According to Income Tax Act 1967, Section 39(1)(l) and LHDN Public Ruling No. 3/2008 & 4/2015:
Not all entertainment expenses are deductible.
-In general, entertainment expenses are only 50% deductible.
-Only specific items clearly stated in the legislation are allowed 100% deduction.
-Expenses unrelated to business or of a private nature are not deductible.
Tax Treatment of Entertainment Expenses:
1.Entertainment during company’s new product launch (for potential or existing customers) → 100% Deductible
2.Wedding gift to customers → Not Deductible
3.Entertainment for employees of related companies → Not Deductible
4.Employees’ annual dinner → 100% Deductible
5.Gifts with company logo (e.g. customer annual dinner door gift) → 100% Deductible
6.Free trip as incentive (e.g. for sales agents achieving targets) → 100% Deductible
7.Flower basket for customer’s new branch opening → 50% Deductible
8.Entertainment for suppliers → 50% Deductible
9.Festive hampers for customers → 50% Deductible
**Data updated on 1.10.2025
(201706002678 & AF 002133)