Business losses are normal. Regardless of whether your business makes a profit or suffers a loss, you are still obligated to submit and report your income annually.

!!! This article talks solely about businesses as in enterprise, partnership and etc. which does not consider as a separate entity with the individual. Therefore, some of the information in this article might not apply to company.

Why report if you made a loss?

Reporting income – even when there’s none – isn’t about paying tax, it’s about keeping records straight with HASiL. In fact, if you operate at a loss, it doesn’t necessarily mean you’ll be taxed. But the key point is: you still need to file your taxes.

Especially for those who have other income, like a salary or side hustle, everything will be assessed under Form B – the tax form used by individuals who run a business. Taxation may still apply based on the combined income.

Reference from subsection 77(1) of the Income Tax Act 1967

Every person, other than a company, limited liability partnership, trust body or co-operative society to which section 77A applies, shall for each year of assessment furnish to the Director General a return in the prescribed form—

(a) in the case of that person who is carrying on a business, not later than 30 June in the year following that year of assessment; or
(b) in any other case than the case in paragraph (a), not later than 30 April in the year following the year of assessment:

Provided that that person has—

(a) chargeable income for that year of assessment; or
(b) no chargeable income for that year of assessment, but has chargeable income or has furnished a return or has been required under this Act to furnish a return, for the year of assessment immediately preceding that year of assessment.

What if I choose not to comply on my tax filing?

Failing to submit your return is a criminal offence and may be charged with the following sections of the Income Tax Act 1967.

IF, HASiL had chose to prosecuted you….

Failure to submit 1 YA of ITRF, Subsection 112(1) of the Income Tax Act 1967, you could face:

“A fine ranging from RM200 to RM20,000 or imprisonment for up to six months, or both, upon conviction.”

or

Failure to submit 2 or more YAs of ITRF, Subsection 112(1A) of the Income Tax Act 1967, you could face:

“A fine ranging from RM1,000 to RM20,000 or imprisonment for up to six months, or both, AND a special penalty triple of the amount based on HASiL best judgement upon conviction.”

Where, when you thought thats the end? not quite so.

Under Subsection 112(2A) of the Income Tax Act 1967,

Where a person has been convicted under subsection (1), the court shall in addition to any penalty imposed under that subsection order that person to furnish the return or give the notice within 30 days from the date of the order.

Which simply means you eventually still had to submit your ITRF.

So HASiL will definitely prosecute all people who did not furnish their ITRF?

Not quite. If in a lucky circumstance, you were not prosecuted by HASiL, they still had the power to raised a best judgement assessment under subsection 90(3) on you with the following consequences.

Subsection 112(3) of the Income Tax Act 1967 kicks in for non-prosecution cases. with the failure of submission of ITRF

“A penalty equal to triple of the amount of tax which, before any set-off, repayment or relief is payable for that year”

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Benefits on a Taxpayer perspective

Transparency with IRBM – It ensures your records are complete and transparent with the IRBM.

Reduce other income source tax payable – If you have other income sources, business losses can be used to offset income in the same year — legally reducing your tax payable.

Losses can be carried forward – Business losses can also be carried forward up to ten (10) YAs to offset future business profits, helping reduce tax in profitable years. – S44 ITA 1967.

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In Short.. Whether its taxable or non-taxable. if you are under the below category, please file your taxes.

• Person who had filed their taxes previously
• Employment income more than RM 34,000
• Person who had a business (regardless in operational profit or loss position)

Disclaimer: Content posted here does not constitute as any official tax advice. Please refer relevant act, rules, public ruling, official website, LHDN guideline or engage a licensed tax agent as your final reference.