Malaysia clarifies small-value asset allowances for foreign-owned companies

The ruling explains an existing statutory allowance

Public Ruling No. 4/2026 interprets paragraph 19A of Schedule 3 to the Income Tax Act 1967; it does not create a new deduction. A taxpayer carrying on a business may elect to claim an allowance equal to 100% of qualifying plant expenditure where each asset costs no more than RM2,000, instead of the normal allowances under Schedule 3 paragraphs 10 and 15. The general statutory ceiling is RM20,000 of qualifying expenditure for each year of assessment. The asset must be owned and used for the business at the end of the basis period.^[1][2]

Qualifying smaller companies can claim without the annual cap

The RM20,000 ceiling does not apply to a company that is resident and incorporated in Malaysia, has paid-up ordinary share capital of no more than RM2.5 million at the start of the basis period and has business gross income of no more than RM50 million for that period. The ruling uses the wider micro, small and medium company terminology and explains how those thresholds operate alongside the ownership tests in paragraph 19A.^[1][2]

Foreign ownership can block the uncapped treatment

From year of assessment 2024, the uncapped treatment is unavailable where more than 20% of the company’s ordinary share capital is owned directly or indirectly by one or more companies incorporated outside Malaysia or by non-Malaysian citizens. Separate related-company exclusions apply where the relevant direct or indirect ownership exceeds 50%. A foreign-owned Malaysian subsidiary can therefore satisfy the capital and revenue thresholds but still remain subject to the RM20,000 annual ceiling.^[1][2]

Groups should distinguish eligible assets and entities

The ruling also says that non-listed investment holding companies, companies with only non-business income and dormant companies do not qualify for the uncapped micro, small and medium company treatment. Assets acquired on hire purchase cannot use paragraph 19A, while taxpayers that do not elect for the special allowance may claim normal capital allowances where the statutory conditions are met. Records must distinguish assets receiving the special allowance from those using the normal regime and must generally be retained for seven years after the return is filed. Groups should therefore test ownership, entity activity and acquisition method before treating low-cost asset expenditure as immediately deductible.^[1][2]