Public Ruling No 2 2021

Public Ruling No. 2/2021 – Tax Deduction for Sponsoring Arts, Cultural and Heritage Activities

The Inland Revenue Board (IRB) recently issued Public Ruling (PR) No. 2/2021: Tax Deduction for Sponsoring Arts, Cultural and Heritage Activities, dated 8 July 2021. The new 10-page PR comprises the following paragraphs and sets out four examples:

1.0          Objective

2.0          Relevant provisions of the law

3.0          Interpretation

4.0          Introduction

5.0          Application of approval for sponsorship and letter of approval for tax deduction

6.0          Tax deduction

7.0          Disclaimer

Broadly, the PR explains the tax deduction available to companies that sponsor any approved local or foreign arts, cultural and heritage activities in Malaysia under Section 34(6)(k) of the Income Tax Act 1967 (ITA).

The PR outlines the following criteria that must be met for a sponsor to qualify for the tax deduction:

• The sponsorship must be for the types of activities or programmes (e.g. stage performances, festivals or fairs) related to arts, culture and heritage, as identified by the Ministry of Tourism, Arts and Culture Malaysia (MOTAC).
• The sponsorship must be in the form (e.g. cash, prize sponsorship) determined by MOTAC.

The PR stipulates that an organizer, representative or programme owner is required to obtain a supporting letter of sponsorship from MOTAC before securing sponsorships for the proposed activities or programmes. The application must be submitted at least 30 days before the activity or programme is carried out. If approved, the letter issued by MOTAC may then be used to source for sponsorships from private or corporate sponsors.

The PR further stipulates that upon execution of the activity or programme, the organizer, representative or programme owner is then required to obtain a letter of approval for tax deduction by submitting an application to MOTAC no later than 90 days after the activity or programme has been carried out.

The PR also explains and provides examples to demonstrate the tax deduction (and its limit) available to companies that sponsor any approved local or foreign arts, cultural and heritage activities in Malaysia, as well as the supporting documents to be produced in the event of an audit.

Further details are available in the Guidelines on Tax Deduction on Sponsorship of Arts, Cultural and Heritage Activities under Subsection 34(6)(k) of the Income Tax Act 1967 (ITA), which are available in the following link: Sponsorship Tax Deduction Incentives - Ministry of Tourism, Arts and Culture Malaysia Official Portal (motac.gov.my)