Talent & Tech Asia Summit 2024
Malaysia companies with flexible work arrangements now eligible for income tax deductions

Malaysia companies with flexible work arrangements now eligible for income tax deductions

The FWA Tax Deduction covers expenses that employers have incurred related to: consultation fee, cost of capacity development, cost of software, and software subscription.

*Scroll below for the press release in Bahasa Melayu.

As Malaysia transitions to its endemic phase, more organisations are adopting flexible work arrangement (FWA) policies that allow employees to vary work arrangements to suit their individual needs. In aid of embracing this new normal, Talent Corporation Malaysia (TalentCorp) has announced that companies currently implementing FWA policies may be eligible for income tax deduction on their flexible work arrangements policies for employees.

The FWA Tax Deduction covers expenses related to:

  • Consultation fee
  • Cost of capacity development
  • Cost of software
  • Software subscription

Applications are for expenses incurred within the period of 1 July 2020 to 31 December 2022. Eligible companies can claim this tax deduction twice, up to a maximum amount of RM500,000 for each year, for up to three consecutive years of assessment starting from the date of implementation approval obtained from TalentCorp.

To note, TalentCorp is the only agency mandated by Malaysia's Ministry of Finance and Inland Revenue Board to facilitate the FWA Income Tax Deduction and the upcoming FWA Development Grant. Thomas Mathew, Group Chief Executive Officer of TalentCorp added, the agency is "committed to advocating for the wider adoption of FWA in Malaysia".

Announced on 5 June 2020 as one of the measures taken to aid Malaysia’s economic recovery and propel local businesses under the National Economic Recovery Plan, this deduction aims to: 

  • encourage companies to implement, and sustain FWA in their organisations
  • help companies manage the cost of implementing such arrangements.

Set to be open for applications in the near future, the upcoming FWA Development Grant will be available for companies that have yet to implement FWA and have trouble doing so due to financial constraints. The grant will cover FWA Implementation, FWA workshops for HR, and a childcare centre grant.

Read on further to find out:

  • The types of flexible working arrangements covered by the income tax deduction scheme
  • Checklist of documentation to prepare for a smoother FWA Tax Deduction application process

Applicable flexible working arrangements covered by the tax deduction scheme

For clarity, FWA refers to work arrangements which provide greater flexibility in the following areas:

  • the workplace
  • the scheduling of hours worked, and
  • the number of hours worked.

These include the following arrangements: 

Compressed Work
Working less days than a standard workweek but longer hours on some days.
Employee’s Choice of Day OffEmployees may plan their work schedule and off days with the approval of their immediate supervisors.
Flexi HoursEmployees are able to choose and adjust their daily working hours as long as they meet the required working hours within a week.
Job SharingPart-time work where two or more employees share the responsibility and compensation of a full-time position.
Leaving Early from WorkLeaving early from work is an arrangement that allows employees to leave earlier than the usual end time on designated business days by not altering weekly contracted hours.
Modified RoleA customised arrangement in which an employee’s role is redesigned, thus enabling them to work on different responsibilities for a period of time before returning back to their primary role.
Phased RetirementPhase retirement is a flexible arrangement in which employees who are approaching retirement have the option of gradually transitioning from full-time schedules and workloads to a more flexible schedule and/or reduced workloads.
Reduced / Part TimeWorking arrangements that allow employees to work less than the standard full-time hours, typically involving shorter work days, fewer work days, weekend work, or a combination of any of the options.
Seasonal WorkRecruiting full-time or part-time employees during seasonal/peak periods or for specific projects to cover the additional workload.
Shift SwappingFlexibility for shift workers to trade shifts with each other
Staggered HoursEmployees are able to adjust their start and end working hours, provided they work the standard eight hours and are present during the defined core hours (e.g. 10am – 4pm).
Work-From-HomeApart from the office, employees are also able to work from home.

Checklist of necessary documentation

For organisations interested in applying, TalentCorp has provided a checklist of the requirements necessary to help companies better prepare for a smoother FWA Tax Deduction application process. 

  1. Eligibility criteria for FWA Tax Deduction is met.
  2. All sections in the Application Form have been completed.
  3. Compulsory documents are attached with Application Form:
    • *A certified copy of latest Memorandum and Articles of Associations; if
    • *A certified copy of latest certificate of Incorporate of company (Form 9); if
    • *A certified copy of the document showing the latest paid up capital (Form 24); if
    • *A certified copy of the latest Notice of Registered Office (Form 44); if applicable
    • *A certified copy of the latest particulars of Directors, Managers and Secretaries
      (Form 49); if applicable
    • * A certified copy of the latest company super form; if applicable
    • *Declaration form (signed by the appropriate authorities)
    • Latest company profile search result by Companies Commission of Malaysia
    • Invoices or proof of payment
    • Detailed breakdown of costs incurred
  4. Supporting documents for each deductible item are attached

*Applicants are reminded that all certified documents must be certified by Commissioner of Oath or Company Secretary. 

Failure to comply to the above may result in the application being rejected.

Potongan Cukai Pendapatan tersedia untuk syarikat yang melaksanakan Pengaturan Kerja Fleksibel

*This is the Bahasa Melayu media release, as provided by TalentCorp.

Mana-mana syarikat yang melaksanakan dasar Pelaksanaan Pengaturan Kerja Fleksibel (FWA) walaupun negara memasuki fasa endemik pada 1 Mei depan, layak mendapat Potongan Cukai Pendapatan Pengaturan Kerja Fleksibel.

Ia merupakan satu inisiatif kerajaan untuk menyokong majikan yang layak, yang melaksanakan atau meningkatkan FWA untuk syarikat mereka.

Image / 123RF

Follow us on Telegram and on Instagram @humanresourcesonline for all the latest HR and manpower news from around the region!

Follow us on Telegram and on Instagram @humanresourcesonline for all the latest HR and manpower news from around the region!

Free newsletter

Get the daily lowdown on Asia's top Human Resources stories.

We break down the big and messy topics of the day so you're updated on the most important developments in Asia's Human Resources development – for free.

subscribe now open in new window