Are there double or extra tax deductions available to Malaysian SMEs?
A few exist but they are narrow. Budget 2026 adds an extra 50% deduction for certified AI and cybersecurity training for SMEs, and there is a 200% automation capital allowance on up to RM10 million of qualifying spending until YA 2027.
Malaysian tax law gives extra deductions only for specific items, and each has conditions, approvals or an end date. Owners should check eligibility before assuming any expense counts twice.
Examples currently reported:
- AI and cybersecurity training (Budget 2026): SMEs are reported to get an extra 50% deduction on certified training costs. The detailed conditions, such as who certifies the training, were not available in the sources we could open.
- Automation capital allowance: 200% allowance on qualifying automation spending up to RM10 million, for YA 2023 to YA 2027. The company needs at least 36 months of manufacturing or services activity, and the equipment must include IR4.0 features.
- Approved donations: deductible up to 10% of aggregate income, but not a double deduction.
- Approved internship and training schemes: some schemes have been given extra deductions in earlier years; check whether they still apply.
Practical steps:
- Check the budget speech and the LHDN or ministry guidelines for the claim you want.
- Get any required certification or approval before spending.
- Keep the proof with the tax file.
Do not claim an extra deduction without a written ruling or published rule that covers the item.
Legal basis
- Income Tax Act 1967, Schedule 3 (automation allowance)
- Budget 2026 proposals (extra deduction for AI and cybersecurity training)
Sources
Applies to YA 2026 · Last reviewed 29 October 2026
General information for business owners, not legal, tax or professional advice. Rules change, so check the sources or ask a licensed professional before you act.
Related questions
- What is PCB or MTD and what must I deduct from employees' salaries?PCB (also called MTD) is the monthly tax an employer deducts from an employee's pay and pays to LHDN. LHDN requires the amount to come from its MTD schedule or computerised method and to be remitted by the 15th of the following month.
- Which business expenses can a Malaysian company deduct for tax?An expense is deductible if it is incurred in producing business income, and it is revenue rather than capital in nature. Typical examples are salaries, rent, utilities, interest on business loans, and professional fees. Capital items get capital allowances instead.
- Which expenses are not deductible for tax in Malaysia?Private or domestic expenses, capital expenditure, fines and penalties, income taxes, and goodwill are not deductible. Entertainment of customers and unapproved donations are also restricted. Accounting profit must be adjusted by adding these back.
- Are entertainment expenses tax deductible in Malaysia?Only partly. Business entertainment, such as meals with customers or suppliers, is generally 50% deductible, while entertaining potential customers is not deductible. Entertainment provided purely to your own employees is generally deductible in full.
- How do capital allowances work for equipment and vehicles in Malaysia?Because accounting depreciation is not deductible, a company claims capital allowances on qualifying assets: an initial allowance plus annual allowances. General plant and machinery gets 20% initial and 14% annual, and assets under RM2,000 can be written off in full, up to a total of RM20,000.