Tax Deduction for Employers With Flexible Work Arrangement

As the country has moved to its endemic phase, more companies are adopting flexible work arrangement (FWA) policies that enable employees to alter their work arrangements to suit their needs.

To help with embracing this new normal, Talent Corporation Malaysia (TalentCorp) has announced that organisations currently implementing FWA policies are eligible for an income tax deduction on their FWA policies for employees.

 

Which companies are eligible for the tax deduction?

Eligible companies must meet the following criteria:

1. Incorporated under the Companies Act 2016 [Act 777]

2. Limited liability partnership registered under the Limited Liability Partnerships Act 2012 [Act 743]; or

3. (iii) Partnership registered under the Partnership Act 1961 [Act 135]

If the company has received any grant, loan, or assistance from the federal or state government, it will not be able to claim this income tax deduction. 

A holding company and its subsidiaries can claim the tax deduction, provided that every company incurred charges on FWA Implementation subject to the allowable deductions.

 

What is the Income Tax Deduction available for companies that implement FWA?

Eligible companies may claim the tax deduction twice, up to a maximum amount of RM500,000 each year, for up to three consecutive years of assessment beginning from the date of implementation approval received from TalentCorp.

According to the guidelines, the FWA Tax Deduction covers expenses related to:

1. Consultation fee

2. Cost of capacity development

3. Cost of software

4. Software subscription

TalentCorp is the only agency mandated by the Ministry of Finance and Inland Revenue Board to facilitate the FWA Income Tax Deduction. 

Applications are for expenses incurred within the period of 1 July 2020 to 31 December 2022.

 

What type of work arrangements are considered FWA?

Work arrangements are considered flexible if they provide greater flexibility in the following areas:

1. The workplace,

2. The scheduling of hours worked, and

3. The number of hours worked.

 

Generally, the types of FWA include:

1. Compressed Work Week,

2. Employee’s Choice of Day Off,

3. Flexi Hours,

4. Job Sharing,

5. Leaving Early from Work,

6. Modified Role,

7. Phased Retirement,

8. Reduced / Part-Time,

9. Seasonal Work,

10. Shift Swapping,

11. Staggered Hours, and

12. Work-From-Home.

Please refer to the Income Tax Deduction Cost of Implementation of FWA Guidelines or visit flexworklife.my for more information.

 

Necessary documents for application

If you are interested to apply, TalentCorp has uploaded a checklist of the requirements to help organisations prepare for a smoother application process. Do ensure the items on the checklist below are fulfilled:

1. Eligibility criteria for FWA Tax Deduction are met.

2. All sections in the Application Form have been completed.

3. Compulsory documents are attached with the Application Form:

   • *A certified copy of the latest Memorandum and Articles of Associations; if
     applicable

   • *A certified copy of the latest certificate of Incorporate of the company (Form 9); if
     applicable

   • *A certified copy of the document showing the latest paid-up capital (Form 24); if
     applicable

   • *A certified copy of the latest Notice of Registered Office (Form 44); if applicable

   • *A certified copy of the latest particulars of Directors, Managers and Secretaries
     (Form 49); if applicable

   • * A certified copy of the latest company super form; if applicable

   • *Declaration form (signed by the appropriate authorities)

   • Latest company profile search result by the Companies Commission of Malaysia
     (SSM)

   • Invoices or proof of payment

   • A detailed breakdown of costs incurred

Note: *All certified documents must be certified by the Commissioner of Oath or Company Secretary

Failure to comply with the above may result in the application being rejected.

 

How to apply for the FWA Income Tax Deduction

1. Refer to the Guidelines and FAQs for the eligibility criteria.

2. Fill in the Application Form and the Declaration Form. You can download the forms here.

3. Send the application, including the supporting documents and signed declaration form through email to flexworklife@talentcorp.com.my.

4. If your application is successful, you will obtain the Surat Pengesahan Pengaturan Kerja Fleksibel, for your e-filling with Lembaga Hasil Dalam Negeri Malaysia (LHDNM).

 

If you want to read more about the FAQs of FWA Income Tax Deductions, please click here.