Latest Update on the IRB's FAQ on Tax Matters during the MCO Period (Deductions for Contributions Made Associated with COVID-19)

To Our Valued Clients

For your update, the Inland Revenue Board ["IRB"] has on 21st April 2020, updated the Frequently Asked Questions ["FAQ"] on Tax Matters During the Movement Control Order Period (18th March 2020 to 28th April 2020) to include clarifications on the claim for tax deduction in respect of contributions made by taxpayers associated with COVID-19. Similar clarifications can also be found in the Special Guidelines on Application for Income Tax Deduction for Community / Charity Projects to Curb the COVID-19 Pandemic issued by the Ministry of Finance ["MoF"].

Some of the pertinent points provided in the FAQ/Guidelines are as summarised below:-

A. Contribution to Community / Charity Projects to Curb the COVID-19
1. Contributions made by taxpayers (companies or others i.e. individual, partnership, trust body and co-operative society) to any hospitals (public/private), Government Departments/Agencies or any registered non-Government Agencies (non-profit and non-political motives) for the purposes of curbing the COVID-19 pandemic (including contribution to Covid-19 Fund managed by the Ministry of Health ["MoH"]) would qualify for tax deduction against business income under Section 34(6)(h) of the Income Tax Act 1967 ["ITA 1967"].
2. The types of contribution that qualify are as listed below:-
 
a. Cash;
b. Equipment such as ventilator, bed for patients, air-conditioner;
c. Disposables such as mask, hand sanitiser, glove, test kit and Personal Protection Equipment ["PPE"];
d. Services such as costs of disinfection and sanitisation of roads, buildings, markets, places of worship, etc., preparation of mobile toilets, delivery of supplies; or
e. Financing cost for provision of permanent / temporary infrastructures such as camps/marquee tents to house additional beds.
3. Donors must obtain an acknowledgment of receipt of contribution with the recipient's official stamp in the format as shown in Appendix I of the Guidelines. An application with the said acknowledgment shall be submitted to the MoF for approval.
4. Claim for tax deduction in respect of the contribution as approved by the MoF shall be made in the tax return form for the relevant year of assessment.
5. Taxpayers are required to maintain the following supporting documents in the event of a tax audit:-
 
a. Original letter of approval from MoF; and
b. Original acknowledgment of receipt of donation or verification letter of service value / project cost value from the recipient.
  Additional documents to be kept for contribution in cash are as listed below:-
 
a. Government Official Receipt (Kew.38);
b. Money transfer slip via ATM;
c. Cheque deposit machine slip;
d. Deposit slip via bank counter;
e. Online payment slip;
f. Transfer slip via Interbank Giro (IBG Transfer);
g. Receipt of Real Time Electronic Transfer of Funds and Securities (RENTAS) System; or
h. Telegraphic transfer receipt with advice of credit.
6. Where a deduction has been made under Section 34(6)(h) of the ITA 1967, no further deduction of the same amount is allowed under Section 44(6) of the ITA 1967.
7. The Guidelines is effective for contributions made commencing from February 2020 until such time the Government declares that the COVID-19 pandemic has ended. Claim for tax deduction can be made commencing from the year of assessment ["YA"] 2020.
B. Cash Donation to the Government, State Government, Local Authorities or Approved Organisation, Institution or Fund
1. Cash donations made by taxpayers (companies or others) to the COVID-19 Fund managed by the National Disaster Management Agency, Prime Minister's Department or any organisation, institution or fund approved under Section 44(6) of the ITA 1967 would qualify for tax deduction.
2. The claim for deduction in respect of donations made to approved organisation, institution or fund is restricted to 10% of Aggregate Income. The said restriction does not apply to donations made to the COVID-19 Fund managed by the National Disaster Management Agency, Prime Minister's Department.
3. The following supporting documents are required for the claim of tax deduction in the event of a tax audit:-
 
a. Donation to the COVID-19 Fund managed by the National Disaster Management Agency, Prime Minister's Department
 
• The same documents for contribution in cash mentioned in A5 above
b. Donation to approved organisation, institution or fund
 
• Official receipt issued by the approved organisation, institution or fund
4. Employers may collect donations from employees and donate on behalf of the employees to the relevant agencies. In which case, tax deduction shall be claimed by the respective employees. For this purpose, the following information is required:-
 
a. Proof of payment;
b. Amount of payment;
c. Company / employer registration number;
d. Company / employer income tax number;
e. Name of employee;
f. Employee's identification number;
g. Employee's income tax number;
h. IRB branch which handles the employee's income tax file; and
i. Amount of contribution made by the employee.
5. The above applies to donations made commencing from February 2020 until such time the Government declares that the COVID-19 pandemic has ended. The claim for tax deduction can be made from YA 2020 onwards.
C. Contribution to Projects of National Interest
1. Contributions in cash / in-kind made by taxpayers (companies or others) to projects of national interest approved by the MoF would qualify for tax deduction under Section 44(11C) of the ITA 1967.
2. The claim for deduction shall not exceed the difference between the amount of 10% of Aggregate Income and the total amount that has been deducted under Sections 44(6), 44(11B) and 44(11D) of the ITA 1967.
D. Donation to Private Medical Treatment (Healthcare Facility)
1. Cash donations made or medical equipment donated by taxpayers (individuals only) to any healthcare facility approved by the MoH would qualify for tax deduction under Section 44(10) of the ITA 1967 (restricted to RM20,000).
2. Examples of medical equipment for this purpose are as listed below:-
 
a. Manual wheelchairs or electric wheelchairs;
b. Hospital beds;
c. Walkers, crutches, canes (or any similar type of mobility assistive equipment);
d. Traction equipment;
e. Pressure mattresses;
f. Insulin pumps;
g. Breast pumps;
h. Nebulizers;
i. Patient Lifts;
j. Bili lights and blankets;
k. Kidney machines;
l. Stationary or portable oxygen tanks; and
m. Oxygen Concentrators Ventilators.
  Medical equipment does not include medical consumables such as PPE, face masks and hand sanitisers.
3. The cost/value of the medical equipment donated shall be as certified by the MoH.

For further information, kindly refer to the following:-

i. FAQ on Tax Matters During the MCO Period (18th March 2020 to 28th April 2020) - Updated on 21st April 2020; and
ii. Special Guidelines on Application for Income Tax Deduction for Community / Charity Projects to Curb The COVID-19 Pandemic.

Please do not hesitate to contact us if you need any clarification on the foregoing.

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