WSP and GKP Applicant must know

eKTP 146

Tax Treatment of Subsidies and Grants Received from Government

During the outbreak of COVID-19, many businesses unable to operate due to MCO. Government has introduced WSP (Wages Subsidy Programme) and GKP (Geran Khas Prihatin) to ease the company’s financial burden.

However, in the view of LHDN, are the subsidies and grants given by the government exempted from income tax?

What is the tax treatment for the expenditure financed by the government grant or subsidy?

To clear your doubt, please watch our video with one click.

Case Study - Chantika Kelang Beras Sdn Bhd V KPHDN (2017)

The taxpayer is a rice miller, received subsidy for rice and paddy seedling.

Taxpayer chooses to claim exemption from declaring as income under the exemption order.

However, LHDN takes the stance that the subsidy scheme is to ensure the price of ST15 rice remains low despite the sharp increase in production cost.

The Special Commissioners of Income Tax (“SCIT”) found that the money received by the taxpayer was not in the nature of a subsidy but compensation to cover the costs for having to sell the paddy seeding and ST15 rice at lower prices than the market rate.

The High court dismissed the appeal.  

The tax exemption could only be given to paddy farmers to purchase good quality of paddy seedlings at ceiling price with the subsidy received. Rice millers are not targeted by the government to be given the subsidy.

Therefore, the taxpayers are encouraged to keep proper documentation and make sure that the purpose of the subsidy and grant is fulfilled accordingly.

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