Last week a client called me.
“Mr Koh, I just finished renovating my office. RM200,000 spent.
Can I claim tax deduction or not?”
New partitions, new flooring, pantry, meeting room.

I told him: “Can. But must do it correctly. Otherwise no tax deduction.”

He went quiet for a moment.
“Why so UNFAIR one?”

This is exactly the problem.
A lot of SME owners do the same thing.
Renovation done, invoice received, and expect: “This one put into P&L la. All claim tax deduction.”

Renovation costs, under Malaysian tax law, are NOT automatically tax deductible.

A lot of SME owners don’t know this.
You feel like you spent money on your business, of course can claim.
Logical right?

But LHDN doesn’t see it that way.
They classify renovation as CAPITAL expenditure.
Meaning you are improving an asset.
Not spending money to earn income.

Two very different things under the tax rules.

“Eh but last time I heard can claim up to RM300,000 one?”
Yes, that was a special measure during COVID.
From March 2020 to December 2022, government opened a window.
Qualifying renovation costs up to RM300,000 can be claimed.
That window closed end of 2022.

Your renovation in 2023, 2024, 2025?
Generally that special deduction no longer applies.

But doesn’t mean your money gone for nothing.
Still got options.
Just must do it correctly.

Option 1: Things like aircon units, signboards, office furniture. These can potentially be classified as plant and machinery. Claim capital allowance, recover the cost over a few years.

Option 2: If your works are repairs, not improvements from fix leaking roof, repaint walls, replace broken tiles. This type may qualify as revenue expenditure. Fully deductible in the same year.

Option 3: If you are a MOTAC-registered tourism operator, Budget 2026 has a new special deduction for you. Up to RM500,000, covering renovation costs until end of 2027.

Back to my client on the phone.
I told him: “First thing first. Go get the itemised breakdown from your contractor.”
He said: “The invoice just say Renovation Works RM200,000.”
I said: “That one not enough. LHDN sure question one.”

If the invoice had proper itemised breakdown.
If the items were classified correctly from day one.

The outcome would be very different.
Don’t wait until LHDN write letter only start to panic.

So if you just renovate, or planning to renovate soon:
Before you pay, ask your contractor for an itemised invoice.
Don’t accept one single line “Renovation works RM200,000.”

Which items are equipment,
Which are building fixtures,
Which are repairs … must separate clearly.
Do it right.