim of 100% on assets valued at RM2,000 (previously RM1,300) or less per asset. This is subject to a maximum claim of RM20,000 (previously RM13,000) for each YA. However, the RM20,000 restriction is not applicable to small and medium enterprises (SMEs).

(b)  Effective from YA 2020, only SMEs having gross income from a source or sources consisting of a business of not more than RM50 million for the relevant YA are eligible for the unlimited special capital allowance claims on SVAs.

Further guidance on this requirement is provided in Practice Note No. 4/2020 (see Tax Alert No. 2/2021).

• The new PR outlines the steps that can be followed to facilitate the determination of special capital allowance claims for a YA.
• An example has been included in the new PR to demonstrate that an investment holding company that is not listed on Bursa Malaysia is not eligible for the special capital allowance claim.