Capital Allowances: A Basic Guide for Small Businesses

What are capital allowances?

Capital allowances are claims on capital expenditure (purchase of business assets such as computers, equipment, commercial vehicles or buildings) that can be claimed and deducted after the computation of your adjusted business income. (Source: HASiL — Digital Business — R6.)

Capital allowances are not an automatic deduction — they must be claimed in the return form (e.g. Form C or Form B) and supporting documents are required.

Capital allowances are separate from:

• Operating expenses (under section 33 ACP); and
• Individual reliefs (under section 46 ACP).

Special allowance for small-value assets

Assets worth ≤ RM2,000 each are eligible for a full claim (Source: PR 4/2026 — R1; Budget 2027 Annex 12 — R3):

• SMEs (micro, small and medium enterprises): eligible without an overall annual limit.
• Non-SMEs: limited to RM20,000 for each year of assessment.

Version note: Public Ruling No. 4/2026 (published 30.09.2026) is the fourth edition and replaces PR 3/2021. Use this new version. (Source: R1.)

The full details of PR 4/2026 (eligibility conditions, hire purchase, disposal, effect of disposal of small-value assets) are only partially verified at this review — verify line by line before publication. This item still awaits official confirmation from HASiL — check again with HASiL before deciding.

The difference in treatment of "small-value assets" for sole proprietors/partnerships (individuals) versus companies has not been fully verified — refer to PR 4/2026 §10–§11; do not generalise. This item still awaits official confirmation from HASiL — check again with HASiL before deciding.

Budget 2027 proposal

Budget 2027 proposes raising the value of each asset to RM3,000 and the annual limit (non-SME) to RM30,000. This is only a proposal — not yet law and applies only after the Finance Act is passed. This item still awaits official confirmation from HASiL — check again with HASiL before deciding. (Source: R3.)

Initial allowance and annual allowance rates

The Initial Allowance and Annual Allowance rates by asset class (e.g. plant & machinery, computers, commercial vehicles, industrial buildings) are not verified at this review because the full text of Schedule 3 ACP has not been reviewed. Do not publish the rate of any class before it is verified from Schedule 3/official rulings. this item still awaits official confirmation from HASiL — check again with HASiL before deciding.

Reinvestment Allowance (Schedule 7A) vs Service Sector Investment Allowance (Schedule 7B)

(Source: Practice Note No. 3/2026 — R2.)

Schedule 7A — Reinvestment Allowance (RA)

• Eligible companies: manufacturing or agricultural companies.
• Eligible projects: expansion, modernisation, automation or diversification.
• Condition: company resident and operating ≥ 36 months; self-claim (no written LHDNM approval required).
• Rate: 60%, may increase to 70%/100% if productivity is determined by the Minister; limited to statutory income.
• Carry-forward: maximum 7 years after the 15-year assessment period.

Schedule 7B — Service Sector Investment Allowance (SSIA)

• Eligible companies: service sector companies (transport, communications, utilities or sub-sectors approved by the Minister).
• Condition: requires written application and Minister's approval.
• Rate: 60%.
• Qualifying period: 5 years from the effective date of approval. This item still awaits official confirmation from HASiL — check again with HASiL before deciding.
• Carry-forward: maximum 7 years of assessment.

e-Invoice ICT incentive (PKPS)

Through the special e-Invoice Voluntary Disclosure Programme (PKPS), businesses are eligible for a full capital allowance claim within a period of one (1) year for (Source: HASiL Media Statement 7 July 2026 — R4):

• expenditure on acquiring ICT equipment; and
• the cost of developing/modifying computer software used for the purpose of implementing e-Invoices.

This incentive was announced together with the PKPS on 7 July 2026; the PKPS runs until 31 December 2027. (Source: R4.)

For small businesses below the RM3 million e-Invoice threshold, this incentive remains relevant if you choose to implement e-Invoices voluntarily.

General conditions and records

• Assets must be used wholly and exclusively for the business.
• Keep records and purchase documents (refer to PR 5/2000 on record keeping). (Source: R7.)

Related questions

I bought a laptop for RM3,500 for my business — am I eligible for the small-value asset allowance?

No for the special small-value asset allowance, because its value exceeds RM2,000 (R1). However, the laptop is still a business asset — the allowance rate applicable to it is subject to the Schedule 3 fact-check before publication. This item still awaits official confirmation from HASiL — check again with HASiL before deciding.

Are capital allowances claimed automatically?

No — capital allowances must be claimed in the return form (e.g. Form C/B) with supporting documents. (Source: R1 note.)

Can a service company claim reinvestment allowance?

Schedule 7A (RA) is for manufacturing/agricultural companies; service sector companies must refer to Schedule 7B (SSIA), which requires the Minister's approval. (Source: R2.)