Tax Incentive for Employers Who Provide Child Care Centre

01Definition of childcare centre

A centre to take care of:

• At least 4 or more children;

• Aged below 4 years old;

• From more than one household

02Qualifying childcare centre

• Registered with the Department of Social Welfare (DSW);

• Subjected to Child Care Centre Act 1984 (Act 308);

• Governed by the Ministry of Women, Family and Community Development

03Existing Tax Treatment

(i) Provision and maintenance of childcare centre

Expenses incurred for the provision and maintenance of a child care centre are allowed for tax deduction. [Paragraph 34(6)(i) of the ITA 1967]

Examples:

•  Rental

• Salaries

• Food and beverage

• Cleaning fee

04(ii) Child care allowances

05Employer – Provider

• The child care allowance paid to employees who have children is allowable for tax deduction under Section 33(1) of the ITA 1967.

06Employee – Receiver

• Employee has to declare the allowances received as part of gross income, which subjects to tax. [Paragraph 13(1)(a) of the ITA 1967]

• Enjoy tax exemption up to RM2,400.

Additional Tax Incentives

A 100% further deduction will be given in respect of:

• The provision and maintenance of child care centre; and

• Child care allowances paid to employees

07Industrial Building Allowance (IBA)

An employer is entitled to claim a 10% IBA of the capital expenditure of the building, where it is:

• Built or purchased by the employer;

• Served as a child care centre for his employees' children; and

• In operation

08Qualifying Capital Expenditure (QCE)

Only cost attributable to the building is entitled, which include:

• Purchase price

• Legal fee

• Stamp duty

• Other incidental expenditure

09Sources:

Public Ruling No. 5/2016: Tax Incentives For Employers Who Provide Child Care Centres

https://phl.hasil.gov.my/pdf/pdfam/PR_5_2016.pdf

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