Preheat oven to 350°F (177°C). Line cupcake pans with liners.
Whisk together the flour, baking powder, and salt in a medium bowl and set aside.
Using a mixer, cream granulated sugar into melted butter until fluffy, about 1-2 minutes. Beat in eggs one at a time, then stir in vanilla extract.
Alternately add the dry ingredients and coconut milk to the butter mixture, starting and ending with the flour mixture. Stir gently until just combined, scraping the bowl as needed.
Fold in the shredded sweetened coconut.
Spoon batter into cupcake liners and bake for 12-18 minutes or until a toothpick comes out clean. Cool completely before frosting.
For frosting, beat softened butter until smooth. Gradually add powdered sugar until mixture is crumbly. Beat in salt, coconut extract, and vanilla extract. Add coconut milk one tablespoon at a time until desired consistency is reached.
Frost cupcakes and sprinkle with additional shredded coconut for garnish.
Notes
Store cupcakes in an airtight container. They can be frozen for up to 2 months. For a gluten-free version, substitute all-purpose flour with a 1:1 gluten-free flour blend.