What Business Expenses Does LHDN Really Allow? The 2025 Guide for Malaysian SMEs (Including TikTok & Instagram Income)
What Business Expenses Does LHDN Really Allow? The 2025 Guide for Malaysian SMEs (Including TikTok & Instagram Income)
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LHDN’s definition of allowable business expenses under Section 33(1) of the Income Tax Act 1967 is tight, but fair.
Claiming non-deductible items risks audit scrutiny, while missing legitimate deductions leaves profits overtaxed.
Let’s unpack the latest list of deductible expenses, especially for digital and social media-based income streams.
Allowable Business Tax Deductions
Allowable Business Tax Deductions
1. Employee-Related Expenses
1. Employee-Related Expenses
Wages, bonuses, employer contributions for EPF (KWSP), SOCSO & EIS (PERKESO), staff training, and basic employee healthcare.
Why it matters: These need timely submission and clear tracking to qualify.
2. Rent, Utilities & Premises Costs
2. Rent, Utilities & Premises Costs
Rental for your office, workshop, or warehouse - all utilities (electricity, water, internet) that are used for business purposes.
Key tip: Document usage proportion if working from home. Upload utility bills linked to business operations.
3. Marketing & Advertising (Including Social Media)
3. Marketing & Advertising (Including Social Media)
Expenses related to business promotion through digital channels are fully deductible.
That includes:
Paid ads on Facebook, TikTok, Instagram
Content creation tools and branded graphics
Influencer collaborations or ad campaign fees
Whether you sell via TikTok Shop or an Instagram boutique, these costs reduce your taxable income.
4. Software & Digital Subscriptions
4. Software & Digital Subscriptions
Subscriptions to platforms like QuickBooks Online, Canva Pro, website hosting, and e-commerce plugins are allowable. If these tools support your business operations, you can claim them in full.
5. Business Travel & Documented Meals
5. Business Travel & Documented Meals
Travel costs for client meetings or project work—Grab/taxi, toll, parking, meals, lodging—all deductible if documented clearly. Keep purpose logs and related receipts.
6. Repairs & Maintenance (Not Capital Assets)
6. Repairs & Maintenance (Not Capital Assets)
Routine repairs to your premises or equipment qualify as measurable deductions. But note: upgrades or new equipment are capital expenditure—handled via capital allowances instead.
7. Bad Debts (Written Off)
7. Bad Debts (Written Off)
Unpaid customer invoices can be claimed if you show they’re genuinely uncollectible. Maintain correspondence and documentation of your collection efforts.
Social Media Income: What’s Taxable & What You Can Claim
Social Media Income: What’s Taxable & What You Can Claim
If you earn through TikTok Shop, Instagram Sales, affiliate marketing or sponsored content—LHDN treats that profit as business income.
Deductible
Costs of ads, editing tools, influencer fees
Shipping, packaging, product sourcing
Internet expenses proportionate to business use
Non-deductible
Personal lifestyle costs or mixed-use gadgets without clear business assignment.
Avoid These Disallowed Expenses
Avoid These Disallowed Expenses
🔸 Personal travel, meals, clothing not tied to business
🔸 Capital items (e.g. vehicles, property upgrades) without claiming capital allowance
🔸 Unapproved donations or fines & penalties
🔸 Pre-incorporation expenses, unless documented and limited per LHDN guidelines
Note: Approved charitable donations still qualify, if documented correctly.
Practices to Stay Compliant & Maximise Deductions
Practices to Stay Compliant & Maximise Deductions
🔹 Use cloud accounting like QuickBooks Online (automate feeds + categorisation)
🔹 Separate personal & business finances
🔹 Keep all receipts and purpose notes—especially for digital ad spending, travel, meals
🔹 Track all digital revenue streams and outgoing costs accurately
Final Word
Final Word
With precision and clarity, good bookkeeping doesn’t just keep you compliant - it saves you money.
A consistent process ensures LHDN sees exactly what your business earns and spends, no blurry lines, no surprises.
Need help claiming your rightful deductions—or organising digital revenue streams like TikTok or Instagram?
Need help claiming your rightful deductions—or organising digital revenue streams like TikTok or Instagram?
💬 I offer a free 30-minute consultation
Let’s talk about how I can simplify your accounts processes and give you peace of mind.
References & Sources
- LHDN – Public Ruling on Allowable Expenses
🔗 https://www.hasil.gov.my/pdf/pdfam/Appendices_2018_2.pdf - Altomate – Guide to Allowable & Disallowable Expenses in Malaysia
🔗 https://altomate.io/my/blog/allowable-and-disallowable-expenses-in-malaysia-a-guide-for-business-owners - LHDN – Digital Business Tax Guide (for Influencers, Streamers, etc.)
🔗 https://www.hasil.gov.my/en/company/digital-business/ - Funding Societies – Personal Income Tax Reliefs in Malaysia
🔗 https://blog.fundingsocieties.com.my/personal-income-tax-relief-malaysia/
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