Special Tax Deduction for Renovation and Refurbishment Expenses in Malaysia (Updated 2025)
Businesses in Malaysia can continue to enjoy a special tax deduction of up to RM300,000 for the cost of renovating or refurbishing their business premises. This incentive was first introduced under the Income Tax (Costs of Renovation and Refurbishment of Business Premise) Rules 2020 [P.U. (A) 381/2020], gazetted on 15 December 2020, and has since been extended under subsequent Budgets.
As of Budget 2025, the incentive has been extended until 31 December 2027, giving businesses more time to upgrade their premises while enjoying tax relief.
Key Highlights of the Incentive
- Effective from: Year of Assessment (YA) 2020
- Valid until: 31 December 2027
- Maximum claimable deduction: RM300,000
- Requirement: Renovation or refurbishment costs must be certified by an external auditor
- Applicable to: All businesses operating in Malaysia
This initiative aims to support businesses in enhancing their operations, improving workplace environments, and ensuring safer, more welcoming premises for employees and customers.
What Costs Qualify for Deduction?
According to the Rules, “costs of renovation and refurbishment” include expenses incurred for purposes such as:
- General electrical installation
- Lighting
- Gas system
- Water system
- Kitchen fittings
- Sanitary fittings
- Door, gate, window, grill, and roller shutter
- Fixed partitions
- Flooring (including carpets)
- Wall covering (including paintwork)
- False ceiling and cornices
- Ornamental features or decorations (excluding fine art)
- Canopy or awning
- Fitting room or changing room
- Recreational room for employees
- Air-conditioning system
- Children’s play area
- Reception area
- Surau
Costs That Do Not Qualify
The deduction does not cover:
Designer fees
Professional fees
Purchase of antiques, fine art, or collectibles
Any expenses already claimed under:
Subsection 33(1) of the Income Tax Act 1967 (general deductions)
Schedule 2 or Schedule 3 (capital allowances)
Practical Examples
A restaurant spending RM200,000 to upgrade its kitchen fittings, flooring, and lighting may fully claim these expenses as a tax deduction.
A retail store installing new partitions, wall coverings, and reception area furniture can also qualify, up to the RM300,000 cap.
However, hiring an interior designer or purchasing antique furniture for decoration would not qualify.
Why This Matters for Businesses
This special deduction helps businesses:
Reduce taxable income while upgrading facilities.
Improve customer experience through modernised premises.
Enhance employee comfort (e.g., recreational rooms, surau, better lighting).
Spread out renovation costs with meaningful tax savings.
Frequently Asked Questions (FAQ)
Any business operating in Malaysia that incurs eligible renovation or refurbishment expenses, certified by an auditor.
No, the incentive is intended for business premises used for operations, not investment properties.
Yes, but the total deduction cap remains RM300,000 across all claims.
You must retain invoices, receipts, and external auditor certification for LHDN review.
Only RM300,000 is deductible. Additional costs may be capitalised or claimed under other provisions if eligible.
ShineWing TY TEOH’s Comment
This incentive presents an excellent opportunity for businesses to invest in workplace improvements while lowering their tax liabilities. If your business has already carried out renovations, it’s important to review your tax position for YA 2024 and YA 2025 to ensure you maximise your deductions.
Key Takeaway
- Claim up to RM300,000 in renovation and refurbishment costs as a special tax deduction.
- Valid until 31 December 2027.
- Covers a wide range of expenses but excludes designer fees, professional fees, and antiques.
Need Guidance?
Navigating tax incentives can be complex, and mistakes could cost your business valuable deductions. Our tax experts at ShineWing TY TEOH can help you:
Assess your eligibility
Review documentation for compliance
Maximise your claims efficiently
📩 Contact us today to ensure you don’t miss out on this valuable tax incentive.
