The Income Tax (Cost of Renovation and Refurbishment of Business Premise) Rules 2020 (“the Rules”) were gazetted on 28 December 2020. The Rules have effect from the year of assessment 2020.
The Rules allow the “costs of renovation and refurbishment of business premise” incurred by a person from 1 March 2020 until December 2021 and used for the purpose of his business, to be deducted for the purposes of ascertaining that person's adjusted income for the basis period for a year of assessment, subject to a maximum deductible amount of RM300,000/-.
The items for which tax deductions are allowed are set out in
the First Schedule of the Rules and are as follows:
- General electrical installation
- Gas system
- Water system
- Kitchen fittings
- Sanitary fittings
- Door, gate, window, grille and roller shutter
- Fixed partition
- Flooring (including carpets)
- Wall covering (including paint work)
- False ceiling and cornices
- Ornamental features or decoration (excluding fine art)
- Canopy or awning
- Fitting room or changing room
- Recreational room for employees
- Air-conditioning system
- Children play area
- Reception area
To qualify for tax deduction, the expenses are required to be certified by an external auditor.
The expenses incurred in respect of the items specified in the Second Schedule of the Rules are not tax deductible, namely:
- Designer fee
- Professional fee
- Purchase of antique (purchase of an object or work of art which, represents a previous era in human society, is a collectible item due to its age, rarity, craftsmanship or other unique features and appreciates in value over time)
To avoid double deduction, the Rules do not apply to a person who has made a claim in relation to the costs of renovation and refurbishment of business premise for allowable expenses under section 33(1) or capital allowance under Schedule 2 or Schedule 3 of the Income Tax Act 1967.
The Rules have effectively ended the controversial issue as to the tax deductibility of designer and professional fees in relation to renovation or refurbishment. If a person seeks to maximise the tax deduction for expenses incurred in renovating or refurbishing his business premises, he will have to ditch his interior designer and forego the Ming vase that would have taken the pride of place in his office reception.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.