Tax Deductions & Capital Allowances for Websites
How Malaysian companies claim website development, custom software, and ongoing maintenance on their corporate income tax returns.
The Golden Rule: OPEX vs. CAPEX
Under Lembaga Hasil Dalam Negeri (LHDN) tax regulations, how you claim your digital expenditure depends on whether the spending maintains an existing digital asset (Revenue Expenditure / OPEX) or creates a brand new enduring asset (Capital Expenditure / CAPEX).
OPEX: 100% Deductible in Year Incurred
Website Maintenance & Security (JagaWeb Care)
Fully deductible under Section 33(1) Income Tax Act 1967Routine maintenance, offsite backups, updates, and monitoring (such as JagaWeb Care at RM450/mo) are operational expenses incurred wholly and exclusively in the production of gross income.
Cloud Hosting, Domain Renewal & SSL
100% deductible operating expenseRecurring monthly or annual infrastructure bills billed directly to your corporate credit card qualify as standard revenue expenditure.
SEO Packages & Content Updates
100% deductible marketing expenseOngoing search engine optimization and digital marketing retainers are treated as revenue operating costs.
CAPEX: Capital Allowance over 4 Years
Custom Web Applications & Portals
Qualifying ICT Capital ExpenditureUnder the Income Tax (Capital Allowance) (ICT Equipment & Computer Software) Rules, custom software development qualifies for an Initial Allowance of 20% and an Annual Allowance of 20% (fully written off in 4 years).
E-Commerce Platforms & System Integrations
Eligible for Accelerated Capital Allowance (ACA)Systems that automate core business transactions, payment gateway integrations, and internal workflow software are recognized as capitalized intangible ICT assets.
What Your Tax Agent Needs
To ensure zero disallowances during an LHDN tax audit, maintain these records in your digital tax file:
- Official e-Invoice: Ensure supplier TIN, SST number, and business registration match.
- Written Scope of Work: Clearly outlining security, updates, bug fixes, or custom programming.
- Ownership Evidence: Confirmation that code repositories and hosting accounts are registered to your company.
Tax Deductibility FAQs
Can an SME claim both the MDEC/BSN Digital Grant and tax deductions?
Yes, but you can only claim tax deduction or capital allowance on the net amount paid by your company. For example, if a custom platform costs RM10,000 and you receive a RM5,000 SME Digitalisation Grant subsidy, only the remaining RM5,000 paid by your business is eligible for capital allowance.
What paperwork does LHDN require to verify website tax deductions?
You must retain: (1) An official tax invoice from a registered Malaysian entity (such as Thither Global (M) Sdn Bhd, SSM 1074704-D), (2) A clear written scope of work specifying the technical deliverables, (3) Proof of company payment (corporate bank statement), and (4) Written confirmation that the domain and software are owned by your business.
Does JagaWeb issue LHDN e-Invoicing compliant receipts?
Yes. JagaWeb is fully integrated with LHDN MyInvois standards, providing validated corporate e-invoices with TIN, BRN, and SST registration details for seamless corporate tax filing.
Need Transparent, Tax-Deductible Website Care?
All JagaWeb plans are billed with clean, audit-proof Malaysian corporate invoices issued by Thither Global (M) Sdn Bhd (SSM 1074704-D).