Export Promotion: Double Deduction for Services and Higher Education

The export promotion deduction most finance teams know about applies to companies exporting physical goods or agricultural produce. However, Malaysia also has separate rules providing deductions for businesses promoting the export of services, as well as a specific deduction for the export of higher education.

These sit under their own legislation, including the Income Tax (Deductions for Promotion of Export of Services) Rules and the Income Tax (Deductions for Promotion of Export of Higher Education) Rules, rather than under the goods focused Promotion of Investments Act rules.

The underlying principle is similar: qualifying expenditure incurred primarily and principally to promote exports may qualify for an additional deduction, subject to the specific conditions of the relevant rules. However, the qualifying expenditure and conditions differ between the different regimes, so the relevant rules need to be considered separately.

For finance teams, this becomes particularly relevant when preparing the marketing or business development budget. Where a company has more than one revenue stream, finance should identify which export activity the expenditure relates to and retain supporting documents showing its purpose. An overseas marketing or business development cost should not automatically be treated under the goods export rules. The key question is which specific export promotion rules apply and whether the expenditure satisfies the conditions of that particular regime.

This review is also worth doing before the tax computation is finalised. A company may have qualifying expenditure sitting within its marketing, business development or overseas travel accounts without the tax team immediately identifying it as an export promotion deduction. Reviewing the expenditure by business activity, rather than simply by accounting category, can help ensure that potentially qualifying expenditure is not overlooked.

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.