Tax Relief for Solar Panels in Malaysia

Switching to solar energy is a smart investment that not only helps the environment but also reduces your long-term energy costs. To support this transition, Malaysia offers significant tax relief for solar panels and other incentives to make renewable energy adoption more attractive and affordable. This guide explores how you can maximise savings through these programs.

Why Invest in Solar Panels?

As Malaysia aims to achieve 31% renewable energy adoption by 2025 and 40% by 2035, the government is rolling out initiatives, including tax relief solar panels, to accelerate green energy uptake. While the initial investment in solar systems may seem substantial, understanding the available tax benefits can greatly offset these costs, leading to substantial long-term savings.

Key Tax Relief and Incentives for Solar Panels in Malaysia

The Malaysian government offers various incentives and tax reliefs to encourage businesses to adopt solar panel installations. These incentives  reduce upfront costs, making solar projects more viable and contributing to Malaysia's renewable energy goals. Here are the main tax reliefs and government rebates available for businesses investing in solar energy:

Green Investment Tax Allowance (GITA)

The Green Investment Tax Allowance (GITA) is a powerful incentive designed to encourage businesses to adopt solar energy solutions. Under this scheme:

100% Tax Allowance

Companies can claim a 100% tax allowance on Qualifying Capital Expenditure (QCE) for solar panel installations. This benefit allows businesses to significantly reduce their tax liability in the year they invest in solar technology.

Tax Reduction Cap

This allows businesses to offset up to 70% of their taxable income for the first year. It helps companies reduce their overall tax burden, enabling greater financial flexibility in the early stages of their solar investment.

Carry-Forward Benefits

Underutilised allowances can be carried forward for up to three years. This extends the potential savings, allowing businesses to use any unused tax benefits in subsequent years, making solar projects even more financially attractive over time.

This tax relief makes solar projects more financially viable, particularly for energy-intensive businesses looking to reduce operating costs.

Capital Allowance (CA)

The Capital Allowance (CA) offers another form of tax relief by covering the depreciation cost of solar systems over time. Businesses can gradually claim tax deductions on their solar investments through:

Initial Allowance (IA)

Deduct 20% of the solar system’s cost in the first year. This upfront deduction reduces the initial financial impact of investing in solar panels.

Annual Allowance (AA)

Deduct 14% of the remaining balance each year. This annual deduction helps businesses to offset the cost of their solar investments over several years.

This structured tax relief solar panel scheme enables businesses to spread their cost savings over several years, reducing the overall financial burden of adopting solar energy.

Net Energy Metering (NEM) Program

The Net Energy Metering (NEM) Program allows businesses and households to generate solar power and offset their electricity bills. NEM 3.0 is extended until June 30, 2025 and offers several categories, including:

NEM Rakyat

This category is designed for residential properties, with a 400 MW capacity, enabling homeowners to generate solar power and reduce their electricity costs.

NEM GoMEn

Tailored for government buildings, NEM GoMEn offers a 100 MW capacity to help public sector entities lower their energy expenses by utilising solar-generated electricity.

NEM Nova

NEM Nova is intended for commercial and industrial users, with a 1,100 MW capacity. This option allows businesses to generate and consume their own solar energy, significantly cutting utility costs.

These NEM options empower users to lower their utility costs by utilising their own solar-generated energy, further enhancing the financial benefits of solar investments.

Eligibility Criteria and Application Process

To take advantage of tax reliefs and rebates for solar panels, businesses must meet specific requirements and follow application procedures. Here’s a step-by-step guide to qualifying for each incentive:

Green Investment Tax Allowance (GITA)

The GITA is available to Malaysian companies (Sdn. Bhd. and Berhad) investing in green technology projects or assets. To qualify for this solar panel tax relief, businesses must:

1. Be a Malaysian-registered company.
2. Invest in eligible green technology projects listed in the MYHIJAU Directory.
3. Comply with guidelines from the Malaysian Investment Development Authority (MIDA).

Application Steps:

1. Prepare Documentation: Gather relevant documents, including financial statements and project plans.
2. Submit the Application: Complete the GITA application via MIDA’s official website.
3. Site Verification: MIDA may conduct a site inspection.
4. Approval: Upon approval, claim the tax allowance during future tax filings.

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Capital Allowance (CA)

Businesses must classify their solar systems as Plant & Machinery assets to qualify for CA. The steps are:

1. Register the Asset: Add the solar system to the company’s asset register.
2. Claim the Allowance: Include the CA claim during tax filings with supporting documentation.

Net Energy Metering (NEM) Program

Eligible properties must be grid-connected, and the solar PV system’s capacity should align with energy consumption requirements.

Application Steps:

1. Engage a Registered Service Provider: Conduct an assessment and design of the solar system.
2. Submit an Application: Apply through the Sustainable Energy Development Authority (SEDA) Malaysia portal.
3. Approval:  After approval, proceed with installation and start offsetting electricity costs.

Additional Solar Incentives in Malaysia

The Malaysian government provides e-rebates to lower the cost of energy-efficient products, including solar panels, making them more accessible to businesses and households.

E-Rebates for Energy-Efficient Equipment

The government has set aside RM 70 million in e-rebates to encourage the purchase of energy-efficient equipment. This incentive makes it more affordable for businesses and households to invest in products such as solar systems. By reducing upfront costs, these rebates facilitates broader access to energy-efficient solutions, accelerating the transition to renewable energy.

Green Technology Financing Scheme (GTFS)

With an additional RM 1 billion in funding, the GTFS offers businesses low-interest financing options for green technology projects. This scheme is a key part of Malaysia's strategy to promote green economic growth and provides the necessary funding to support renewable energy initiatives, including solar projects. Eligible businesses can access favourable financing terms to offset the cost of solar installations and other environmentally friendly ventures.

Renewable Energy Credits (RECs)

RECs provide businesses and homeowners generating excess renewable energy an opportunity to earn additional income. By selling RECs, producers of renewable energy can monetise their surplus energy, making solar installations even more attractive and financially viable. This incentive not only supports the growth of clean energy but also helps maximise returns for solar adopters.

Financial Benefits of Investing in Solar Panels

Investing in solar panels presents numerous financial advantages, particularly when businesses take advantage of available tax incentives such as the Green Investment Tax Allowance (GITA) and Capital Allowance (CA). For instance, a company investing RM 1 million in a solar system can claim up to 48% of the project cost, totalling RM 480,000, through GITA and CA. This includes a 100% claim on the first-year expenses under GITA, along with a gradual tax deduction over six years through CA. Such tax savings for solar panels help alleviate the initial investment burden.

Maximise Your Solar Tax Savings Today

Switching to solar isn’t just an environmentally friendly choice—it makes financial sense too, especially with the tax relief for solar panels available in Malaysia. By leveraging incentives like GITA, CA, and other government rebates, you can maximise your savings and accelerate your transition to sustainable energy. At GetSolar, we make the switch to solar even easier and more affordable with our Rent-to-Own program, which allows you to enjoy solar energy benefits without the hefty upfront costs. Discover how much you can save by using our free solar calculator for an instant, personalised estimate. Start your journey to renewable energy today!

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