Are Loan Interest Expenses Deductible?

When businesses secure loans to support their operations and growth, the interest paid on these loans is often considered a necessary cost. Are these interest expenses tax-deductible as business expenditures in Malaysia? In this article, we explore the tax implications surrounding interest expenses as business deductions.

Under Section 33(1) of the Income Tax Act (ITA), a business expenditure can be eligible for deduction if it is incurred wholly and exclusively to produce income. This means that expenses incurred to generate more revenue are typically considered tax-deductible. This principle extends to interest expenses too, specifically addressed under Section 33(1)(a) of the ITA. According to this provision, interest can be deducted if the borrowed funds are used to produce gross income and are connected to the regular operations or activities that generate income.