Tax Exemption for House of Worship

Tax Exemption for House of Worship

  • Supporting Letter to obtain tax exemption
    • Any organizations or temples that want to operate a ‘Management Fund for House of Worship’ (Tabung Pengurusan Rumah Ibadat) can apply for tax exemption under the Section 44(6) Income Tax Act (ITA) 1967.
    • Upon request, MHS will provide the supporting letter
  • Who may apply for this tax exemption?Any House of Worship generally formed without the aim to make profits and established solely for the purpose of religious worship or expansion of religious.
  • What is Management Fund for House of Worship?Pursuant to Subparagraph 44(7)(c)(ii) & (iii) of Income Tax Act (ITA) 1967 a House of Worship means:-“An organization established and maintained exclusively to administer and augment a public fund established and held solely for the purposes of religious worship or the advancement of religious and such fund is to be used –(ii) to provide facilities to carry on the activity related to those purposes; or

    (iii) to provide for the management of the activity related to those purposes”.

    For temple or church, its existence and operation should be certified by National Religious Body, such as Malaysian Buddhist Association, Christian Federation of Malaysia, Malaysia Hindu Sangam, Malaysian Gurdwaras Council and Federation of Taoist Association Malaysia.

    Otherwise, the relevant TPRI need be supported by Majlis Perundingan Agama Buddha, Kristian, Hindu, Sikh dan Tao (MCCBCHST) or Jabatan Perpaduan Negara dan Integrasi, Jabatan Perdana Menteri.

  • Application ProceduresThere is NO Specific prescribed form for the application under Section 44(6) of ITA 1967.The TPRI committee members may write an official letter to Lembaga Hasil Dalam Negeri Malaysia, Jabatan Dasar Percukaian by furnishing following documents:-
    • Rules and regulations of the fund for the managing House of Worship
    • List of committee members of House of Worship
    • Approved /certified / supporting letter from the body or organization that mentioned above.
    • A copy of registration certificate of committee or body which operates the House of Worship.
    • List of activities carried out by the House of Worship
  • Requirements for ApprovalIt is essential that the following has to be fulfilled:-
    • The Fund must be set up objectively for the purpose of managing a building in Malaysia that used for religious worship or the advancement of religion or carrying on and managing any activities in relation to the house of worship or the advancement of religion.
    • The Fund cannot be enjoyed by the founders, committee members and staffs. They should not use their authority delegated by the committee for personal advantage or self-interest.
    • iii. Family or close personal relationship i.e. between employer and staff and etc should not be established in the committee to avoid the situation of unfettered power.

    Generally, Funds from a house of worship are donations from devotees/followers. For a house of worship that has been approved under Section 44(6) of the Act, the relevant approved Fund will be exempted from income tax (except for taxable dividend income – S108 Franked Divided) under Paragraph 13(1)(a), Schedule 6 of ITA 1967.

    The Management Fund must be used solely for the daily operating expenditure of the house of worship i.e. administrative expenses, utilities and, repair and replacement basis.

    Income and donations derived must be utilised for the achievement of the objective. In determining the expenses incurred for the purpose of operate house of worship which regarded as allowable expenses and categorized as charitable expenses, these includes:-

    • Salaries and administrative expenses;
    • Daily operational expenses, i.e. wages of cleaners and gardeners
    • Utilities
    • Equipment replacement expenses
    • Payment for religious lecturer/speake
  • Fund for Constructing, Major Improvement or Renovation of a House of WorshipThe Management Fund should not be used for the purpose of constructing or major improvement and renovation of the house of religious worshipIn case of the fund to be utilised for constructing, major improvement or renovation of the house of worship, a separate application for approval will be required – Section 44(7)(c)(i) of ITA 1967.For a group of houses of worships, an application for approval shall be made by the Committee of each house of worship provided that house of worship is able to prepare its own audited account.
      • Activities of operating public cemeteries;
      • Childcare centers; and
      • BookshopsOther IncomeA house of worship may receive other types of incomes of which may subject to income tax. Example of such income may arise from:-

    These other income had to separate from the Funds. Such incomes are subject to income tax EXCEPT income derived from public cemeteries activities which are tax exempted under Income Tax. (Exemption)(No. 36) 2005 [P.U. (A) 266/2005].

    Since TPRI is regarded as a separate entity, thus the Committee of worship is required to keep a separate account from the group accounts of the houses of worship.

    Moreover, TPRI is required to file an Income Tax Return Form (ITRF) i.e. Form TF for each year of assessment. The ITRF should be furnished to the Director General of Inland Revenue on or before 30 April in the year following that year of assessment.

  • Individual / Company Tax DeductionThe donors who are donating to the approved TPRI fund are also be given a tax deduction in arriving at total income.The deduction will be restricted to 7% (Individual) or 10% (Company) of the aggregate income in respect of the cash contribution made to the Fund, by reference to the official receipts are provided.However, contribution in kind to the Fund is not eligible for tax deduction.