Malaysian SMEs are entitled to a variety of tax deductions that can help ease their financial burden and improve overall tax efficiency.
1. Staff Salaries
Staff salaries are one of the most common tax deductions for Malaysian SMEs. This includes wages, bonuses, commissions, and allowances paid to employees. When calculating your taxable income, you can deduct the full amount of these employment-related costs, as they are considered necessary expenses for running the business. This also extends to salaries of directors if they are actively involved in business operations. Since wages are a regular cost for businesses, it directly impacts the profitability, and thus, reduces the tax burden.
2. EPF, SOCSO & EIS Contributions
The employer’s contributions to the Employees Provident Fund (EPF), Social Security Organization (SOCSO), and Employment Insurance System (EIS) are deductible business expenses. These are statutory contributions that employers are required to pay in addition to employee salaries. These contributions help businesses meet their legal obligations and are deducted from taxable income, reducing the overall tax liability of the company.
3. Office or Shop Rental
If your business leases office space, retail shops, or other facilities for operations, the rent paid is fully deductible as a business expense. Whether you’re renting a small office or a large industrial warehouse, all rental payments for business premises are eligible for tax deduction. The rented space must be wholly used for business purposes; otherwise, you might need to apportion the rental costs if part of the premises is used for personal purposes.
4. Utilities & Internet
Expenses related to utilities such as electricity, water, telephone bills, and internet services are also tax-deductible. These are essential expenses to keep your business running smoothly. The tax deduction applies to utilities used for business purposes only. If a portion of the utility is used for personal reasons, that part cannot be deducted, and the business must apportion the total cost accordingly.
5. Marketing & Advertising
Marketing and advertising expenses are crucial for any business looking to grow and attract customers. Expenses on social media ads, traditional advertising, online campaigns, and any promotional materials can be fully deducted. These expenses help generate business income, which is why the government allows these to be written off as they directly relate to revenue generation.
6. Professional Fees
The fees paid to external professionals such as accountants, auditors, tax consultants, lawyers, and management consultants are also tax-deductible. These services are essential for maintaining compliance with regulatory requirements, managing finances, and ensuring proper legal guidance. These fees are considered necessary for business operations and are deducted from taxable income.
7. Business Travel Expenses
When employees or business owners travel for work-related purposes, the expenses incurred can be deducted. This includes transportation costs, such as airfare, train tickets, taxi fares, or petrol expenses. Accommodation and meals while on business trips are also deductible. Additionally, any tolls, parking fees, and other travel-related expenses that are incurred while conducting business are fully claimable.
8. Office Supplies & Equipment
Expenses for purchasing office supplies such as stationery, printers, computers, and software are deductible. Office equipment like desks, chairs, and even business vehicles used for operations can also be written off. However, for large assets like computers or machinery, the cost may be spread over several years through capital allowances rather than a single deduction. This allows businesses to claim depreciation on assets over time, which reduces taxable income in the long run.
9. Repairs & Maintenance
Costs related to the repair and maintenance of office equipment, machinery, or property used for business are deductible. If an office printer requires servicing, those costs can be deducted. Similarly, if you renovate your office or business premises, the expenses associated with repairs, renovations, or regular maintenance can be deducted as long as they don’t add value to the property beyond its original condition.
10. Training & Courses
Investing in the training and development of employees comes with tax benefits. Training costs, workshops, and courses that help employees develop new skills relevant to their work can be fully deducted. These expenses might include things like professional certifications, business management workshops, or IT training. The courses must be relevant to the current business activities and operations.
Refer here.