Conversion of Office Premise to Residential House in Malaysia

The Rules apply to the cost of expenditure for the renovation and conversion of an office premise into a residential house. Only expenditure incurred for the following purposes is covered:

1.  Fixture and fittings;

2.  Flooring;

3.  General electrical installation;

4.  Wall covering (including paint work);

5.  Fixed partitions;

6.  Door, window, grill and roller shutter;

7.  False ceiling and cornices;

8. Water system;

9. Gas system;

10.  Air-conditioning system.

The cost of renovation and conversion does not include the following, which is certified by an external auditor:

1.  Designer fee;

2.  Professional fee; and

3. Purchase of antique (purchase of an object or work of art which represents a previous era in human society, is a collectable item due to its age, rarity, craftsmanship or other unique features and appreciates in value over time).

The deduction is available only for an office premise which meets the following requirements:

1.  it has been used for administrative and office management activities for a period of more than ten years and is no longer in use; and

2.  it does not include a shophouse.

A deduction is allowed in ascertaining the adjusted income of a person resident in Malaysia from its business in Malaysia in a basis period for a YA. The amount of the deduction is equal to 10% of the cost of renovation and conversion incurred by the person from 1 January 2026 until 31 December 2027.

The total amount of deduction allowed shall not exceed RM10,000,000.

A person claiming the deduction must satisfy all of the following conditions:

1.  the residential house development plan has been approved by the local authority;

2. the residential house is used exclusively for human habitation and does not include a premise partly used for administrative and office management activities; and

3.  the residential house is rented out after the renovation and conversion have been carried out.

The Rules do not apply to a person who has made a claim in relation to the cost of renovation and conversion of an office premise under:

1.  any allowable expenses under subsection 33(1) of the Income Tax Act 1967 (hereinafter referred to as “the Act”);

2. any capital allowance under Schedule 2 of the Act; or

3. any capital allowance under Schedule 3 of the Act.