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Additional deduction for expenditure incurred on the rental of premises and workers’ dormitories
Under the Strategic Programme to Empower the People and Economy (PEMERKASA), to incentivize companies to participate in the Safe@Work initiative and provide their employees with conducive work and living environments, the Government proposed that a further deduction be given to manufacturing companies and manufacturing-related services companies for expenditure incurred on the rental of premises and workers’ dormitories (see Special Tax Alert No. 2/2021). The qualifying expenditure eligible for the additional deduction is capped at RM50,000 for each company, for expenses incurred between 1 January 2021 and 31 December 2021.
Thereafter, in Budget 2022, the Government proposed that the incentive be extended for an additional year, i.e., until 31 December 2022.
To legislate the proposals, the Income Tax (Deduction for Expenditure on Provision of Employees’ Accommodation) Rules 2021 [P.U.(A) 470] were gazetted on 24 December 2021. The Rules provide that in ascertaining a company’s adjusted income from its business for a YA, a further deduction (i.e., deduction in addition to any deduction allowable under Section 33 of the ITA) shall be allowed for the expenses incurred by the company for the rental of premises for its employees’ accommodation* between 1 January 2021 and 31 December 2022. The total amount of expenditure is capped at RM50,000 for each company.
*The employees’ accommodation must be certified with a Certificate for Accommodation as provided under Section 24D of the Employees’ Minimum Standards of Housing Accommodations and Amenities Act 1990. Accommodation for directors is excluded.
The Rules shall apply to a Malaysian resident company which:
(a) Is incorporated under the Companies Act 2016
(b) Is carrying on the business of manufacturing or manufacturing-related services, and
(c) Has obtained an approval of compliance under the Safe@Work programme from the Ministry of International Trade and Industry.
The Rules are effective from YA 2021.