Deduction For The Sponsorship Of Scholarship To Malaysian Students Pursuing Studies In The Field Of Engineering And Technology At The Technical And Vocational Certificate, Diploma Or Bachelor’s Degree Levels Rules 2021 (“The Rules”).

The Rules allow a company incorporated under the Companies Act 2016 (Act 777) and resident in Malaysia which sponsors scholarships to Malaysian students pursuing full-time courses of study in the field of engineering and technology:

• at technical and vocational certificate levels in an institution; or
• at diploma or bachelor’s degree level in a higher educational institution,

to claim a double tax deduction on the expenditure incurred. It is to be noted that the scholarship agreement must be executed with a student on or after 1 January 2019 but not later than 31 December 2021 for a company to eligible for the incentive.

For the purpose of ascertaining the adjusted income of a company from its business in a basis period for a year of assessment, a deduction shall be allowed for an amount of expenses incurred and paid by that company in that basis period for sponsoring scholarship to a student in accordance with the period of the relevant sponsorship agreement. The total amount of deduction allowed shall be equivalent to twice the amount of expenses allowed.

The Rules allow the company to claim double tax deduction on the expenses incurred in respect of sponsorship of scholarship which consist of the following expenses:

• payment required by the relevant institution or higher educational institution relating to the course of study; and
• educational aid and reasonable cost of living expenses throughout the student’s period of study at the relevant institution or higher educational institution.

Any amount refunded by the student and when it is received by the company shall be treated as gross income of that company from the business derived from Malaysia in the basis period for that year of assessment. Click here for the references.

" In In our point of view, The Rules enable companies to reduce tax burden through the double tax deduction. On top of that, it also encourages companies to participate in supporting more Malaysian students to pursue their studies in the field of engineering and technology."

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