Tax incentive for companies participating in the NDTS

Tax incentive for companies participating in the National Dual Training Scheme (NDTS)

In Budget 2019, it was proposed that a double deduction be given for expenses incurred by companies participating in the NDTS approved by the Ministry of Human Resources (MOHR). The double deduction would apply to programmes implemented between 1 January 2019 and 31 December 2019. Thereafter, in Budget 2020, it was proposed that the incentive be extended for another two years (i.e., until 31 December 2021).

To legislate the above proposal, the Income Tax (Deduction for Training Costs under the National Dual Training System (NDTS) Rules 2021 [P.U.(A) 390] were gazetted on 11 October 2021.

The Rules provide that in ascertaining a qualifying company’s adjusted income from its business for a YA, a double deduction shall be given for expenses incurred and paid by the qualifying company during that basis period for its participation in a qualifying programme. The double deduction is given for the following expenses:

(a)   Monthly training allowance of not less than RM300 paid to the apprentice

(b)  Expenses incurred for the provision of the qualifying programme

(c)   Expenses incurred for food, travelling and accommodation allowances for apprentices during the qualifying programme

(d)  Expenses incurred for insurance provided to the apprentice

For items (b) and (c), the total deductions allowable for each apprentice shall not exceed RM5,000 for each YA.

The Rules shall apply to a qualifying programme which is implemented and approved by MOHR between 1 January 2019 and 31 December 2021.

The following terms have been defined in the Rules:

(i)    Apprentice 

A Malaysian citizen and resident registered with the Department of Skills Development (DSD) to undergo the qualifying programme, who is:

(a)  An employee of the qualifying company, or

(b) A school leaver

(ii)   Qualifying programme

A programme which:

(a)   Complies with the National Occupational Skills Standard (NOSS)

(b)  Is accredited by the DSD

(c)   Is certified as a National Dual Training System (NDTS) – Industry4WRD Programme, and

(d)  Implements two modules of training which are:

-     Practical training at the company which covers 70% - 80% of the training (performance), and

-     Theoretical training at the training centre which covers 20% - 30% of the training (knowledge)

(iii) Qualifying company

A company:

(a)   Incorporated in Malaysia under the Companies Act 2016

(b)  Accredited as an Accreditation Center by DSD to implement the NDTS Programme

(c)   Implementing the NDTS Programme based on the NOSS, and

(d)  Participating in the NDTS Programme

The non-application provisos stipulate that the Rules shall not apply where a claim for the following has been made for the same expenses:

• For any fund or Government grant related to the training, or
• Any exemption or deduction under any other provision of the ITA

The Rules are deemed to have come into operation from YA 2019.