FAQ (English version translated by KTP) on special deduction for the renovation cost Part I

FAQ (English version translated by KTP) on special deduction for the renovation cost Part I

FAQ (English version translated by KTP) on special deduction for the renovation cost Part I

FAQ on special deduction for the renovation cost under P.U. (A) 381/2020 (Updated on 11.03.2021)

Expenses incurred (between 1 March 2020 to 31 December 2020) to renovate/refurbish (R&R) the business premises for business purpose are given tax deduction up to a limit of RM300,000.

1. Who is eligible?

To be eligible to claim for tax deduction, shall be subject to the following conditions:

- Any taxpayer who incurred an expense of R&R on business premises.

- The business premises are used for the purpose of its business.

- Deduction is given on the adjusted income under paragraph 4 (a) of the Act Income Tax 1967

2. What is meant with the premise business for this purpose?

All the business premises are either owned or rented by the taxpayer and the premises are used for the purpose of business is eligible.

Example:

(a) Mr. Vincent is the owner of a homestay in Bagan Lalang. During the Movement Control Order (PKP) 2020, Mr. Vincent has costs incurred of R&R on homestays. Expenses of R&R performed by Mr. Vincent for the period of 1 March until 31 December 2020 is eligible for a deduction under P.U. (A) 381/2020 in determining income adjustment of his homestay business for the year of assessment 2020 is subject to the conditions set.

(b) Mr. Rahim rented a shop house for running a restaurant business. During the period Movement Control Order (PKP), the restaurant business was temporarily closed and Mr. Rahim has costs incurred of R&R. Expenses of R&R done by Mr. Rahim is eligible for deduction in determining the income of its subject business to the conditions prescribed under P.U. (A)381/2020.

(c) Hijras Arkitek Sdn Bhd provides services of architectural consultant and has an office in Petaling Jaya. In March 2021, the office has costs incurred of R&R i.e. installing carpets in his office. Hijras Arkitek Sdn Bhd is eligible deductions in determining the income of his business subject to the conditions set out under P.U. (A) 381/2020.           

3. What are the eligible and not eligible cost of R&R?

Expenses eligible for tax deduction in the First Schedule P.U. (A) 381/2020:

- General electrical installation

- Lighting

- Gas system

- Water system

- Kitchen fittings

- Sanitary fittings

- Door, gate, window, grill and roller shutter

- Fixed partitions

- Flooring (including carpets)

- Wall covering (including paint work)- False ceiling and cornices

- Ornamental features or decorations excluding fine art

- Canopy or awning

- Fitting room or changing room- Recreational room for employee

- Air-conditioning system

- Children play area

- Reception area- Prayer Room

All the cost involved must be certified by external auditors.

Not eligible costs of R&R are in the Second Schedule P.U. (A) 381/2020:

- Designer fee

- Professional fee- Purchase of antique (purchase of an object or work of art which, represents a previous era in human society, is a collectable item due to its age, rarity, craftsmanship or other unique features and appreciates in value over time)

4. What is the external auditors?

External auditor means a qualified auditor who can confirm the cost incurred by the taxpayer on claims for renovation and renewal costs business premises under P.U. (A) 381/2020.   

To be continued…..

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