Accelerated Capital Allowance for ICT equipment and software in Malaysia: what counts?

What is the Accelerated Capital Allowance?

A capital allowance lets a business deduct the cost of an asset over several years. The Accelerated Capital Allowance (ACA) shortens that period, so spending on qualifying ICT is claimed within two or three years instead of over the asset's normal life. It changes the timing of the deduction, not the amount.

Capital allowances are claimed in two parts: an initial allowance in the year the spending is incurred, and an annual allowance in each year after until the cost is used up. For ordinary equipment the annual rate is low, so the claim stretches across many years. The ACA rules raise both rates for specific kinds of asset.

For a growing SME the benefit is cash flow. A larger deduction in the first years reduces tax payable sooner, which matters when the money for a system has already gone out. It is not a grant, and it only helps a business that has taxable income to set it against.

What do the ICT Equipment Rules 2024 cover?

The Income Tax (Accelerated Capital Allowance) (Information and Communication Technology Equipment) Rules 2024, P.U.(A) 328/2024, apply from year of assessment 2024 to a Malaysian resident who buys ICT equipment listed in its Schedule. The initial allowance is two-fifths (40%) and the annual allowance is one-fifth (20%), so the cost is claimed over three years.

The Schedule lists 18 items. They include computers and components, storage, screens, printers, communication and network equipment, and "software system or software package". The rules say the purchase includes installation. The rules revoke the earlier 2018 ICT rules, which gave 20% initial and 20% annual allowance.

The rules do not apply if the same equipment already benefits from certain other incentives: investment tax allowance under the Promotion of Investments Act 1986, reinvestment allowance, service sector investment allowance, an ACA under other rules, or specific tax exemptions. One asset gets one incentive.

• WhoA person resident in Malaysia, not only companies (rule 2).
• Rates40% initial allowance, 20% annual allowance (rules 3 and 4).
• FromYear of assessment 2024; the rules state no end date.

What did Budget 2026 and Budget 2027 add?

Budget 2026 announced a separate ACA, described in Appendix 21 of its tax measures, for spending from 11 October 2025 to 31 December 2026. Budget 2027 proposes, in Appendix 28, to extend it for four years to spending from 1 January 2027 until 31 December 2030, at 20% initial and 40% annual allowance, fully claimed by companies within two years.

Appendix 28 of the Budget 2027 tax measures document lists four qualifying items. Items 3 and 4 are the ones that matter for software: "purchase of ICT equipment and computer software package" and "consultation, licensing and incidental fees related to the development of customised computer software". The first two items cover heavy machinery and plant.

Two cautions. The Budget 2027 extension is a proposal until the Finance Bill and the supporting rules are gazetted. And as of 30 October 2026 we could not find the gazetted rules for the Budget 2026 measure on the official legislation portal, so we describe it as announced, using the Ministry of Finance's own wording, rather than as law. Ask your tax agent which regime they will claim under before you rely on the faster rate.

Does custom software count?

Yes, under its own rules. Consultation fees, payment for rights of software ownership and incidental fees for developing customised computer software qualify for capital allowance under P.U.(A) 327/2024, also at 40% initial and 20% annual allowance. The Budget 2026 and 2027 measure also names custom software development fees.

Off-the-shelf packages sit in the ICT Equipment Rules. Software built for your business sits in the Development Cost for Customised Computer Software Rules 2024. Our separate article on whether custom software is tax deductible covers what LHDN counts as a development cost and what it does not.

When you buy a system, ask the supplier to separate hardware, software package licences, custom development and consultation on the quotation and the invoice. Each line may fall under a different rule, and your tax agent needs the split to claim it.

What about small value assets?

Assets worth up to RM2,000 each can be written off in full in the year of purchase. Under LHDN Public Ruling 4/2026, MSMEs have no annual cap, while other companies are limited to RM20,000 a year. Budget 2027 proposes raising the per-asset limit to RM3,000, and the cap for non-MSME companies to RM30,000, from year of assessment 2027.

This is often the simplest route for a laptop, a printer or a tablet for the front desk. The per-asset value is what matters, so a RM2,800 laptop bought in 2026 does not qualify as a small value asset, while one bought in the 2027 basis period may, if the proposal is enacted (Appendix 12).