When Covid-19 first started, businesses were impacted by the Movement Control Order (MCO) and standard operating procedure (SOP) right away. It was a tough time indeed as normal business operations could not be carried out like usual, resulting in immense and unforeseen financial losses. In some extreme cases, companies could not sustain themselves and had no choice but to close down.

Even as 2023 is slowly approaching, the widespread impact brought forth by the Covid-19 pandemic is still far from over. Not only do bosses and employers have to keep businesses running, but at the same time, they also have to ensure that their workers and employees are well taken care of. In order to do that, purchasing Personal Protective Equipment (PPE) at workplaces and offices is essential and compulsory to safeguard a healthy working environment.  

Such an additional expense is no doubt adding salt to injury for business owners. Besides decreased profits and suffering losses, business owners still have to fork out extra money to purchase protective equipment. However, there is always a silver lining. Effective from Year of Assessment (YA) 2020, expenses incurred by employers to provide employees with PPE for the purpose of prevention and protection from Covid-19 of its business from 1 March 2020 will be allowed for tax deduction (Income Tax (Deduction for Expenses in Relation to the Cost of Personal Protective Equipment) Rules 2021).

This leads to two different tax treatments for the purchase of PPE prior to and after 1 March 2020. Before 1 March 2020, if you purchase any PPE and they are capital assets, you can claim capital allowance. Bear in mind that the capital allowance for other equipment is 20% for the initial allowance and 10% for the annual allowance. Depending on the value of the PPE, if it is considered a small-value asset (less than RM2,000), the capital allowance claim can be 100%. This, however, is subjected to a maximum claim of RM20,000 for each YA. On the contrary, if the purchase of PPE was made after 1 March 2020, tax deduction against gross business income is allowed.
 

(a) Capital allowances for qualifying expenditure under Schedule 3 of the Income Tax Act 1967; or

(b) Accelerated capital allowances under Income Tax (Accelerated Capital Allowance) (Machinery and Equipment Including Information and Communication Technology Equipment) Rules 2021 [P.U. (A) 268/2021]. 

Did you claim capital allowance or tax deduction for purchasing PPE? Are you aware that the maximum claim for capital allowance is not the same for small and medium enterprises?