Crowe Chat Vol.6/2026

Introduction

To encourage the use of low-carbon vehicles, it was proposed in Budget 2023 that companies renting non-commercial electric vehicles be granted a tax deduction on rental expenses of up to RM300,000.

Deduction Rules

To legislate the above proposal, the Income Tax (Deduction for Rental Payments) (Electric Motor Vehicles) Rules 2026 was gazetted on 26 June 2026.

Introduction Details of the Deduction Rules

• The Rules have effect from the year of assessment (YA) 2023 to YA 2027.The qualifying expenditure incurred by the company in relation to the rental of electric motor vehicles includes:
  a) the rental payments for the electric motor vehicles; and 
  b) the insurance payments and processing fees relating to the process of the rental of the electric motor vehicles. 
• The total qualifying expenditure allowed under the Rules is subject to a maximum aggregate sum of RM300,000 in a YA and subsequent YAs.

Introduction

The Income Tax (Deduction for the Sponsorship of Scholarship to Malaysian Student Pursuing Studies at Technical and Vocational Certificate, Diploma, Bachelor’s Degree, Master’s Degree or Doctor of Philosophy Levels) Rules 2022 was gazetted on 7 March 2022. The special deduction under the 2022 Rules covered scholarship agreement with a student on or after 1 January 2022 but not later than 31 December 2025.

In Budget 2026, it was proposed that this deduction be enhanced and extended from YA 2026 until YA 2030

Deduction Rules

To legislate the Budget 2026 proposal, the Income Tax (Deduction for the Sponsorship of Scholarship to Malaysian Student Pursuing Studies at Technical and Vocational Certificate, Diploma, Bachelor’s Degree or Professional Certificate Levels) Rules 2026 was gazetted on 8 July 2026.

Details of the Exemption Order

The salient points are as follows: 

Eligible company

• Company incorporated under the Companies Act 2016 and tax resident in Malaysia.
• Sponsors a scholarship for a student pursuing a full-time course of study in one of the following categories:
  • technical and vocational certificate levels at a recognised institution;
  • diploma or bachelor’s degree levels at a higher educational institution; or
  • professional certificate levels that are certified and approved by a recognised professional body.

Period of the scholarship agreement

• The scholarship agreement must be signed between 1 January 2026 and 31 December 2030.

Details of the Deduction Rules

The salient points are as follows:

Criteria of the student

• The student must be a Malaysian citizen and must also be resident in Malaysia.
• The student must be studying on a full-time basis.
• The student must not have any source of income.
• The total monthly income of the student’s parents or guardian must not be more than RM15,000.

Qualifying expenditure

Companies are entitled to claim double deduction for the scholarship-related expenses such as:

• payment required by the higher education institution that relate directly to the course of study; and
• educational aid and reasonable cost of living expenses throughout the student’s period of study at the higher education institution.

Reporting requirement

The deduction is subject to the condition that the company submits a report to the Ministry of Higher Education in relation to the scholarship agreement which contains the following details:

• student's information;
• sponsored course;
• institution of placement; and
• the amount of sponsorship.

Crowe's Comments

It is noted that the 2026 Rules has now excluded the Master’s Degree and Doctor of Philosophy levels from the categories of courses of study that qualify for scholarship sponsorship.

In substitution, professional certificate levels approved by a professional body has been included within the scope of eligible scholarship sponsorships.

Companies are advised to review their scholarship sponsorship policies to align with these changes.

Introduction

The Income Tax (Exemption) (No. 3) Order 2024 was gazetted on 4 March 2024 to exempt a company, limited liability partnership, trust body and co-operative society resident in Malaysia from the payment of income tax in respect of gains or profits from the disposal of capital assets arising from outside Malaysia which are received in Malaysia from 1 January 2024 until 31 December 2026. 

Amended Exemption Order

The Income Tax (Exemption) (No. 3) Order 2024 (Amendment) Order 2026 was gazetted on 29 July 2026 to extend the exemption period for another four (4) years until 31 December 2030.

The Amendment Order comes into operation on 1 January 2027.

The Royal Malaysian Customs Department (RMCD) has issued Service Tax Policy No. 3/2026, dated 24 June 2026, setting out the Service Tax exemption granted by the Ministry of Finance (MOF). 

• The Service Tax exemption applies with effect from 1 July 2026.
• JMBs/MCs are exempted from charging Service Tax on maintenance charges and sinking fund contributions to property owners for non-residential buildings.
• However, if the JMB/MC acquires taxable services from third-party service providers, any Service Tax charged by the service providers remains payable in accordance with the applicable Service Tax legislation.

Effective from 1 August 2026, certain Harmonized System (HS) codes under Chapters 89.01, 89.05, 89.06, 89.07 and 89.08 have been removed from the Sales Tax (Rate of Sales Tax) Order 2025.

• In addition, certain HS codes under Chapters 89.01, 89.03, 89.04, 89.05, 89.06, 89.07 and 89.08 have been included under the Sales Tax (Goods Exempted From Sales Tax) Order 2025. Therefore, goods falling under the specified HS subheadings are exempted from Sales Tax with effect from 1 August 2026.
• For the specific HS subheadings affected, reference should be made to the amendments to the Sales Tax (Goods Exempted From Sales Tax) (Amendment) Order 2026 and Sales Tax (Rate of Sales Tax) (Amendment) Order 2026.