Business Deduction (Entertainment [Section 39(1)(l)] (Eight exception…
Entertainment [Section 39(1)(l)]
Entertainment is defined under sec 18 as including:
a) The provision of food, drink, recreation or hospitality of any kind
b) The provision of accommodation or travel in connection with or for the purpose of faciliating entertainment of the kind mentioned above.
Eight exception where entertainment are
under the act;
i. Entertainment provided to employees
unless the entertainment is incidental to the provision of entertainment to others.
e.g: expenses for employees that can be deductible are free meals
ii. Taxpayer in the business of entertainment
the cost of entertainment will be
e.g: restaurant hotel karaoke business
iii. Promotional gifts at foreign trade fairs
-outside Malaysia will be
, gifts should not be an item produced by taxpayer.
iv. Promotional samples
-sample cost of product by taxpayer business is
e.g: free sample provided to launch a new product
v. Cultural and sporting events
-the event which are open to general public to promote taxpayer business are
-this exception will lost if entertainment is provided to special class of people only such as client
vi. Promotional gifts in Malaysia
-referred to product which are manufactured by taxpayers business only
vii. Entertainment wholly related to sales
-it is wholly related to sales arising from the business of the person
viii. Leave passage to faciliate a yearly event within Malaysia
-involve the employer, employee and the immediate family members of that employee
allowed if expenditure not fall in definition of entertainment.
allowed if the expense is not wholly and exclusively incurred in the production of gross income.
10.5.13 Leave Passage Cost (Section 39(1)(m)
• A leave passage within or outside Malaysia is
as a deduction
• In Addendum to Public Ruling no. 1/2003, there are exceptions provided:
• The cost of food and accommodation is
as entertainment expenses.
• The amount
is restricted to the amount spent on his employees only.
• The leave passage give benefit to an employee to facilitate a yearly event within Malaysia which involves the employer, the employee and the immediate family members.
Goods and Services Tax [Section 39(1)(o) and (p)]
• Any amount paid or to be paid as input tax in respect of GST by a person –
not allowed as deduction
• Any amount paid or to be paid as output tax in respect of GST by a person if he registered or liable to be registered under the GSTA –
not allowed as a deduction
Remuneration to Partner of Limited Liability Partnership [Section 39 (1)n]
• Any remuneration or any similar payment paid to a partner of a limited liability partnership (LLP) where such remuneration or payment is not specified in the LLP agreement made in accordance with sec 9,LLP Act 2012 –
Failure to Furnish Information as Required by the DGIR [Section 39 (1A)]
• Where a person fails to furnish any information as requested by the DGIR in accordance with sec 81 ITA to justify the person’s claim for deduction within the time specified in the notice –
Payments to Public Entertainers (section 39 (1)(q)
• When a person fails to remit the withholding tax under sec 109A and penalty in respect of payment made to public entertainer for services performed or rendered in Malaysia –
to claim for tax deduction in respect of the payment