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Tax deduction on cost of personal protective equipment (PPE)
To encourage businesses to adapt to new norms and adhere to COVID-19 related standard operating procedures (SOPs), it was proposed under PENJANA that a tax deduction be given on costs incurred to prevent the spread of COVID-19, including the purchase of personal protective equipment (PPE), thermal scanners and COVID-19 screening tests.
To legislate the proposal, the Income Tax (Deduction for Expenses in relation to the Cost of Personal Protective Equipment) Rules 2021 [P.U.(A) 269] were gazetted on 15 June 2021. The Rules provide that in ascertaining the adjusted income of an employer from his business in a basis period for a YA, a deduction shall be allowed for the cost of PPE for the purpose of his business from 1 March 2020.
The “cost of PPE” has been defined in the Rules to mean expenditure incurred by the employer for the purpose of prevention and protection of its workers from COVID-19.
The non-application provisos stipulate that the Rules will not apply to an employer who has claimed the following on the costs of the PPE:
- Capital allowances for qualifying expenditure under Schedule 3 of the ITA, or
- Accelerated capital allowance under the Income Tax (Accelerated Capital Allowance) (Machinery and Equipment Including Information and Communication Technology Equipment) Rules 2021
The Rules came into operation in YA 2020.