Tax15 Jul 2021

IRB extends tax incentive on assets during pandemic

01What You Need to Know About the Tax Incentive on Assets During This Pandemic?

02Overview

On 09.06.2021, The Minister issue a gazette order Income Tax (Accelerated Capital Allowance) (Machinery and Equipment Including Information and Communication Technology Equipment) Rules 2021 that allows higher Capital Allowance (“CA”) rate.

03Key takeaway

You will understand the:

· Accelerated Capital Allowance (ACA)

· Information and communication technology equipment (“ICT Equipment”)

· Rate of claiming ACA

· Effect for year of assessment

04What is Accelerated Capital Allowance (ACA)?

The Accelerated Capital Allowance (ACA) is a tax incentive scheme that allowed taxpayer to claim a higher rate in the purchase of information and communication technology equipment (“ICT Equipment”).

05What is information and communication technology equipment (“ICT Equipment”)?

ICT Equipment means information and communication technology equipment as specified in the following:

ü Access control system;

ü Banking systems;

ü Barcode equipment;

ü Bursters / decollators;

ü Cables and connectors;

ü Computer Assisted Design (CAD);

ü Computer Assisted Manufacturing (CAM);

ü Computer Assisted Engineering (CAE);

ü Card readers;

ü Computers and components;

ü Central Processing Units (CPU);

ü Storages;

ü Screens;

ü Printers;

ü Scanners / readers;

ü Accessories; and

ü Communication and networks

06Accelerated Capital Allowance allowed taxpayer to claim the ICT Equipment as follow:

a. Initial allowance: 20% of the QE incurred

b. Annual allowance: 40% of the QE incurred (Normal CA rate is at range of 10% to 20%)

* Qualifying expenditure (“QE”) means amount incurred on purchase of plant or machinery used for the purpose of a business with an expected useful life of more than two (2) years that can claim capital allowance.