Tax deductions

Malaysian companies with flexible working arrangements are now eligible for income tax deductions

The FWA tax deduction covers expenses incurred by employers for: consulting fees, capacity development cost, software cost, and software subscription.

* Scroll below for the press release in Bahasa Melayu.

As Malaysia moves into its endemic phase, more and more organizations are adopting flexible working policies (FWAs) that allow employees to vary working conditions to suit their individual needs. To help embrace this new normal, Talent Corporation Malaysia (TalentCorp) has announced that companies currently implementing FWA policies may be eligible for an income tax deduction on their flexible working policies for employees.

The FWA tax deduction covers expenses related to:

  • Consulting fees
  • Capacity development cost
  • Software cost
  • Software subscription

Claims are for expenses incurred during the period July 1, 2020 to December 31, 2022. Eligible businesses can claim this tax deduction twice, up to a maximum amount of RM500,000 for each year, up to three years. consecutive evaluations from the date of implementation approval obtained from TalentCorp.

Of note, TalentCorp is the only agency mandated by the Malaysian Ministry of Finance and the Inland Revenue Board to facilitate the deduction of FWA Income Tax and the upcoming FWA Development Grant. Thomas Matthewadded the TalentCorp group chief executive, the agency is “committed to advocating for the wider adoption of FWA in Malaysia”.

Announced on June 5, 2020 as one of the measures taken to help Malaysia’s economic recovery and propel local businesses under the National Economic Recovery Plan, this deduction aims to:

  • encourage companies to implement and maintain FWA in their organizations
  • help companies manage the cost of implementing these devices.

Set to open for applications in the near future, the next FWA Development Grant will be available to companies that have not yet implemented FWA and are struggling to do so due to financial constraints. The grant will cover the implementation of FWA, FWA workshops for HR and a grant for a daycare centre.

Read on to find out:

  • The types of flexible working arrangements covered by the income tax deduction scheme
  • Documentation Checklist to Prepare for a Smoother FWA Tax Deduction Application Process

Applicable flexible working arrangements covered by the tax deduction scheme

For clarity, FWA refers to working arrangements that provide greater flexibility in the following areas:

  • work place
  • the planning of hours worked, and
  • the number of hours worked.

These include the following provisions:

Compressed work
The week
Work fewer days than a standard work week, but longer hours on some days.
Choice of the day off by the employee Employees can schedule their work schedule and days off with the approval of their immediate supervisors.
Flexible hours Employees can choose and adjust their daily working hours as long as they fulfill the required working hours in the week.
job sharing Part-time work where two or more employees share responsibility and pay for a full-time position.
Leave work early Early departure from work is an arrangement that allows employees to leave earlier than the usual end time on designated working days by not changing the weekly contractual hours.
Changed role A personalized arrangement in which an employee’s role is redesigned, allowing them to work on different responsibilities for a period of time before returning to their primary role.
Phased retirement Phased retirement is a flexible arrangement in which employees approaching retirement have the option of gradually moving from full-time hours and workloads to more flexible hours and/or reduced workloads.
Reduced / Part-time Work arrangements that allow employees to work less than normal full-time hours, typically involving shorter workdays, fewer workdays, weekend work, or a combination of any of the options.
Seasonal work Recruit full-time or part-time employees during seasonal/peak periods or for specific projects to cover the additional workload.
Change of team Flexibility for shift workers to swap shifts with each other
Staggered hours Employees can adjust their work start and end times, as long as they work the standard eight hours and are present during the defined fixed hours (for example, from 10:00 a.m. to 4:00 p.m.).
Work at home Besides the office, employees can also work from home.

Checklist of necessary documents

For organizations interested in applying, TalentCorp has provided a checklist of necessary requirements to help companies better prepare for a smoother FWA tax deduction application process.

  1. The eligibility criteria for the FWA tax deduction are met.
  2. All sections of the application form have been completed.
  3. The mandatory documents are attached to the application file:
    • * A certified copy of the last memorandum and articles of association; if
      in force
    • * A certified copy of the company’s latest certificate of incorporation (Form 9); if
      in force
    • *A certified copy of the document indicating the last paid-up capital (form 24); if
      in force
    • * A certified copy of the last notice of registered office (Form 44); if applicable
    • *A certified copy of the latest contact details of the directors, managers and secretaries
      (Form 49); if applicable
    • * A certified copy of the company’s latest super form; if applicable
    • *Declaration form (signed by competent authorities)
    • Latest company profile search result by Companies Commission of Malaysia
    • Invoices or proof of payment
    • Detailed breakdown of costs incurred

  4. Supporting documents for each deductible item are attached

*Applicants are reminded that all certified documents must be certified by the Commissioner for Oaths or the Corporate Secretary.

Failure to comply with the above may result in the rejection of the application.

Potongan Cukai Pendapatan tersedia untuk syarikat yang melaksanakan Pengaturan Kerja Fleksibel

*This is Bahasa Melayu’s press release, as provided by TalentCorp.

Mana-mana syarikat yang melaksanakan dasar Pelaksanaan Pengaturan Kerja Fleksibel (FWA) walaupun negara memasuki fasa endemik pada 1 Mei depan, layak mendapat Potongan Cukai Pendapatan Pengaturan Kerja Fleksibel.

Ia merupakan satu inisiatif kerajaan untuk menyokong majikan yang layak, yang melaksanakan atau meningkatkan FWA untuk syarikat mereka.

Picture / 123RF

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