Malaysia proposes extending two-year capital allowances to 2030

An extension of the investment window

Appendix 28 identifies four categories: heavy machinery procured from local manufacturers; plant and general machinery from local manufacturers; ICT equipment and computer software packages; and consultation, licensing and incidental fees for customised-software development. The proposal retains the described two-year write-off, comprising a 20% initial allowance and 40% annual allowance. It is not a proposal for an immediate deduction of the entire cost.^[1]

The Budget describes the preceding expenditure window as 11 October 2025 to 31 December 2026. The same categories, rates and period appeared as a proposal in Appendix 21 of Budget 2026. That earlier announcement is useful chronology, but is not itself evidence of the subsidiary instrument establishing a taxpayer’s current entitlement.^[1][2]

The statutory framework and the proposal are different

The underlying capital-allowance framework is Schedule 3 of the Income Tax Act 1967, Act 53. In IRBM’s text updated to 21 May 2024, paragraph 2 defines qualifying plant expenditure by reference to machinery or plant used for business; paragraphs 10 and 15 provide initial and annual allowances, with prescribed fractions. Section 154(1)(b) provides the rule-making power for prescribed matters. That dated text supplies the framework, not a certification of every current incentive condition.^[3]

Implications for group investment

For multinational groups, the announcement supports reviewing the timing and asset classification of planned Malaysian investment. The distinction between locally manufactured machinery and the separately listed ICT/software categories remains important. The four-year window concerns when qualifying expenditure is incurred; the two-year period describes the proposed recovery pattern. Neither the Budget announcement nor its stated future dates should be treated as an enacted claim entitlement.^[1]