The Government has allowed expenses incurred in 2021 by an employer for detection of Coronavirus Disease 2019 carried out on its employees to be tax deductible.
The Income Tax (Deduction for Expenses in relation to the Cost of Detection Test of Coronavirus Disease 2019 (COVID-19) for Employees) Rules 2021
[P.U.(A) 404/2021] (‘Rules’
) were gazetted on 20 October 2021 and are deemed to have effect from the year of assessment 2021.
Rule 2(1) of the Rules provide that the expenses incurred by an employer who is resident in Malaysia for the cost of detection test of Coronavirus Disease 2019 (COVID-19) (‘Covid-19 Detection Test
’) for its employees within the period from 1 January 2021 until 31 December 2021 shall be allowed as a deduction for the purpose of ascertaining the adjusted income of that employer from its business in a basis period for a year of assessment.
To claim a deduction under the Rules, an employer is required to produce a receipt and certification issued by a medical practitioner registered with the Malaysian Medical Council or a medical practitioner registered outside Malaysia that the Covid-19 Detection Test has been provided to its employees.
The Rules further state that the amount of deduction allowed under Rule 2(1) of the Rules is an addition
to any deduction allowed for cost of the Covid-19 Detection Test under section 33 of the Income Tax Act 1967. This means that a double deduction
will be allowed for expenses incurred by an employer in a Covid-19 Detection Test carried out on its employee.
The Rules have been issued to give effect to one of the initiatives announced by the former Prime Minister as part of the Short-Term Economic Recovery Plan (PENJANA) on 5 June 2020. Although the Rules have been issued rather late in the year, they are nevertheless welcomed as they enable employers to claim double deduction of the expenses incurred in the Covid-19 Detection Test carried out on their employees.
For the Covid-19 Detection Test conducted outside Malaysia, the taxpayer should seek confirmation that the foreign medical practitioner is registered in the jurisdiction where he carries out his practises and maintain the supporting document of the same for the purposes of the Rules.
Alert by Desmond Liew (Senior Associate) of the Tax Practice of Skrine.