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Tax incentive for Structured Internship Programmes
In Budget 2022, it was proposed that the scope of double deductions for companies conducting Structured Internship Programmes approved by Talent Corporation Malaysia Berhad be expanded to students pursuing Master’s degrees, professional certificates and Malaysian Skills Certificate Levels 1 and 2, and extended to the year of assessment (YA) 2025 (see Take 5: Malaysia Budget 2022).
To legislate the above proposals, the Income Tax (Deduction for Expenditure Incurred for Provision of Approved Internship Programme) (Amendment) Rules 2023 [P.U.(A) 188] were gazetted on 23 June 2023 to amend the Income Tax (Deduction for Expenditure Incurred for Provision of Approved Internship Programme) Rules 2019 [P.U.(A) 398].
The Income Tax (Deduction for Expenditure Incurred for Provision of Approved Internship Programme) Rules 2019 provide that in ascertaining the adjusted income of a qualified person from his business for a basis period for a YA, a double deduction shall be given for expenses incurred by the qualified person to conduct an approved internship programme (see Tax Alert No. 1/2020).
The Amendment Rules provide that:
(a) A double deduction will be given for the following expenses:
(i) Monthly allowances paid to students pursuing:
- Malaysian Skills Certificates Levels 1 to 4, diploma level or its equivalent, of not less than RM500 per student
- Malaysian Skills Certificate Level 5, Bachelors degree, Masters degree or its equivalent, or professional certificate, of not less than RM600 per student
(ii) Expenditure incurred for the provision of training
(iii) Meals, travelling expenses and accommodation for the students during the internship programme, and
(iv) Expenditure incurred for digital and communication costs
For items (ii), (iii) and (iv), the total deductions allowable for each student shall not exceed RM5,000.
(b) The double deduction will apply to a qualified person who conducts or has conducted an approved internship programme for a student from YA 2017 until YA 2025 (previously YA 2021).
The following terms have also been redefined in the Amendment Rules:
(a) Higher educational institution
(b) Qualified course
(c) Student
(d) Approved internship programme
The Amendment Rules are effective from YA 2022.