A set of rules gazetted on 11 August 2026 allows employers to claim a tax deduction for giving employees additional paid leave to care for a young child, a sick family member, or a disabled family member. The rules apply retrospectively, with effect from year of assessment 2025 to year of assessment 2027.

Under the rules, a qualifying employer can deduct an amount equal to fifty percent of the remuneration paid to an employee during this additional paid leave. This deduction is on top of the normal deduction already allowed under section 33 of the Income Tax Act 1967. The leave must cover care for a child under two years old, an immediate family member who is sick, or an immediate family member who is disabled.

The deduction period cannot exceed twelve consecutive months in a year of assessment. The employee must be employed on a full-time basis. Care of a sick family member must be certified by a medical practitioner registered with the Malaysian Medical Council. Care of a disabled family member must be certified by the Department of Social Welfare.

Compliance with these conditions is verified by Talent Corporation Malaysia Berhad, from 1 January 2025 to 31 December 2027.

A qualifying employer does not include a company controlled by the employee, a sole proprietorship, or certain relatives of the employee.

Immediate family member is defined broadly to include a spouse, parents including parents-in-law and adoptive or step-parents, children including stepchildren and adopted children, siblings, and grandparents.

If you wish to focus on running and growing your business, our CFO advisory team can take care of your accounting, payroll, tax planning, e-stamping, corporate secretarial and compliance matters for you. Feel free to WhatsApp us at 010-246 2151.