A new gazette published on 16 June 2026 gives employers a tax incentive for putting flexible work arrangements in place. Under the Income Tax (Deduction for the Costs of Implementation of Flexible Work Arrangements) Rules 2026, employers can claim a 50% additional tax deduction on qualifying expenditure related to flexible work implementation, and this applies from the year of assessment 2025.

The deduction covers two categories of spending: capacity development costs and software acquisition costs. Capacity development includes training course fees, internal trainer fees, training materials, rental of training space, examination fees, and travel costs for employees and trainers attending the training. Accommodation is capped at RM300 per day, and meal expenses at RM150 per day.

The total expenditure eligible for this deduction is capped at RM500,000, and the deduction can only be claimed once. This deduction is on top of any deduction already allowed under Section 33 of the Income Tax Act 1967, meaning it does not replace your existing expense deductions.

For flexible work, the gazette defines this as arrangements relating to place of work, scheduling of working hours, or the number of hours worked. To qualify, the implementation must be verified by Talent Corporation Malaysia Berhad, and the employer's application must have been received by TalentCorp on or after 1 January 2025 but no later than 31 December 2027.

Employers who have already claimed under earlier rules, specifically P.U. (A) 134/2015 or P.U. (A) 377/2021, are not eligible under this new gazette.

If your company is moving towards flexible work and you want to make sure the spending is structured correctly to support a tax deduction, feel free to reach out via WhatsApp at 010-246 2151.

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