Tax Benefits for Companies Leasing Electric Motor Vehicles
Key Takeaway
Qualifying EV rental
expenditure is eligible for
a special deduction up to
RM300,000, subject to
prescribed conditions,
instead of section 39(1)(k)
limits.
The Income Tax (Deduction for Rental Payments) (Electric Motor
Vehicles) Rules 2026 introduce a special deduction for rental payments
incurred by eligible companies on qualifying electric motor vehicles
(EVs). The Rules apply retrospectively from YA 2023 to YA 2027, with
the deduction capped at RM300,000.
Under the existing section 39(1)(k) of the Income Tax Act 1967, rental expenses for non-commercial motor vehicles are generally restricted to RM50,000 per vehicle, or RM100,000 per vehicle where the prescribed conditions are met. This means that where the rental cost exceeds the applicable limit, the excess is not deductible for tax purposes.
The new EV Rules provide a separate special deduction of up to RM300,000 for qualifying EV rental expenditure. In effect, qualifying EV rental costs are no longer subject to the RM50,000 / RM100,000 restriction under section 39(1)(k), provided the requirements of the new Rules are met.
For example, where a company incurs RM120,000 in rental payments for a qualifying EV, the company may claim a special deduction of RM120,000, subject to the conditions and the RM300,000 limit. Under the existing section 39(1)(k) treatment, the deduction would generally have been restricted to RM50,000 or RM100,000, depending on the circumstances.
Under the existing section 39(1)(k) of the Income Tax Act 1967, rental expenses for non-commercial motor vehicles are generally restricted to RM50,000 per vehicle, or RM100,000 per vehicle where the prescribed conditions are met. This means that where the rental cost exceeds the applicable limit, the excess is not deductible for tax purposes.
The new EV Rules provide a separate special deduction of up to RM300,000 for qualifying EV rental expenditure. In effect, qualifying EV rental costs are no longer subject to the RM50,000 / RM100,000 restriction under section 39(1)(k), provided the requirements of the new Rules are met.
For example, where a company incurs RM120,000 in rental payments for a qualifying EV, the company may claim a special deduction of RM120,000, subject to the conditions and the RM300,000 limit. Under the existing section 39(1)(k) treatment, the deduction would generally have been restricted to RM50,000 or RM100,000, depending on the circumstances.
