EV Rental Tax Deduction for Companies in Malaysia
The Government gazetted the Income Tax (Deduction for Rental Payments) (Electric Motor Vehicles) Rules 2026 [P.U.(A)232/2026] on 26 June 2026. These Rules apply from the Year of Assessment (“YA”) 2023 through to YA2027.
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Eligible Entities and Vehicle Criteria
To qualify for this tax deduction, the claimant must be a company incorporated under the Companies Act 2016 and resident in Malaysia. Furthermore, the rented vehicle must meet the definition of an “electric motor vehicle” (hereinafter referred to as “EV”) under Section 2 of the Road Transport Act 1987 and satisfy three conditions:
(1)
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the EV must be new;
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(2)
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the EV must not have been previously used by any person for any purpose prior to its rental to the company; and
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(3)
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the EV must not be licensed by the relevant authority for commercial usage such as carrying goods or passengers.
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Scope of Deductible Expenses
Eligible companies can deduct qualifying expenses incurred in the basis period of the relevant YA. The scope of expenditure includes:
(1)
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rental payments for the electric motor vehicles; and
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(2)
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costs attributable to the process of rental of the EV, specifically insurance payments and processing fees.
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Deduction Limits and Restrictions
The total deduction allowed under these Rules is subject to an aggregate amount not exceeding RM300,000 in a YA and subsequent YAs, for the entire qualifying period from YA2023 to YA2027.
The Director General of Inland Revenue has the authority to review these rental expenses. If the total amount claimed exceeds what is reasonably expected in the ordinary course of business, the Director General of Inland Revenue can disallow the excess portion.
Additionally, to prevent duplicate tax benefits, companies claiming a deduction under these Rules are restricted from claiming the same expenses under paragraph 39(1)(k) or Schedule 3 (Capital Allowance) of the Income Tax Act, 1967.
KAIZEN Group, together with its associate firms in Malaysia, can help the clients to perform these compliances formalities so as to maintain the Malaysia company in good standing. Please call and talk to our professional accountants in Kaizen for further clarification.
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