Preheat the oven to 350°F (175°C) and line a muffin tin with cupcake liners.
In a bowl, whisk together flour, baking powder, and salt.
In a separate bowl, cream butter and sugar until light and fluffy.
Add eggs one at a time, beating well after each addition, then stir in vanilla.
Gradually add dry ingredients to the wet mixture, alternating with coconut milk, mixing until just combined.
Fold in shredded coconut and divide batter evenly into prepared cupcake liners.
Bake for 18–20 minutes or until a toothpick inserted into the center comes out clean.
Cool cupcakes completely on a wire rack.
In a bowl, beat cream cheese and powdered sugar until smooth.
Add heavy cream and beat until fluffy.
Pipe or spread frosting onto cooled cupcakes.
Garnish with toasted coconut and serve.