“Can I Deduct My Son’s Internship for Tax?” – A Lesson in Common Sense

Last week, a client approached me with an intriguing tax query: “Can I claim a tax deduction if I hire my son as an intern in my company?” This seemingly straightforward question turned into a lively discussion about tax principles and practicality.

To address his query, I asked him a few polite questions:

1. How much do you intend to pay your son compared to your current interns?

If his son’s stipend is significantly higher without justification, it might raise red flags with LHDN. Fair market value applies to all employees, family or not.

2. What does your son study?

The relevance of his field of study to the company’s operations is crucial. An intern’s work should contribute value to the business, not just be a token position.

3. Which department does your son intend to work in?

Assigning roles must align with skills and the company’s genuine needs, avoiding unnecessary or exaggerated expenses.

My client seemed unhappy with my questioning, but I explained that this wasn’t a complex technical issue—it was about common sense. Tax laws, while detailed, often follow a simple principle: does it make sense? If something seems too far-fetched or artificial, it probably won’t hold up under scrutiny.

After a pause, my client asked, “Can I just put my son as an employee instead?”

Knowing his son was still in secondary school, I asked, “How old is your son?” That question alone made him realize the inappropriateness of the idea. The situation reminded me of the so-called “pasar malam schemes”—unsound shortcuts that attempt to evade tax through creative but questionable practices.

Tax planning is not about finding loopholes to exploit; it’s about aligning business operations with legitimate tax provisions. This story highlights why applying common sense is as vital as understanding the law. Hiring a family member isn’t prohibited, but it must meet genuine business needs and follow fair practices.

In the end, my client thanked me for my candid advice, realizing that tax isn’t about creating schemes but ensuring sustainable compliance.