Malaysia's Ministry of Finance has gazetted P.U. (A) 252/2026, allowing resident companies to claim double tax deductions for expenses incurred when sponsoring eligible Malaysian students at vocational, diploma, degree, and professional certificate levels.
Malaysia’s Ministry of Finance has 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) on 8 July 2026, which establishes a detailed tax incentive framework for corporate educational sponsorships.
These rules allow resident companies to claim a double tax deduction for expenses incurred when providing scholarships to Malaysian students. Eligible funding includes tuition fees, educational aids, and living costs for individuals pursuing vocational, diploma, degree, or professional certifications.
The key features of these rules are:
Eligible companies and supported education levels
To qualify for the deduction, the sponsor must be a company incorporated under the Companies Act 2016 that is resident in Malaysia. The company must be sponsoring a student for a full-time course of study in one of the following categories:
- Technical and vocational certificate levels at a recognised institution.
- Diploma or bachelor’s degree levels at a higher educational institution.
- Professional certificate levels that are certified and approved by a recognised professional body.
Crucial student eligibility criteria
The rules also enforce strict requirements on who qualifies as an eligible “student.” To be eligible for the sponsorship deduction, the student must be a Malaysian citizen and resident in Malaysia who has no independent means of income. Furthermore, the student’s parents or guardians must have a total monthly income that does not exceed MYR 15,000.
Timeline of the scholarship agreement
The tax incentive is time-bound. The company and the student must officially execute the scholarship agreement on or after 1 January 2026, but no later than 31 December 2030.
Double deduction mechanics and qualifying expenditures
Companies are entitled to a deduction equivalent to twice the amount (double deduction) of the allowed expenses that are incurred and paid during the basis period in accordance with the sponsorship agreement. The specific expenses that qualify for this double deduction consist of:
- Mandatory payments required by the educational institution that relate directly to the course of study.
- Educational aid and reasonable cost of living expenses are provided to the student throughout their study period at the institution.
Compliance and reporting requirements
Securing the deduction is conditional upon the company’s compliance with reporting standards. The company must submit a formal report to the Ministry of Higher Education. This report needs to comprehensively detail the student’s information, the specific course being sponsored, the institution of placement, and the total amount of the sponsorship.
Limitations and IRB disallowance
The Director General of Inland Revenue acts as a safeguard against inflated claims. If the claimed expenses exceed an amount that would reasonably be expected to be incurred in the ordinary course of business, the Director General has the authority to disallow the excess amount as a deduction.
Treatment of refunded sponsorships
If, for any reason, a student refunds any portion of the sponsorship amount back to the company, that refunded money must be recognised as gross income for the company. It will be treated as income derived from a business in Malaysia during the basis period in which the refund is received.
