Solar guys keep telling me about the Solar tax incentive… What & How does it work?

The Government used to provide certain incentives to encourage the development of renewable energy power generation such as mini hydro, Solar PV, biomass etc.

One of them is the Green Technology Financing Scheme (GTFS). 

If your GTFS application is successful, the Government will rebate 2% annual interest rate of your project loan interest, and guarantee 60% of your project cost.

This will greatly improve your return of investment..

Like the SEDA Net Energy Metering (NEM) Quota, people who believe quickly apply and enjoy the benefit..

People who doubt it, missed the boat!

Now what incentive is left for you if you intend to install a Solar PV system for your premise?

Green Investment Tax Allowance (GITA).

GITA means the amount of money you invested in RE assets (Solar PV system for instance), you can deduct the same amount from your statutory income.

Thus, you pay less income tax. 

Let’s work you through with an example

For instance, you spent RM300,000 to install Solar PV system for your business premise.

And the statutory income of your financial year says is RM100,000

So, can you deduct RM100,000 and pay zero tax (since you spent RM300,000)?

Unfortunately, you can only deduct a maximum upto 70% of your statutory income, in this case it is RM70,000.

Thus, you only pay tax for the RM30,000. And you save 24% of RM70,000 = RM16,800 of tax.

After you use the RM70,000 from the RM300,000. You have a balance of RM230,000 to be brought forward for next year.

The same applies for next year until your RM300,000 is fully utilized.

All in all, you will have a total of 24% of RM300,000 = RM72,000 tax saving.

It is possible that the RM300,000 is being utilized in the first year. Say your statutory income is RM500,000.

70% of it is RM350,000. So, you can deduct RM300,000 from your statutory income in one year. And you only pay tax for 24% of RM200,000.

For GITA, you need to apply from MIDA. And subsequently get verification from Greentech Malaysia before you can enjoy the tax saving.

Application of GITA is free, but verification by Greentech comes with a cost.

If you intend to install Solar PV for your business premise, you shall act fast or else you will miss the boat of this GITA…