The special tax deduction extension for Labuan companies applies from the year of assessment (YA) 2024 to YA 2027, as announced in the 2024 budget.

Malaysia’s Ministry of Finance has extended the special tax deduction for companies or Labuan companies on expenses related to issuing or offering Sustainable and Responsible Investment Sukuk (SRI Sukuk).

This extension, outlined in PU(A)267/2025, which was published in the Official Gazette on 25 August 2025, applies from the year of assessment (YA) 2024 to YA 2027, as announced in the 2024 budget.

The key provisions for tax regulations are as follows:

Deductions

1. For   the   purpose   of   ascertaining   the   adjusted   income   of   a company or Labuan company from its  business  in  the  basis  period  for  a  year  of  assessment, a    deduction    shall    be    allowed    for    the    expenditure    incurred    by    the company or Labuan company on the  issuance or  offering  of  a  Sustainable  and  Responsible Investment Sukuk—

  • approved or authorised by, or lodged with, the Securities Commission under the Capital Markets and Services Act 2007 [Act 671];
  • issued  or offered to an investor in compliance with the  guidelines relating   to   sukuk issued  by the Securities Commission under the Capital Markets and Services Act 2007; and
  • 90% of the proceeds raised from the issuance or offering of the  Sustainable and  Responsible Investment Sukuk are used solely for the purpose of funding the  Sustainable and Responsible Investment Project specified in the guidelines relating to sukuk issued by the Securities Commission under the Capital Markets and Services Act 2007.

2. The total amount of deduction allowed under subrule (1) shall be determined in accordance with the following formula: A –B = C, where,

  • A is the amount of expenditure incurred by the company or Labuan company on the issuance or offering of the Sustainable and Responsible Investment Sukuk;
  • B is the amount exempted under subsection  127(3A)  of the  Act in  respect  of  a  grant  to finance an external review expenditure for  the issuance or offering of  the  Sustainable  and  Responsible Investment Sukuk; and
  • C is the total amount of deduction allowed.

3. Any company or Labuan company that has claimed a deduction for expenditure on the issuance or offering of the Sustainable and Responsible Investment Sukuk under any rules made under section 154 of the Act in the basis period for a year of assessment shall not be eligible for the deduction under these  Rules for that year of assessment.

4. For the purpose of this rule—external review expenditure” means an expenditure incurred by a company or Labuan company on the issuance or offering of the Sustainable and   Responsible Investment Sukuk to appoint an external reviewer to assess and provide a report on:

  • The eligibility of the project to be implemented by the company or Labuan company for the purposes of the Sustainable and Responsible Investment Project specified in the guidelines relating to sukuk issued by the Securities Commission under the Capital Markets and Services Act 2007; or
  • The compliance of the company or Labuan company with the requirements under the guidelines relating to sukuk issued by the Securities Commission under the Capital Markets and Services Act 2007.