Malaysia: Income tax and real property gains tax developments

The KPMG member firm in Malaysia prepared a monthly report covering the following income tax and real property gains tax developments.

Income tax

• Accelerated capital allowance (ACA) for information and communication technology (ICT) equipment and capital allowance (CA) for customized computer software: Following the 2024 budget proposal to incentivize technological advancement, new subsidiary legislations have been gazetted to increase the initial allowance rate from 20% to 40% for qualifying expenditures. This includes consultation fees, payments for software ownership rights, and incidental fees related to customized computer software development, as well as the purchase and installation of ICT equipment. The new rules will come into effect from the year of assessment 2024. Notably, under the new rules, businesses granted certain incentives under the Promotion of Investments Act or the Malaysian Income Tax Act will not be eligible for ACA/CA for the same qualifying assets, regardless of whether the incentive is claimed.
• Guideline on application for green technology incentives: In line with Malaysia's goal to become a sustainable and carbon-neutral nation by 2050, the 2024 budget proposed a revision of green technology tax incentives under a tiered approach. The Malaysian Investment Development Authority has issued guidelines detailing the criteria and conditions for qualifying green activities under the green investment tax allowance (GITA) project, types of green income tax exemptions related to solar leasing, and the application procedure for these tax incentives. Applications can be made online from January 1, 2024, to December 31, 2026.

Real property gains tax

• Updated guideline on the approval of applications for transfer of assets between companies in the same group: The Malaysian Inland Revenue Board has issued an updated guideline that deems the transfer of assets between companies in the same group as a “no gain no loss” transaction, provided it brings about greater efficiency in operations. The approval may be revoked within three years if a disposal is made for purposes other than those stipulated under the Real Property Gains Tax Act (RPGTA). Examples include transferring ownership to obtain loan facilities or maintain credit rating, and to meet conditions for maintaining current incentive status.