Malaysia has gazetted rules which introduces additional employer deduction equal to 50% of remuneration paid to approved women returning to work for up to 12 months, effective for the years of assessment 2025 through 2027, complementing an existing income tax exemption for eligible returning women workers.
Malaysia has gazetted the Income Tax (Deduction for Employment of Approved Individual) Rules 2026 on 23 June 2026, providing qualifying employers with an additional deduction equal to 50% of remuneration paid to approved individuals for a period not exceeding 12 months.
As previously reported, the Rules define “approved individual” by reference to the Income Tax (Income of Approved Individual) (Women Returning to Work After Ceasing from Employment Temporarily) (Exemption) Order 2026, which grants eligible women returning to work after temporary employment cessation an income tax exemption on gross employment income for up to 12 months.
The combined effect provides tax relief to both employers and returning women workers for the same 12-month period.
The Income Tax (Deduction for Employment of Approved Individual) Rules 2026 include the following details:
Tax deduction benefit
Qualifying employers are granted an additional deduction equal to 50% of remuneration paid to approved individuals, available in addition to the standard deduction for remuneration permitted under section 33 of the Income Tax Act 1967. The deduction applies for a period not exceeding twelve consecutive months and is effective for the years of assessment 2025 through 2027.
Definition of a qualifying employer
While a “qualifying employer” generally includes any person who employs an approved individual, the Rules specifically exclude the following from eligibility:
- Any company controlled either directly or indirectly by the approved individual.
- All sole proprietorships are excluded.
- Any employer who is a relative of the approved individual. “Relative” is broadly defined to include parents (and parents-in-law), children (including stepchildren and legally adopted children), siblings, grandparents, grandchildren, and spouses.
Approved individuals and verification
An “approved individual” is defined according to the Income Tax (Income of Approved Individual) (Women Returning to Work After Ceasing from Employment Temporarily) (Exemption) Order 2026 [P.U. (A) 215/2026]. To claim the deduction, a qualifying employer shall comply with the conditions imposed by the Minister, and the compliance of the conditions shall be verified by Talent Corporation Malaysia Berhad.
