“Boss, we are buying a RM1 million AI server.
Can save RM240,000 tax, right?”

My answer is…
Maybe.

But first, please show me the invoice.
Because Malaysian tax law does not have a special capital allowance category called “AI machine”.

Your vendor can call it:
“AI Solution.”
“Smart Automation.”
“Digital Transformation Package.”

But LHDN will still ask :
“What exactly did the company buy?”

A server?
GPU and computer components?
Software?
Cloud subscription?
Or an automation machine used directly in production?

Same AI label.
Very different tax treatment.

Qualifying servers, computer components, storage, networking equipment and software may generally enjoy Accelerated Capital Allowance.

Under the current ICT rules, the claim is generally:
First year: 60%.
Second year: 20%.
Third year: 20%.

Budget 2026 also proposed a faster two-year claim for qualifying ICT equipment and software acquired within the qualifying period from 11 October 2025 to 31 December 2026:

First year: 60%.
Second year: 40%.

For a RM1 million AI server, assuming a 24% corporate tax rate and sufficient business income, the total tax effect may be RM240,000.

But this is not free money from the Government.

It is mainly a timing benefit. The company enjoys the tax deduction earlier.

There is also a separate 200% Automation Capital Allowance for qualifying manufacturing and services companies investing in Industry 4.0 automation.

😂😂😂

The equipment must generally be used directly in the qualifying operation, reduce man-hours and improve productivity. MIDA and SIRIM requirements also apply.

The biggest mistake normally happens before the tax computation.

The vendor issues one invoice:
“AI Solution RM1,000,000.”
Hardware not separated.
Software not separated.
Installation not separated.
Cloud subscription also mixed inside.

When the tax agent asks for details, everyone starts playing tai chi.
Vendor says, “Ask your finance department.”
Finance says, “Ask the IT department.”
IT says, “The system is AI.”

Boss says, “Government encourages AI, surely can claim.”
Finally, the tax agent becomes the bad person.

Read the full content in our blog
https://lnkd.in/gRcusFZe

This article is based on information available as at 27 August 2026 and is general educational content only. It does not constitute tax or professional advice, and the application of tax legislation depends on the facts and circumstances of each case. KTP Group of Companies accepts no liability for any loss arising from reliance on this article without obtaining specific professional advice.