Q.
Can Zakat be deducted from Corporate Tax in Malaysia?
A.
Yes, companies are allowed to utilize Zakat payments as tax deduction in Malaysia.
For company, effective from YA 2005, the Government had allowed the amount of zakat paid by a company is to be treated as deduction of up to 2.5% of the Aggregate Income – Sec 44(11A).
Azam Sdn. Bhd. recorded a statutory income of RM50,000.00 for the year ended 31 December, 2012. Losses which was not deducted from last year’s income is RM10,000.00. In November 2012, the
company paid zakat on business of RM1,250.00.
Tax calculation for YA 2012 for Azam Sdn. Bhd. is shown below:
Hence, it is not like personal tax where the rebate is deducted from the tax to be paid for the year of assessment. It is taken like that of 'Relief' but deducted from Aggregate Income. In this manner, a company can only off-set all the profits to a maximum of 2.5% for Zakat, and cannot choose not to pay Corporate Tax.
Thinking along this issue, government can never afford to allow all the available Income Tax collection to Zakat which is managed solely by Majlis Agama Islam of individual states. Remember, only one Majlis Agama Islam under Wilayah Persekutuan is directly under the Federal Government. Indeed, you can say that different Majlis are autonomous on their own and they do not report their financial standing to the Federal Government.
Ref:
Musa Bin Othman (2013) Zakat and Tax Treatment, proceeding presented in National Business Zakat Symposium 2013, 8 Oct, 2013 viewed on 31 Dec, 2013 from http://www.mia.org.my/new/downloads/nbzs/2013/03-Zakat-And-Tax-Treatment.pdf