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01
What are pre-operation expenses?
Pre-operation expenses are costs incurred before a company officially starts business. Examples include early advisory work, feasibility studies, licensing preparation, branding, website setup, renovation and equipment acquisition.
02
Why not every item is deductible
The general deduction principle requires expenses to be wholly and exclusively incurred in producing business income. If the business has not started, LHDN may view the cost as creating the income source rather than producing income.
Operating expenses after commencement
- Rent
- Payroll
- Ongoing advertising
Pre-operation or capital costs
- Renovation
- Equipment
- Business setup expenditure
03
How owners should keep records
Keep supplier name, date, amount, service description and payment proof.
Record how the expense relates to the company's business.
Track the first sale, contract, invoice or operational date.
Separate setup costs, capital assets, operating expenses and private expenses.
04
VSG recommendation
Do not wait until tax filing season to organise expenses. Separate pre-operation costs, operating expenses, asset purchases and shareholder advances from the start.
05
Official sources and disclaimer
This guide is for general educational purposes only and is not tax advice. Tax rates, deductions, filing deadlines and incentive eligibility may change and depend on each company's facts. Please consult a tax professional or refer to the latest LHDN guidance before making decisions.