BOOST YOUR RETURN ON INVESTMENT (ROI)
WHEN YOU GO SOLAR
Capital Allowance (CA) and Green Investment Tax Allowance (GITA)
WHAT IS CAPITAL ALLOWANCE (CA)?
The Capital Allowance (CA) is given to owners of businesses (Sdn Bhd & Bhd) who invest in solar installation. It is deductible from “adjusted income” for the cost of solar installation under Schedule 3 of Income Tax Act 1967. The solar installation will fall under the category of “plant and machinery” and the cost is deductible as Initial Allowance (20%) on the first year and Annual Allowance (14%) for each year.
WHAT IS GREEN INVESTMENT TAX ALLOWANCE (GITA)?
Since 2018, the Malaysia Government provides Green Investment Tax Allowance as an initiative to encourage the purchasing of green technologies.
In terms of rate of incentive, Green Investment Tax Allowance (GITA) of 100% of qualifying capital expenditure incurred on approved green technology assets from the date of purchase until 31 December 2023. The allowance can be offset against 70% of statutory income in the year of assessment. On top of that, unutilized allowances can be carried forward until they are fully absorbed.
Promoted projects include renewable energy, energy efficiency, integrated waste management and green building / data centre. In other words, companies that obtained qualifying green technology assets are eligible for the application of GITA. Eligible companies would also need to comply with all the following requirements:
- Minimize the deterioration of the environment or reduce greenhouse emissions.
- Focus on promoting health and improvement of the environment
- Conserve the use of energy, water and other forms of natural resource, or promote the use of renewable energy, or recyclable waste material resources.
For those who are eligible and interested, application for GITA should be received by MIDA until 31 December 2023
For more info on who is eligible to GITA please visit the link below
HOW MUCH WILL I SAVE?
In a nutshell, you can receive a double tax deduction on the money spent on solar installation. The tax savings are as follows:
- For companies in the 25% tax bracket (adjustable income above RM500,000), 50% of the amount of money spent on a solar PV installation can be recovered through these tax incentives
- For companies in the 20% tax bracket (adjustable income below RM500,000), 40% of the cost of solar installation can be recovered.
Here's an Example of How Your Saving
with GITA & CA Could Look Like:
Sample of Estimated Savings with 140kWp Solar
Estimated Solar System Cost (RM):
Approved Green Technology Asset
Standard Corporate Tax Liability Rate is 24%
Saving based Capital Allowance (RM):
Saving based GITA (RM):
Summary of Financial Benefits of Going Solar
Double tax Saving up to 48% of System Cost (RM):
Savings in Electricity Cost over 25 Years (RM):
Total Savings over 25 Years (RM):
Net Savings over Lifetime of Solar System (RM):
Notes : Estimated savings based on a business case study