Deduction on Sponsorship of Scholarship in Malaysia

The Government gazetted the Income Tax (Deduction for the Sponsorship of Scholarship to Malaysian Student Pursuing Studies at Technical and Vocational Certificate, Diploma, Bachelor’s Degree or Professional Certificate Levels) Rules 2026 [P.U.(A) 252/2026] for the purpose of building up a skilled and talented work force for Malaysia. These Rules apply to scholarship agreements executed on or after 1 January 2026 but not later than 31 December 2030.

1. Eligible Entities and Sponsorship Criteria
   
   To qualify for this tax deduction, the claimant must be a company incorporated under the Companies Act 2016 and resident in Malaysia. Furthermore, the company must satisfy the following conditions:
   
   

   (1)	the company sponsors a scholarship to a qualifying student pursuing a full-time course of study; and
   (2)	the scholarship agreement is executed with the student on or after 1 January 2026 but not later than 31 December 2030.

   
   
2. Qualifying Student Criteria
   
   Under these Rules, a qualifying “student” is defined as an individual who satisfies all four of the following conditions:
   
   

   (1)	Malaysian citizen and resident in Malaysia;
   (2)	pursuing full-time course of study;
   (3)	has no financial means on his own; and
   (4)	whose parents or guardians’ total monthly income does not exceed RM15,000.

   
   
3. Approved Course Levels and Recognised Institutions
   
   The sponsorship must be for a full-time course of study falling under the following categories:
   
   

   (1)	technical and vocational certificate levels in an institution recognised by the Malaysian Qualifications Agency or the Skills Development Department;
   (2)	diploma or bachelor’s degree levels in a higher education institution established under the Universities and University Colleges Act 1971, Universiti Teknologi MARA Act 1976 or the Private Higher Educational Institutions Act 1996; and
   (3)	professional certificate level which is certified by a professional body.

   
   
4. Deductible Expenses and Tax Treatment
   
   A double deduction is allowed for the expenses incurred and paid in relation to sponsoring the scholarship to a student in accordance with the period of the relevant sponsorship agreement for that basis period. The qualifying expenses consist of:
   
   

   (1)	payments required by the relevant institutions or higher educational institutions relating directly to the course of study; and
   (2)	educational aid and reasonable cost of living expenses throughout the student’s period of study at the relevant institution.

   
   
5. Compliance and Restrictions
   
   The double tax deduction allowed under these Rules is subject to specific administrative compliance rules and statutory restrictions:
   
   

   (1)	the company is required to submit a report to the Ministry of Higher Education in relation to the scholarship agreement. The report must contain the student’s details, sponsored course, institution of placement and total sponsorship amount.
   (2)	if the total expenses claimed exceed what would reasonably be expected in the ordinary course of business, the Director General of Inland Revenue has the discretion to disallow the excess portion; and
   (3)	any amount subsequently refunded by the student to the company must, when received, be treated as gross business income of the company derived from Malaysia in the basis period for that YA.

For further information, please visit the official website of the Inland Revenue Board of Malaysia at https://www.hasil.gov.my/en

KAIZEN Group, together with its associate firms in Malaysia, can help the clients to perform these compliances formalities so as to maintain the Malaysia company in good standing. Please call and talk to our professional accountants in Kaizen for further clarification.

Disclaimer All information in this article is only for the purpose of information sharing, instead of professional suggestion. Kaizen will not assume any responsibility for loss or damage.

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