In Malaysia, many businesses observe the Hungry Ghost Festival with prayer ceremonies. The cultural value is clear, but how do these expenses stand under tax law?

Deductible (Section 33, ITA 1967):

1. Staff refreshments such as food and drinks during prayer sessions. These are part of staff welfare and supported by Public Ruling No. 5/2019 (Perquisites from Employment)
2. Basic staff welfare costs like simple venue setup or small offerings that contribute to employee harmony.

Not Deductible (Section 39, ITA 1967):

1. Ceremonial items like incense papers and papercraft offerings, as these are cultural rather than business-related.
2. Excessive spending even refreshments may be disallowed if deemed extravagant.

The Inland Revenue Board (IRB) also refers to Public Ruling No. 4/2015 (Entertainment Expenses), which allows reasonable food and drinks for employees at work events.

Key takeaway:
Keep your claims reasonable, document everything clearly, and separate staff welfare costs from cultural items. This helps avoid unnecessary tax issues while still respecting tradition.

Read the full content in our blog
https://lnkd.in/df-wc8j5