# Motor Vehicles and the Capital Allowance Restriction

> Why a company car rarely gets full capital allowances, when the cap is RM100,000 instead of RM50,000, and how electric vehicles are treated.

- Category: taxation
- Language: en
- Status: published
- Updated: 2026-07-20
- Canonical: https://negaraku.md/en/taxation/motor-vehicle-capital-allowance

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A company buys a RM320,000 executive saloon, books it as plant, and expects
capital allowances on RM320,000. It will get them on RM50,000. The car is new,
but it costs more than RM150,000, so the higher cap never opens — and the
difference, RM270,000, is simply never deducted.

## What the cap actually says

Paragraph 2(2) of Schedule 3 to the Income Tax Act 1967 limits qualifying plant
expenditure on a motor vehicle to **RM50,000**, unless the vehicle is licensed by
the appropriate authority for the commercial transportation of goods or
passengers — in which case there is no cap.

The proviso raises the limit to **RM100,000** only where **both** conditions are
met for a vehicle purchased on or after 28 October 2000:

1. the vehicle **has not been used prior to purchase**; and
2. the **total cost does not exceed RM150,000**.

Fail either one and you fall back to RM50,000. There is no sliding scale.

| Vehicle | Cost | Qualifying expenditure |
| --- | --- | --- |
| New, not commercially licensed | RM90,000 | RM90,000 — the cap only bites above the ceiling |
| New, not commercially licensed | RM145,000 | RM100,000 |
| New, not commercially licensed | RM320,000 | RM50,000 — total cost exceeds RM150,000 |
| Used, not commercially licensed | RM90,000 | RM50,000 — fails the new test |
| Reconditioned van | RM75,000 | RM50,000 — reconditioned is not new |
| Lorry licensed for goods | RM260,000 | RM260,000 — no restriction |

Those outcomes follow the worked examples in Public Ruling No. 6/2015. The
reconditioned-van case (Example 8) is the one people lose on: PR 6/2015 states
plainly that a reconditioned vehicle cannot be categorised as new, even where it
has been overhauled with high-quality parts and passed functional and safety tests.

Note the trap in the word *new*. For capital allowances it means never used.
For benefits-in-kind it means something different — paragraph 3.3 of Public
Ruling No. 11/2019 defines a new motorcar as including **a reconditioned car at
the time it was first registered in Malaysia**. Same word, two regimes, opposite
answers.

## What is not qualifying expenditure

Public Ruling 6/2015 paragraph 5.2(a) excludes:

- **road tax, insurance and hire-purchase interest** — recurring expenses, allowable instead under s.33(1);
- **reserve price for a personalised registration number**, including tender and service fees — treated as private expenditure.

Cash price including basic accessories and the mandatory JPJ registration fee do
qualify. Optional accessories offered only by some dealers do not.

## Leasing instead of buying does not escape it

Section 39(1)(k) disallows lease rentals on a non-commercial motor vehicle above
RM50,000, or RM100,000 where the vehicle was unused before the rental and its
total cost does not exceed RM150,000. The further proviso makes the ceiling
**aggregate across the year of assessment and all subsequent years** for that
vehicle — so a long lease exhausts the allowance and every later rental on the
same car is disallowed.

## Electric vehicles

There is a distinct gazetted rule for rentals. The **Income Tax (Deduction for
Rental Payments) (Electric Motor Vehicles) Rules 2026, P.U.(A) 232/2026**, allow
a Malaysian-incorporated resident company a deduction for EV rental payments,
including insurance and processing fees connected to the lease. The rules have
effect **from YA2023 to YA2027**.

The conditions are strict:

- the vehicle must be an electric motor vehicle within s.2 of the Road Transport Act 1987;
- it must be **new** and never used by any person before the rental;
- it must not be licensed for the commercial carriage of goods or passengers;
- the aggregate deduction must not exceed **RM300,000** per vehicle across all years;
- the Director General may disallow any excess over what is reasonable in the ordinary course of business.

Rule 2(5) is the part to read twice. Where a company claims under these Rules,
**no claim may be made under s.39(1)(k) or Schedule 3** for the same
expenditure. You choose one route.

No corresponding instrument raising the *purchase* cap for electric vehicles was
found — an EV bought outright appears to sit under the ordinary paragraph 2(2)
limits.

## Common mistakes

**Reading RM100,000 as the default.** It is the exception. Most guides lead with
RM100,000 and bury the two conditions; the statutory default is RM50,000.

**Treating a reconditioned import as new.** It is the single most common
reclassification on audit.

**Assuming a four-wheel drive used to carry goods is commercial.** Example 5 of
PR 6/2015 restricts exactly that vehicle to RM100,000 because it was not
*licensed* as a commercial vehicle. The test is the licence, not the use.

**Claiming EV rentals and Schedule 3 allowances on the same vehicle.** Rule 2(5)
of P.U.(A) 232/2026 forbids it.

**Capitalising road tax and insurance into the cost.** They are revenue, and
including them inflates a figure that is capped anyway.

## What's next

Reprice the decision before you sign. Above roughly RM150,000, a purchase gives
tax relief on RM50,000 while an EV lease can give relief on up to RM300,000
through YA2027 — and the employee still pays benefit-in-kind tax either way.

## Sources

- Income Tax Act 1967 (Act 53), reprint as at 21 May 2024 — Schedule 3 paragraph 2(2) and s.39(1)(k) — https://www.hasil.gov.my/wp-content/uploads/20240521-akta-cukai-pendapatan-1967-akta-53.pdf (LHDN)
- Public Ruling No. 6/2015 — Qualifying Expenditure and Computation of Capital Allowances — https://www.hasil.gov.my/wp-content/uploads/PR_6_2015.pdf (LHDN)
- Income Tax (Deduction for Rental Payments) (Electric Motor Vehicles) Rules 2026, P.U.(A) 232/2026 — https://lom.agc.gov.my/ilims/upload/portal/akta/outputp/3571327/PUA%20232%20%282026%29.pdf (Attorney General's Chambers)

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