The Income Tax (Deduction for Rental Payments) (Electric Motor Vehicles) Rules 2026 introduce a special deduction for rental payments incurred by eligible companies on qualifying electric motor vehicles (EVs). The Rules apply retrospectively from YA 2023 to YA 2027, with the deduction capped at RM300,000.

Under the existing section 39(1)(k) of the Income Tax Act 1967, rental expenses for non-commercial motor vehicles are generally restricted to RM50,000 per vehicle, or RM100,000 per vehicle where the prescribed conditions are met. This means that where the rental cost exceeds the applicable limit, the excess is not deductible for tax purposes.

The new EV Rules provide a separate special deduction of up to RM300,000 for qualifying EV rental expenditure. In effect, qualifying EV rental costs are no longer subject to the RM50,000 / RM100,000 restriction under section 39(1)(k), provided the requirements of the new Rules are met.

For example, where a company incurs RM120,000 in rental payments for a qualifying EV, the company may claim a special deduction of RM120,000, subject to the conditions and the RM300,000 limit. Under the existing section 39(1)(k) treatment, the deduction would generally have been restricted to RM50,000 or RM100,000, depending on the circumstances.

The Income Tax (Determination of Chargeable Income of an Individual in Respect of Limited Liability Partnership’s Profit) Rules 2026, [P.U.(A) 278/2026] was gazetted on 31 July 2026 and applies from Year of Assessment (YA) 2026 and subsequent YAs. The Rules provide the method for determining an individual partner’s chargeable income arising from Limited Liability Partnership’s (“LLP”) Profit.

The chargeable income in respect of the profits of an LLP is determined using the following formula:

Effective from 1 January 2026, The Finance Act 2025 has expanded the meaning of “disposal” under section 65C of the Income Tax Act 1967 (“ITA 1967”) for capital gains tax (“CGT”) purposes.

Previously, a “disposal” would generally be understood as a sale or transfer of a capital asset. From 1 January 2026, the definition is broader and can cover situations where a person’s ownership or rights in shares come to an end, even if the shares are not sold.

The amended section 65C specifically includes:

• the extinguishment of rights due to the dissolution or winding up of a company;
• reduction of share capital;
• conversion of shares;
• redemption of shares;
• a company purchasing its own shares; and
• other situations where ownership of the capital asset ends.

Management fees are a common feature of businesses operating within a group structure. Centralised functions such as finance, human resources, information technology, administration and strategic management are often provided by a related company in return for a management fee.

While such arrangements may be commercially reasonable, the tax deductibility of management fees depends on whether the expenditure satisfies the requirements of Section 33(1) of the Income Tax Act 1967. A recent Malaysian tax case involving management fees highlights the importance of having sufficient evidence to support both the nature of the services provided and the commercial purpose of the expenditure.

On Friday, 9th October 2026, YAB Dato’ Seri Anwar Ibrahim, Prime Minister and Minister of Finance, announced Malaysia’s Budget 2027. The Budget introduces proposed tax measures affecting individuals, companies, SMEs and unincorporated business, with implications for personal tax relief, corporate tax rates, tax incentives etc.

This Tax Newsletter highlight the key tax measures announced in Budget 2027 affecting individual taxpayers, companies, sole proprietors and partnerships including changes in personal tax relief and corporate income tax rates.

Under the existing rules, companies generally commence payment of their estimated tax from the second month of the basis period. Following the amendment, instalment payments will commence from the first month of the basis period.

An Investment Holding Company (“IHC”) may provide a practical structure for separating investment assets from a group’s operating businesses. However, the suitability of an IHC should be assessed in the context of the group’s overall commercial objectives, particularly where tax efficiency is a key consideration.

The Inland Revenue Board of Malaysia (“IRBM”) has issued Public Ruling No. 2/2024 – Investment Holding Company, which sets out the relevant tax framework applicable to IHCs under the Income Tax Act 1967.

Malaysia generally operates on a territorial basis of taxation. Under section 3 of the Income Tax Act 1967 (“ITA 1967”), income accruing in or derived from Malaysia, as well as income received in Malaysia from outside Malaysia where applicable, may fall within the Malaysian income tax framework.

With effect from 1 January 2022, foreign-sourced income (“FSI”) received in Malaysia by a Malaysian resident is, in principle, brought within the scope of Malaysian taxation. However, specific exemptions are available for qualifying resident individuals.

For resident individuals, the key exemption is contained in the Income Tax (Exemption) (No. 5) Order 2022 [P.U.(A) 234/2022], as amended. The exemption generally covers foreign income received in Malaysia, other than income from a partnership business in Malaysia, subject to the relevant conditions.

The Income Tax (Deduction for Payment of Additional Paid Leave for the Care of Child or Sick or Disabled Immediate Family Member) Rules 2026 [P.U. (A) 289/2026] were gazetted on 11 August 2026, introducing an additional tax deduction for qualifying employers that provide additional paid leave to employees to care for:

• a child; or
• a sick or disabled immediate family member.

The Royal Malaysian Customs Department has issued Service Tax Policy No. 5/2026, introducing a service tax exemption for certain construction services provided to customers outside Malaysia.

The exemption covers:

• Construction of offshore facilities
• Construction of onshore facilities
• Conversion of ships into floating structures

The exemption applies where the customer is not established in Malaysia.