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Double Tax Deduction
Besides premium FiT rates, the solar PV installation cost is entitled for significant tax deduction.
Owners of businesses (Sdn Bhd & Bhd) who invest on solar installation are entitled to the following tax incentives :
- Capital Allowance is deductable 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 deductable as Initial Allowance (20%) on the first year and Annual Allowance (14%) for each year.
- Investment Tax Allowance (ITA) of 100% on qualifying capital expenditure incurred within a period of 5 years. This allowance can be set-off against 100% of statutory income for each year of assessment;
This effectively means a double tax deduction on the money spent on solar installation. The tax savings are as follow :
- For companies in the 25% tax bracket (adjustable income above RM500,000), half 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.

Under the Budget 2011 announcement: these incentives will be extended for applications received until 31 December 2015.
Note that the term ‘Companies’ refer to companies locally incorporated under the Companies Act 1965-Syarikat Berhad and Syarikat Sendirian Berhad. This type of application is also known as a ‘project’ application.


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