Rules for Deduction of Expenses for Providing Employees’ Accommodation Gazetted

31 December 2021

The Income Tax (Deduction for Expenditure on Provision of Employees’ Accommodation) Rules 2021 [P.U.(A) 470/2021] (‘Rules’) were gazetted on 24 December 2021 and have effect from the year of assessment 2021.

Permitted deduction

The Rules provide that for the purpose of ascertaining the adjusted income from its business in a basis period for a year of assessment, a company shall be allowed to deduct an amount equivalent to the expenses incurred by it on rental of a premise for the purpose of employees’ accommodation within the period from 1 January 2021 until 31 December 2022, subject to a maximum amount of RM50,000 for each company.

The amount of deduction under the Rules are in addition to any deduction allowable under section 33 (allowable deductions from gross income to determine adjusted income) of the Income Tax Act 1967. In other words, the Rules allow a double tax deduction on the expenses incurred for providing accommodation for employees.

Conditions for deduction

To qualify for the deduction under the Rules:

The accommodation must be an ‘accommodation’ within the meaning provided in section 24B of the Employees’ Minimum Standards of Housing, Accommodations and Amenities Act 1990 (‘the Act’), namely the accommodation must be a permanent or temporary building structure, including any house, hut, shed or other roofed enclosure, used for the purposes of human habitation and includes centralised accommodation;

The company must be resident in Malaysia which satisfies all of the following requirements:

is incorporated under the Companies Act 2016;

carries on the business of manufacturing or manufacturing related services; and

has obtained an approval of compliance under the Safe@Work programme from the Ministry of International Trade and Industry; and

The accommodation in respect of which deduction is claimed under the Rules:

must be certified with a Certificate for Accommodation issued by the Director General of Labour under section 24D of the Act; and

must not be an accommodation for a director.

Comments

It must be noted that the tax deduction under the Rules only apply to accommodation provided to employees in the manufacturing or manufacturing related services sectors and the total amount of expenses shall not exceed RM50,000.

Alert prepared by Desmond Liew (Senior Associates) of the Tax Practice and Nur Liana binti Mohamed (Associate) of the Corporate Practice Group of Skrine.

This alert contains general information only. It does not constitute legal advice nor an expression of legal opinion and should not be relied upon as such. For further information, kindly contact skrine@skrine.com.

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Rules for Deduction of Expenses for Providing Employees’ Accommodation Gazetted