Double tax exemption for businesses going solar. Enjoy a relief of 50% off CAPEX.

by Michael Leong | 4 May 2021

solar double tax exemption for businesses in malaysia

Double tax incentives (capital allowance + green investment tax allowance).

The double tax incentive provides relief of up to 48% of project cost. They are both reliefs in the form of :

a. Capital Allowance (CA) and
b. Green Investment Tax Allowance (GITA)

A. Capital allowance (CA).

Capital Allowance (CA) is for businesses to relief the loss of depreciation of a purchased business asset. When a business purchases a solar PV system (business asset classified under “Plant & machinery”), that qualifies the business for CA; and can be subtracted from what a business owes in tax.

The rates of CA consist of Initial Allowance (IA) of 20% for the first year only. And Annual Allowance (AA) of 14% for six years. The conditions for claiming CA are:

Operating a business
Purchase of business asset
Owner of the asset(s)

B. Green investment tax allowance.

The Green Investment Tax Allowance, or GITA, is a tax incentive to encourage the buying and selling of green technologies. A business which generates electricity through solar renewable energy qualifies them for this tax allowance; under the qualifying activity of “Renewable Energy”. GITA’s rate of incentive are as:

“Investment Tax Allowance (ITA) of 100% of Qualifying Capital Expenditure (QCE) incurred on a green technology project from the year of assessment 2013 (date on which the first Qualifying Capital Expenditure incurred is not earlier than 25 October 2013) until the year of assessment 2020. The allowance can be offset against 70% of statutory income in the year of assessment. Unutilised allowances can be carried forward until they are fully absorbed (up to 5 years).

Source: MIDA.”

Extention of GITA – GITA, as announced during Budget 2020 (Malaysia), is further extended to year 2023. Source: SEDA

Qualifying Capital Expenditure (QCE) is the purchase of approved green technology asset by a qualifying company that have been verified by GreenTech Malaysia.

Essentially, GITA makes up for 24% (corporate tax rate in Malaysia) of the QCE (the cost of solar PV system) with the caveat that 70% of taxable statutory income is more than the GITA value. In which case, 100% can be claimed on year 1 as opposed to 70%.

There will be a processing fee(s) impossed on businesses applying for GITA. GITA guidelines can be found on GreenTech’s site – similar to the table below.

Processing fees chargeable to applicants
Type of Tax Incentives	Description	Processing fee (RM)
GITA Assets	For each green technology asset (refer to item 4.2 below)	1,000
GITA Project Total cost for equipment / machinery	Less than 500,000	2,500
	500,000 – 1,000,000	4,000
	1,000,001 – 5,000,000	7,000
	More than 5,000,000	10,000
GITE Services	For each application	2,000

Example: How double tax exemption is achieved for solar.

solar - double tax exemption sample from ers energy

Tap to enlarge.

*T&C where applies. The views expressed by the author, are of the author’s own and do not represent the opinions of any entity with which the author have been, am now, or will be affiliated.