Dormant Company in Malaysia? Why You May Still Owe LHDN — and What to Do About It

This situation arises more often than directors expect: a company dormant since 2019, no Form C ever filed, a CP270 penalty notice for more than RM10,000. By the time the notice arrives, the remediation chain is already long — and the cost of resolving it is significantly higher than it would have been if the company had been closed properly from the start.

The Misconception That Causes This

Most directors with dormant companies operate on the same assumption: no activity means no obligation. That assumption is incorrect — and LHDN's enforcement position under Section 90(3) of the Income Tax Act 1967 makes the consequence of that assumption expensive.

LHDN does not automatically know your company is dormant. In the absence of a Form C submission, silence is treated as non-compliance, not inactivity. The same applies to EPF and SOCSO — neither authority automatically deregisters a company because it has ceased operations.

What Is a CP270 and How Is It Triggered?

A CP270 is a penalty notice issued by LHDN. When a company fails to submit Form C, LHDN is empowered under Section 90(3) of the Income Tax Act 1967 to raise a best-estimate assessment of the company's income. The estimate is LHDN's determination — not the company's declaration. Once issued, the burden shifts entirely to the company to dispute it. The CP270 is the penalty notice that follows that assessment.

What Dormant Companies Are Still Required to Submit

LHDN's official website states explicitly:

"Companies, limited liability partnerships, trust bodies and cooperative societies which are dormant and/or have not commenced business are required to furnish the ITRF (including Form E) with effect from Year of Assessment 2014."
Source: hasil.gov.my/en/company/

Two separate filing obligations apply to every dormant company in Malaysia:

• Form C (company income tax return) — required every year since the company was incorporated. The YA 2014 starting point does not apply to Form C. A company incorporated in 2010 that has been dormant since inception is required to have filed Form C for every year from its first year of assessment.
• Form E (employer's return) — required for dormant companies from YA 2014 onwards, per LHDN's official website. This obligation applies regardless of whether any business was conducted or any employees were on payroll.

Both obligations continue for as long as the company remains registered with SSM. Deregistration with SSM does not happen automatically — it requires a formal strike-off application, which itself can only be made after all filing and payment obligations are resolved.

The Remediation Chain — Once a CP270 Has Been Issued

A CP270 is not the end of the problem. It is the beginning of a remediation process that involves multiple authorities, each with their own requirements and timelines:

1. Respond to the CP270 — dispute or settle within the stipulated deadline. Ignoring it increases the liability and reduces the options available.
2. Prepare accounts and file outstanding Form C for all unfiled years since incorporation, with supporting financial statements.
3. File outstanding Form E for all years from YA 2014 to the current year in which the company remains registered.
4. Clear all outstanding tax liabilities and formally close the LHDN income tax file.
5. Close the EPF file — formal deregistration is required even if no contributions were ever made.
6. Close the SOCSO file — same requirement applies. Silence is not deregistration.
7. Apply for SSM strike-off — only after steps 1 to 6 are fully completed. SSM will not approve a strike-off where outstanding statutory obligations remain unresolved.

The Correct Sequence — Before a CP270 Arrives

If your company is dormant and you have not yet received a penalty notice, the window to resolve this cleanly is still open. Acting now means the company controls the timeline and the cost. Acting after a CP270 means responding to LHDN's timeline and LHDN's estimate. The correct sequence is:

1. Prepare final financial accounts for all outstanding years
2. File all outstanding Form C returns for every unfiled year since incorporation
3. File all outstanding Form E returns from YA 2014 onwards
4. Settle any tax liability and obtain formal closure of the LHDN tax file
5. Close EPF and SOCSO files
6. Apply for SSM strike-off — last step only

Key Facts Summary

Item	Position
Form C obligation — dormant company	Required every year since incorporation
Form E obligation — dormant company	Required every year from YA 2014 onwards
LHDN power when Form C not filed	Section 90(3) ITA 1967 — best-estimate assessment
Penalty notice type	CP270
SSM strike-off — when to apply	Only after LHDN, EPF and SOCSO files are closed

Sources

• Section 90(3), Income Tax Act 1967
• LHDN official website — Company taxpayer responsibilities: hasil.gov.my/en/company/
• ITRF Filing Programme: hasil.gov.my

Need Help?

KS Chia & Associates handles the full remediation process for dormant companies — accounts preparation, Form C filing for all outstanding years since incorporation, Form E filing from YA 2014 onwards, LHDN tax file closure, EPF and SOCSO deregistration, and SSM strike-off coordination.

WhatsApp or call: 011-2366 5233
KS Chia & Associates (AF001828)

5 Red Flags LHDNM Will See From Your e-Invoice Data

 LHDN is no longer just asking whether your business issues e-Invoices. They are checking how you issue them, and whether your numbers tell a consistent story. Since e-Invoice implementation began on 1 August 2024, HASiL has actively used transaction data to cross-match against tax returns.

Recent press statements confirm that more than 500,000 potential cases have been flagged where financial activity does not match existing tax records. This data-matching exercise has already resulted in 38,906 taxpayers voluntarily declaring RM3.5 billion in previously unreported income.

Here are the 5 red flags in your e-Invoice data that can trigger an LHDN review.

1. Your e-Invoice Revenue Does Not Match Your Tax Return

If your MyInvois portal shows validated e-Invoices totalling RM10 million, but your Form C or Form B declares RM6 million in income, that gap is visible the moment HASiL runs a data match. No audit officer needs to visit your premises to identify this discrepancy.

HASiL confirmed in its February 2026 press statement that more than 500,000 potential cases were flagged for exactly this pattern — high financial activity with no corresponding tax record.

KS Chia's take: The reconciliation between your MyInvois submission log and your audited accounts is now a compliance document. If those two numbers cannot be explained and reconciled, you are exposed before anyone asks a single question.

2. Frequent Cancellations and Credit Notes

The occasional credit note is normal business practice. But a pattern of frequent cancellations or credit notes — particularly with related companies, major customers, or at year-end — signals potential revenue reversal activity.

Under the e-Invoice framework, credit notes, debit notes, and refund notes are all submitted to and validated through the MyInvois portal. The full transaction trail is visible to HASiL. Adjustments do not disappear — they create a data record of their own.

KS Chia's take: Every credit note should have a clear, documented business reason that your finance team can explain immediately. If the justification is not on file, the pattern will be the story.

3. Invoice Splitting to Avoid the RM10,000 Threshold

For Phase 1, 2, and 3 businesses: the RM10,000 threshold is fully operative now. Every single transaction above RM10,000 requires its own individual validated e-Invoice. Artificially splitting one RM15,000 transaction into two RM7,500 invoices to route it through the consolidated channel is precisely the type of invoicing anomaly that data-matching analytics is designed to surface.

For Phase 4 businesses: the RM10,000 rule is suspended during the relaxation period. Under e-Invoice Specific Guideline Version 4.7, Section 16.2(a) overrides the standing obligation in Section 3.7 — Phase 4 taxpayers may issue consolidated e-Invoices for all transactions, including those above RM10,000, until 31 December 2027.

KS Chia's take: The relaxation is real and significant — but it expires 1 January 2028. Phase 4 businesses should use this window to build the right workflows now. For any Phase 1-3 client, invoice splitting above RM10,000 is a workflow risk that needs to be corrected today.

4. Self-Billed e-Invoices Your Supplier Did Not Reflect

If your customer issues a self-billed e-Invoice to you — for commission payments, freight rebates, sub-contractor fees — that transaction is validated in the MyInvois portal and visible to HASiL. If your books do not reflect the same amount, or you never declared that income at all, the mismatch is automatic.

KS Chia's take: This catches many SME clients off guard — particularly agents, sub-contractors, and logistics operators who assume "if I did not issue the invoice, there is nothing to declare." Under self-billing, your customer creates the record. Your obligation to declare the income exists regardless of who generated the document.

5. Operational Records That Do Not Align With Your e-Invoice Trail

At the system level, HASiL cross-references validated e-Invoice data against filed tax returns to identify income discrepancies. In a field audit, LHDN officers go further — comparing physical delivery orders, goods received notes, stock movement records, and e-Invoice logs.

If your delivery order shows 500 units dispatched but your e-Invoice records show only 400 units billed, that discrepancy will be queried and documented.

KS Chia's take: e-Invoice data does not replace field audits — it makes the starting point for a field audit far easier to identify and justify. For trading, manufacturing, and logistics businesses, your warehouse, operations, and sales teams now generate data that feeds directly into your tax risk profile. This is not just a finance department issue.

What You Should Do Now

• Reconcile your MyInvois submission log against your YA 2024 and YA 2025 declared income — now, before filing season closes.

• Review your credit note and cancellation log for patterns that cannot be immediately explained.

• If you are Phase 1, 2, or 3 — check your invoicing workflow for any transactions above RM10,000 being processed through the consolidated route.

• If you received a nudge letter — act before it becomes a formal audit notice. Voluntary disclosure at this stage carries materially lower penalty exposure.

• If you are Phase 4 — use the relaxation period to build compliant workflows. 1 January 2028 is a hard deadline.

Need Help?

Contact KS Chia & Associates (AF001828) for professional advice on e-Invoice compliance and tax risk management.

WhatsApp us at 011 2366 5233.

Sources:

•HASiL press statement HASiL/2026/02/03–10, dated 03/02/2026

•HASiL press statement HASiL/2026/04/27–25, dated 27/04/2026

•e-Invoice Specific Guideline V4.7, Sections 3.7, 16.2(a), and 16.2(d)

Rental Income: Business Source or Non-Business Source? Malaysia High Court Rules in 2026

A High Court decision on 22 April 2026 has clarified a question that affects many Malaysian companies that own and rent out properties: when does rental income qualify as business income under Paragraph 4(a) of the Income Tax Act 1967 (ITA 1967), and when is it simply passive rental income under Paragraph 4(d)? The answer has significant consequences for how expenses are deducted, whether losses can be carried forward, and whether capital allowances are available.

The Case: Glenmarie Estates Sdn Bhd v Director General of Inland Revenue

Glenmarie Estates Sdn Bhd, a non-listed investment holding company, owns 14 properties that were rented out. The company took the position that its rental income was taxable as business income under Paragraph 4(a). LHDN disagreed and raised additional assessments for financial years 2015, 2016, and 2017 on the basis that the income was non-business rental under Paragraph 4(d).

The Special Commissioners of Income Tax dismissed the taxpayer's appeal on 14/07/2023. The company brought the matter to the High Court of Kuala Lumpur, which dismissed the appeal again on 22/04/2026, with costs awarded to LHDN.

The Legal Test: What Does "Comprehensive and Active" Mean?

Under Public Ruling No. 12/2018 (Income from Letting of Real Property), rental income is treated as a business source under Paragraph 4(a) only if the owner provides maintenance or support services that are both comprehensive and active.

Comprehensive means covering all general upkeep of the property — structural elements, common areas, stairways, lobbies, lifts, car parks, drains, landscape, exterior fittings. Providing security services alone does not meet this standard.

Active means the owner proactively ensures these services are delivered — either directly or through appointed contractors — as an ongoing obligation. Services that are only provided when tenants make a request or complaint do not qualify.

In this case, the court found that the tenancy agreements did not require the company to provide comprehensive maintenance. The evidence showed services were provided reactively — upon request or complaint only. This was insufficient to satisfy the test in PR 12/2018.

The Investment Holding Company Dimension: Section 60F ITA 1967

Because Glenmarie Estates is a non-listed investment holding company (IHC), Section 60F ITA 1967 applies. Under Section 60F, income derived from investments — including rent — is treated as income from a non-business source. This reinforced LHDN's position that the correct treatment is Paragraph 4(d).

If your company is structured as an IHC and rents out properties, the threshold to qualify for Paragraph 4(a) is higher, and the risk of misclassification is greater.

What About PR 12/2018 Applying to Pre-2018 Years?

The taxpayer argued that PR 12/2018, published on 19/12/2018, should not apply to financial years 2015, 2016, and 2017. The court rejected this. PR 12/2018 replaced Public Ruling No. 4/2011, which had been in force since 10/03/2011. The same guidance on the comprehensive-and-active test existed throughout the years under assessment. There was no retrospective application — the law and its interpretation were consistent.

Key Differences: Paragraph 4(a) vs Paragraph 4(d)

• Deductible expenses: Under 4(a), both direct and indirect expenses are deductible. Under 4(d), only direct expenses directly related to earning that rental income are allowed.
• Capital allowances: Claimable under 4(a) on qualifying plant and machinery. Not available under 4(d).
• Rental losses: A 4(a) business loss can be set off against aggregate income from other sources and carried forward. A 4(d) rental loss is restricted — cannot be set off against other sources and cannot be carried forward.

What Property-Owning Companies Should Do Now

• Review your tenancy agreements — do they expressly require you to provide comprehensive maintenance, or only to respond to complaints?
• Review your actual maintenance practices and ensure records exist to show services are delivered proactively and comprehensively.
• Confirm whether your company is classified as an IHC, and whether Section 60F applies to your situation.
• Review your current and prior-year tax filing positions to assess exposure.

Need Help?

KS Chia & Associates advises companies on rental income classification, investment holding company tax treatment, and LHDN audit exposure. If you own properties through a company structure and are unsure whether your tax position is defensible, speak to us before your next filing.

WhatsApp or call us at 011-2366 5233.

Note: Glenmarie Estates retains the right to appeal to the Court of Appeal within 30 days from 22/04/2026. This article reflects the High Court decision. The position may change if the Court of Appeal rules differently.

HASiL Found RM3.5 Billion in Unreported Income Using e-Invoice Data — What Malaysian Businesses Must Know

On 27 April 2026, HASiL (Lembaga Hasil Dalam Negeri Malaysia) announced that cross-referencing e-Invoice transaction records against filed income tax returns identified taxpayers with unreported income. The results confirm that e-Invoice data is now an active tax enforcement tool — not a future risk.

What the Numbers Show

Following HASiL's nudging exercise, 38,906 taxpayers submitted income tax returns (Borang Nyata Cukai Pendapatan / BNCP) declaring RM3.5 billion in previously unreported income, resulting in RM760.7 million in tax payable. Taxpayers who did not respond voluntarily will face audit and enforcement action under the Income Tax Act 1967.

Separately, a National e-Invoice Compliance Operation conducted from 20 to 24 April 2026 identified 108 Phase 1 and 2 businesses — those with annual turnover above RM25 million — still not issuing e-Invoices. These businesses are now subject to enforcement action.

What This Means for Your Business

• Received a nudge letter? Act before it becomes a formal audit notice. Voluntary disclosure at this stage carries materially lower penalty exposure than a post-audit assessment.
• No letter yet? Check whether your declared income for YA 2024 and YA 2025 is consistent with your e-Invoice submission records. A gap is detectable.
• Phase 1 or 2 business not yet on e-Invoice? Enforcement action is already underway. Rectify immediately.
• Phase 4 business (below RM5 million)? The relaxation period runs until 31 December 2027. Use it to prepare — not to defer.

Key Facts at a Glance

Item	Figure
Unreported income identified	RM3.5 billion
Taxpayers who submitted returns after nudging	38,906
Tax payable declared	RM760.7 million
Phase 1 & 2 businesses under enforcement	108
Phase 4 relaxation deadline	31/12/2027

Source

HASiL Press Statement HASiL/2026/04/27 – 25, dated 27 April 2026. Available at www.hasil.gov.my.

Need Help?

If you have received a nudge letter, are unsure whether your records are consistent, or need to assess your e-Invoice readiness, contact us before the situation escalates.

WhatsApp or call: 011-2366 5233
KS Chia & Associates (AF001828)

Form BE Last-Minute Check: 5 Quiet Errors That Draw LHDN Attention (YA 2025)

Form BE e‑filing closes 30 April 2026. LHDN offers a grace period until 15 May 2026. Many salaried employees rush the submission and miss small details. The mistakes that cause issues are not obvious typos. They are quiet gaps that pass initial checks but raise flags later. We review hundreds of files each season. Here are the patterns we see.

Why “Quiet Errors” Matter More Than Typos

LHDN’s system validates your submission in real time. It accepts the form even if figures do not add up perfectly. The mismatch shows up later. You receive a CP500 instalment notice or an information request 3–6 months after filing. Correcting it then takes extra steps. You can file Amended BE Form to fix the record. Catching the error now saves time and removes uncertainty.

Silent Trigger #1: HK‑2 Working Sheet Figures Do Not Match the EA Form

Your employer submits the EA Form to LHDN. You submit the HK‑2 working sheet with your Form BE. LHDN’s system compares the two. A difference of even RM50 triggers a flag. Common causes: manual calculation slips, missing bonus lines, or using last year’s draft template. Solution: request the final EA Form from HR. Match each line to your HK‑2. Keep both documents for seven years.

Silent Trigger #2: Income Placed in the Wrong Section

Dividends, rental income, or side freelance work often land in the employment income section. This happens when taxpayers copy last year’s layout. For YA 2025, dividend income moves to Part BA (Item B8). Actively managed rental belongs on Form B, not Form BE. Passive rental can stay on Form BE. Misclassification changes your tax bracket and relief eligibility. Use the current MyTax portal layout. Do not copy-paste from prior years.

The Other 3 Triggers (Relief Claims & Documentation)

We track three more gaps. They sit in relief claims and supporting documents. They look routine on paper. LHDN checks them against your spending history and employer data.

We keep the exact verification steps, acceptable document formats, and response templates in our internal checklist. It saves clients hours when LHDN sends an information request.

Want the full 5‑point checklist and correction steps? WhatsApp “BE SAFE” to 011 2366 5233. We’ll send the PDF straight to your WhatsApp.

What If You Already Filed?

Do not wait for a notice. Log into MyTax. Compare your filed HK‑2 against your final EA Form. If figures differ, prepare Amended BE Form. LHDN allows penalty-free corrections for YA 2025 errors filed in 2026. If you need a quick review, send us your EA Form and HK‑2 draft via WhatsApp. We’ll check the alignment and flag gaps before they become queries.

Frequently Asked Questions

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Q: What is the Form BE filing deadline for YA 2025?

A: 30 April 2026. LHDN provides an e-filing grace period until 15 May 2026.

Q: What happens if my HK-2 does not match my EA Form?

A: LHDN’s automated system flags the difference.

Q: Can I still correct my Form BE after submission?

A: Yes. Submit Amended BE Form through MyTax. 

Q: Do I need to declare dividends on Form BE for YA 2025?

A: Yes. Report dividends in Part BA (Item B8). If your total dividend income exceeds RM100,000, the excess is subject to 2% tax.

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