Donation Tax Deduction in Malaysia: How to Maximize Your Tax Savings

Life these days is hard even for the working class like us. That said, a simple act of generosity these days, truly goes a long way.

Now if you have, through the goodness of your heart, extended a helping hand to any organizations or NGOs in Malaysia, you could actually save some on your taxes!

Thanks to the kindness of our tax system, in Malaysia, you will be rewarded for giving through donation tax deductions and reliefs.

However, the only way to know if your charitable act is indeed qualified for donation tax relief is by going through LHDN’s donation tax exemption list.

To help you figure this out easily, we have put together the perfect guide to help you reduce your chargeable tax even while giving!

We will also touch on how simple it is to claim tax deductions for donations you have made while answering some commonly asked questions about donation tax deduction in Malaysia.

Ready? Let’s go!

Table of Contents

What Is the LHDN Donation Tax Exemption List?

There are 9 categories of donations which are currently exempted from tax, as per LHDN’s list. Let’s take a look at each one of them below:

	Type of donation or gift	Tax Deduction Percentage
1	Cash donations to government, state or local authorities	N/A
2	Cash donations to institutions, funds or organizations which are approved	Maximum 10% of aggregate income
3	Cash donations or cost of contribution in kind to any sports body or approved sports activity	Maximum 10% of aggregate income
4	Cash donations or cost of contribution in kind for any project of national interest approved by Ministry of Finance	Maximum 10% of aggregate income
5	Cash donations in the form of wakaf to any religious authorities, public universities; gift of money in the form of endowment to a public university	Maximum 10% of aggregate income
6	Gift of artifacts, manuscripts, or paintings	N/A
7	Cash donations for provision of library facilities or to libraries	Maximum RM20,000
8	Cash donations or contribution in kind for the provision of facilities in public places for the benefit of disabled persons	N/A
9	Cash donations or medical equipment to any healthcare facility approved by the Ministry of Health	Maximum RM20,000
10	Gift of paintings to the National Art Gallery or any state art gallery	–

If you are keen to check first to see if LHDN indeed recognizes the organization that you want to donate to, you can directly check on their website here.

It is safe to assume that, if the organization you’re looking for is not listed under LHDN’s website, you won’t be able to claim for any donation tax relief.

Common Mistakes to Avoid

There are a handful of mistakes which are often done when claiming donation tax deduction Malaysia. Let’s take a look at some of them so that we can avoid repeating these mistakes:

Missclassifying contributions: Contribution made to customers or business partners are never charitable donations. So, make sure to check if your donations fall into the 9 categories listed above before claiming them.
Insufficient Documentations: Like how you’d save your purchase receipt for tax claims, you need to save all the donation receipts, or official letters that acknowledge your contribution, as proof so that you can claim your donation tax relief.
Exceeding Donation Limit: For every category of donation, there are maximum amounts involved, unless stated otherwise. Be sure that your donation amount does not exceed said limit.
Organization not Approved: Chances are slim for the donation tax relief to be claimed if the organization is not approved under LHDN. Make sure to check if the organization you contribute too is indeed approved, directly on LHDN’s website if you intend to

How to Check if Your Donation Qualifies

Checking if the organization that you contribute to is approved by LHDN is an easy process. Let’s look at the step by step process below:

A step-by-step guide to accessing and verifying the list.

Step 1

Go to https://www.hasil.gov.my/
Look for ‘Quick Link’ on their Homepage, click and look for ‘Donations Approval’

Step 2

Once you are on the ‘donations Approval’ page, select either one of the 3 categories to run a search on the organization that you wish to donate to. The 3 categories are :
- Subsection 44(6): tax exemption incentive given to institutions, organisations or funds
- Subsection 44(11D): tax exemption incentive given to wakaf and endowments
- P.U.(A) 139/2020: tax exemption incentive given to religious institutions and worship house
Most organizations will fall under the Subsection 44(6) category. Click on the category.

Step 3

Insert the Name of Institution/Organization/Donation, Select the appropriate category and location and click ‘Search’

Step 4

If the organization is indeed approved, it will show up on the site as per the example below :

How to Claim Donation Tax Deductions

Now that you have confirmation that the organization you want to contribute to is in the list of approved donations in malaysia for tax deductions, let’s look at how to file your donation tax relief correctly.

Required Documents

Official Receipt or Acknowledgement Letters: Receipts and letters generated by the donee must include the donor’s name, donation amount, and organization’s approval status. Keep this as proof of contribution
Other Proof of Donation : Keep other proof like transfer slips, or cheques which can provide additional support to your claim if necessary.

Filing Process with LHDN:

Have your documents on standby and complete your tax return form in LHDN’s website. Make sure to include the total amount of approved donations under the ‘tax Relief’ section. Remember also to make sure that it does not exceed the stipulated amount allowed.
Submit your tax returns as usual
Check your submission to ensure there are no errors.
File your receipts and documents safely, in case any issues arise, these can be used as proof.

Limits on Deductions

Each donation type can carry some form of limitation. For example, you can only make a maximum of RM20,000 Cash donations for provision of library facilities or to libraries.

Check the table we have provided above to see if any maximum amount is stated so that you can file for your donation tax relief correctly.

Understanding Donation Tax Deduction in Malaysia

If you have been paying your taxes for a while now, you are aware that tax deductions will help to maximise the amount of tax savings.

However, these tax reliefs are usually deducted from your chargeable income. For donation tax deduction in Malaysia, your aggregate income is reduced instead.

What is aggregate income? Aggregate income is the income you earn from employment, rent, royalties, to name a few. To illustrate this, let’s take a look at Aisha’s calculation below:

Aisha’s annual aggregate income: RM48,000

Donations to approved sports body (annual): RM 5,600

Rule: Maximum 10% of aggregate income is allowed to be donated to approved sports body or activity

Claim: 10% x RM48,000 = RM4,800

Based on the scenario above, although Aisha has contributed close to RM5,600 in donations to an approved organization under LHDN, the maximum amount of 10% of aggregate income is exceeded.

In this case, Aisha can only claim up to RM4,800 in tax deductions. Her chargeable income after reducing RM4,800 is RM 43,200 – the amount she will have to pay tax for.

Conclusion

While you should not be counting on getting tax relief while doing an act of charity, it is indeed exciting to get some form of tax savings from it!

All you need to do is to leverage the benefits you can obtain from the donation tax deduction in Malaysia! Remember to check if the organization is approved. Use our simple step-by step process to check on LHDN’s website directly.

Then, report the amount while doing your yearly tax claims. Don’t forget about the maximum allowable limits that LHDN has set up for certain donation categories.

Lastly, with a little bit of planning ahead of time, we’re sure you can truly enjoy the fruits of your generosity!

FAQ: Common Questions About Donation Tax Deductions

How much donation is tax-deductible in Malaysia?

Tax payers like yourself are eligible to claim up to 10% of your aggregate income as a donation tax relief. The organization that you contribute to however, must be one that is approved by LHDN.

Is gift to employee tax deductible in Malaysia?

Unfortunately no. Gifts are not considered contributions or donations. They will not qualify to be deducted as donation tax relief.

Can I Claim Tax Relief for International Donations?

Only local charitable institutions and organizations listed on the list of approved donation bodies in Malaysia for tax are qualified for tax relief.

What Happens If I Donate to a Non-Approved Organization?

The contribution which you made will not be qualified to be listed when you are claiming your tax. Therefore, you will not receive any relief or tax savings.

Is there a minimum amount of donation required to qualify for tax deductions?

There are no minimum amounts to qualify for tax deductions. But there are maximum amounts that you can claim for. Receipts and proof of payments are still necessary irrespective of how big or small the donation amount contributed.

Disclaimer: This article is for informational purposes only. It should not be considered as professional tax advice. Please consult the Inland Revenue Board of Malaysia (LHDN) or a licensed tax professional for specific guidance regarding your tax situation.