Okay so I'm wondering what benefit are there in buying a company car? My brother in law has his own business and just bought a car under my sister's name. It's a 2nd hand Exora for the workers to drive. If I'm not mistaken, buying company car for company use can deduct tax right?

So is it better to spend a few extra thousand for company car or just save the money n put as private?

You can claim capital allowance on the vehicles but there is a restriction on the amount you can claim. Also, the vehicle must be used in the production of business income.

Disposing the asset within 2 years (i.e. to ownself/family member etc) will cause a claw back to be imposed by way of balancing charge unless there is a valid reason (i.e. cessation of business).

If not mistaken, I think the ownership of the vehicle must be in the company's name and not your sister's name. If your sister uses the car regularly too, she might have to include it in her income tax computation as benefit in kind.

So let's say a new car and a 2nd hand car, does it affect the capital allowance or its fixed on any types of motor vehicles? N how much is the maximum amount u can claim either.

It's gonna be driven to the scrap yard, not going to change ownership anytime soon so it won't be a problem

That's what I thought. Which is why I have absolutely no idea why they did it.

Firstly, you need to understand the purpose of Capital allowance (CA). CA is like a replacement for depreciation. Tax department won't allow you to calculate tax based on depreciation because a business can simply increase depreciation rates to reduce income and hence tax payable.

So what the tax department does is that they give you a separate rate for you to use known as capital allowance rate. The capital allowance consist of initial allowance (IA) and annual allowance (AA). The rate depends on the type of asset.

Initial allowance is an extra rate given to the business in the year of acquisition. Annual allowance is given every year as long as it meets certain criteria. So in the year of acquisition, you can claim IA and AA but only AA in subsequent years.

The maximum capital allowance claimable is the Qualifying Expenditure (QE) which is usually the cost of the asset. There is no restriction on the amount you can claim for commercial vehicles such as bus, lorry, van and taxi. Hence, the maximum amount of CA claimable for these commercial vehicles is the QCE. However, for passenger vehicle (vehicles for manager, salesman etc) there is a restriction imposed. Therefore,

If motor vehicle is a commercial vehicle, no QE restriction. E.g. Cost=RM180,000; QE=RM180,000
If the passenger vehicle is NEW and cost >RM150,000, the QE is only RM50,000 although more than RM150,000 is paid.
If the passenger vehicle is NEW and cost <=RM150,000, the maximum QE is only RM100,000. E.g. cost=RM30,000, QE=RM30,000; Cost=RM120,000, QE=RM100,000.

CA for the year = (IA+AA) x QE

For example, IA and AA rates are 20% and 20% respectively. You purchase a second hand car for RM20,000 using cash. Your QE is the cost which is RM20,000. You can claim CA of RM8,000 in the year of acquisition (RM20,000 X 20% + RM20,000 X 20%). But in subsequent years, CA claimable is only RM4,000 per year (RM20,000 X 20%). Maximum CA claimable is the QE which is RM20,000. [Note: Suppose that cash is paid to acquire vehicle. Calculation is different if vehicle is bought on hire purchase.]

Residual Expenditure (RE) is the amount of CA left you can claim that is QE - all the CA you claimed so far. In the year of disposal, any gain/loss is a balancing adjustment which can be a balancing charge or balancing allowance.

If disposal price > RE, then there is a gain on disposal. A balancing charge will be imposed that is the disposal price - RE. The balancing charge increases your income and you pay tax on this but it is restricted to the QE.
If disposal price < RE, then there is a loss on disposal. A balancing allowance is given that is the RE - disposal price. The balancing allowance decreases your income and reduces the tax you pay.

In this case, if the car is really used for workers then it is legal and beneficial to have it place under the business and not as private. But make sure the workers really use it. As for the maximum amount, I am not sure because the Proton Exora is most likely a passenger vehicle as it does not fall under lorry, truck, bus, mini bus, van, taxi or hire car. So the maximum CA claimable is RM50,000. Tax saving is the CA claimed in the year x your business tax rate.

Whew Macam reading from textbook. But understand so far. So it is far better to register as a company car as it proves more beneficial then private. Makes total sense

Correct me if I m wrong
Road tax and vehicle insurance differ

Hi, may I ask, is MPV like Toyota Alphard / Vellfire Recond considered as Commercial vehicle? and allowed to claim the full Capital allowance over the years for company tax, if say purchase it for RM150,000?

Commercial and company-owned vehicle are different. Commercial licensing vehicle are those with PUSPAKOM disc displayed on windscreen with company's / owner's name painted on the body. Any car can be commercial vehicle as long as you fulfill it's requirement. I'm sure you seen before Proton Saga, Mit Triton used by TM or TNB, those are commercial vehicle. For commercial vehicle, full CA based on purchased price.

Thanks for your reply T.T.C, much appreciated it and understand it now, seems like it is not feasible to make it a commercial car.

From my understanding, in this case, if buy recond car at RM150,000, the eligible Capital Allowance will only be RM50,000, and if the director is using the car, need to declare the benefit of using the car for income tax purpose. What will happen to the difference example RM150,000 - RM50,000 = the RM100,000 for company accounting/tax perspective?

is it not feasible/encourage to make it a company car, as only RM50,000 will be allowed for Capital Allowance, or did I miss other benefit/calculation that will benefit the business in tax?

Thank you very much

How about renting the car from family member?

While road tax and insurance are much more expensive, it's more beneficial for it to be company-owned. If you are a Sdn Bhd / Bhd owner, you can refer to your appointed accountant to calculate the benefits in 3 years or 5 years, from there, you can make your judgement. I can't comment much as I'm not an accountant but just a businesses owner who owns both commercial registered and company owned vehicles.

Only if the other party is a registered business or company.

Thank you T.T.C. for your insight, will check with our accountant on the benefit of placing the car as company car. Have a nice weekend ahead