TAX - Special Allowances For Small Value Assets (PR NO. 10/2014)

Small Value Assets And Special Allowances

Define under 19A(1) Schedule 3 of the ITA

- asset is not more than RM2,000 but it does not include assets that have an expected life span of not more than 2 years.

- The claim for special allowances for small value assets is restricted to a maximum amount of RM20,000 for each year of assessment. 

Prior year tax treatment

Options

- Claim for special allowances (paragraphs 19A Schedule 3 of ITA)

- Claim normal capital allowances (paragraphs 10 and 15, Schedule 3 of ITA)

Special Allowances For Small And Medium Companies (19A(3) Schedule 3 of the ITA)

- Small and medium companies (SME) where there is no restriction on the total amount of special allowances claimed on small value assets

*Paid-up capital in respect of ordinary shares not exceeding RM2.5 million and

*Has gross income from a source or sources consisting of business not exceeding fifty million ringgit (RM 50 million) for the basis period for that YA

Steps to Claim Special Allowances

1. Identify small value assets (Value > RM2,000 + life span >  2years) 

2. Determine the total of QPE for small value asset

- For other than SMC, limited to a maximum amount of RM 20,000 per YA

- For SMC, there is no limit for each YA

Restriction On Amount Of Special Allowances Claim For Certain Small And Medium Companies

SME not restriction on the total amount of special allowances claimed on small value assets as follows:-

(a) more than 50% of the paid-up capital of the company's ordinary shares are owned directly or indirectly by a related company;

(b) more than 50% of the paid-up capital of the related company’s ordinary shares are owned directly or indirectly by the company;

(c) more than 50% of the paid-up capital of the ordinary shares of the company and its related company are owned directly or indirectly by another company.

Person Not Eligible To Claim Special Allowances

A person is not eligible to claim this special allowances if the person:

(a) is a business trust or a Special Purpose Vehicle which is established for the purpose of asset-backed securitization in a securitization transaction approved by the Securities Commission.

(b) has made an election to claim capital allowances under paragraphs 10 and 15, Schedule 3 of the ITA.

Hire Purchase Of Small Value Assets

The special allowances under paragraph 19A Schedule 3 of the ITA is not applicable to small value assets acquired on hire purchase. A person can make the normal capital allowance claim under paragraphs 10 and 15, Schedule 3 of the ITA in respect of such small value assets.

Disposal Of Small Value Assets

If a small value asset is disposed of in the basis period for a year of assessment and that small value asset has been given the special allowances, then a balancing charge can be made in relation to that small value asset if its disposal value exceeds the residual expenditure at the date of disposal.