Special Tax Deduction for Expenditure on Malaysian-Made Handicraft by Hotel Industry
Updated: Jul 15
Updated on 15 July 2023 - Dialogue between MOF，LHDNM， and CTIM [21/6/2023]Update: The Ismail Sabri Government Budget is no longer applicable. Malaysia's national budget for 2023 was re-tabled again in February 2023.
To Download Revised Budget 2023 Speech and some other related publications - https://www.ccs-co.com/post/budget-2023-malaysia-madani
Current Position
The hotel industry has the opportunity to advertise itself as an enabler and assist in promoting the use of local handicraft products within the premises.
Some examples of these products include songket decorations, ceramic, and wood-based products.
Under normal circumstances, Capital Allowance is granted under Schedule 3 of the Income Tax Act 1967 when an eligible asset (if qualified as a "plant") is purchased.
Assets with a life span of less than two years are deductible on a replacement basis; subsequent purchases to replace an asset with a value of less than RM2,000 are eligible for a tax deduction under Section 33 of the Income Tax Act 1967.
Proposal
It is proposed that a special tax deduction be given for expenditures on qualified Malaysian-made handicrafts purchased from handicraft entrepreneurs certified by Perbadanan Kemajuan Kraftangan Malaysia incurred by hoteliers.
The amount of this deduction would be capped at RM150,000.
The purpose of this proposal is to support the recovery of Malaysian-made handicraft.
Effective Date
For eligible expenditure on handicraft products incurred from 1 January 2023 until 31 December 2025
Dialogue between MOF, LHDNM and CTIM [21/6/2023]
As mentioned under the current position, the purchase for replacement of assets with a value of less than RM2,000 qualifies for outright deduction under S.33 of the ITA 1967.
CTIM was seeking confirmation on whether this is a concession given by the IRB and where it is legislated.
LHDNM's Feedback:
It is not a concession.
For asset categories valued at RM2,000 and below, claims can be made through:
Special allowance claims under paragraph 19A of Schedule 3 of the ITA 1967; or
Capital allowance claims under paragraphs 10 and 15 of Schedule 3 of the ITA 1967.
For assets with a useful life not exceeding two years, claims can be allowed on a replacement basis under Section 33 of the ITA 1967.
Are taxpayers given an option whether to choose a special tax deduction claim on the items or to claim capital allowance / outright tax deduction under S33 if, let's say, this item is potentially a long-lasting item that is capital in nature?
LHDNM's Feedback:
Companies are allowed to choose to claim eligible capital expenditure as:
special tax deduction for Malaysian handicraft products; or
deduction under subsection 33(1) of the ITA 1967; or
capital allowance under Schedule 3 of the ITA 1967.
The tax treatment option, once decided, is final and cannot be amended.
CTIM sought clarification on what are the “ceramic and wood-based products in hotel premise” in the context illustrated.
MOF's Feedback: The product details will be discussed with the Malaysian Handicraft Development Corporation (PKKM) and will be informed accordingly through guidelines.
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