Capital Allowance in Malaysia: Tax Deduction for Company Assets

When a company buys computers, equipment, machinery or vehicles, accounting depreciation may be recorded. For tax purposes, depreciation is generally replaced by capital allowance.

VSG SecretaryPublished and updatedï¼š24 June 2026Practical guide for business owners

ImportantLHDN's Company FAQ states that asset cost or depreciation is not deducted as an expense; qualifying assets used for business may receive capital allowance if conditions are met.

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What capital allowance is for

Capital allowance is the tax mechanism for qualifying business assets. It is not accounting depreciation; it is computed based on tax rules, qualifying expenditure, business use and ownership conditions.

Initial Allowance and Annual Allowance

Initial Allowance

At acquisition stage

Carrying on a business
Purchasing business assets
Assets used for business
Owner at the relevant time

Annual Allowance

Yearly claim

Business is carried on
Asset is still used for business
Owner at basis period end
Claim is made

Common assets

Computers and IT equipment

Computers, servers, printers and POS equipment.

Ops

Machinery and tools

Machines, tools and production equipment used in business.

Vehicle

Vehicles

Company vehicles require extra attention to usage, restrictions and records.

Special industry allowances

LHDN's FAQ also covers Agriculture Allowance, Forest Allowance and Industrial Building Allowance. These may be relevant for agriculture, timber, manufacturing, warehouses or industrial buildings.

Official sources and disclaimer

LHDN: Frequently Asked Question (Company)

Disclaimer

This guide is for general educational purposes only and is not tax advice. Tax rates, deductions, filing deadlines and incentive eligibility may change and depend on each company's facts. Please consult a tax professional or refer to the latest LHDN guidance before making decisions.