How far back can LHDN audit my company or raise additional tax?
LHDN can generally raise an additional assessment within five years after the end of the year of assessment, and seven years for transfer pricing. These limits do not apply to fraud, wilful default or negligence.
The Income Tax Act sets time limits for LHDN to assess more tax.
Time limits (s.91 of the Act):
- Additional assessments can be made in the year itself or within five years after it ends (s.91(1)).
- For transfer pricing adjustments the limit is seven years (s.91(5)).
- There is no time limit where there is fraud, wilful default or negligence (s.91(3)).
Audit scope: LHDN decides which years to examine, usually starting with the most recent, and can widen the review if issues arise.
Record-keeping: ss.82 and 82A require records and documents to be kept for seven years, which is longer than the five-year assessment limit.
What an audit looks like: LHDN writes to the company, asks for accounts and documents, may visit, and then issues findings with proposed adjustments and penalties. Cooperating promptly and correcting errors voluntarily before an audit starts is usually treated better than being found out.
Penalties on audit findings follow ss.103, 112 and 113; see the separate answers.
Legal basis
- Income Tax Act 1967, s.91(1), (3) and (5)
- Income Tax Act 1967, ss.82 and 82A
Sources
Applies to YA 2026 · Last reviewed 29 October 2026
General information for business owners, not legal, tax or professional advice. Rules change, so check the sources or ask a licensed professional before you act.
Related questions
- What is the penalty if my CP204 estimate is too low?For companies the penalties sit in s.107C. If tax payable exceeds the latest estimate by more than 30% of the tax payable, 10% is charged on the part of the excess above that 30% (s.107C(10)). An instalment not paid by its due date carries 10% of the unpaid amount (s.107C(9)). With no estimate at all, 10% is added to the tax payable.
- What is the penalty for not issuing e-invoices in Malaysia?Non-compliance can be prosecuted under s.120(1) of the Income Tax Act, with a fine of RM200 to RM20,000, up to six months in prison, or both. LHDN will not prosecute during the relaxation period if the consolidated e-invoice conditions are met, and has a voluntary disclosure programme to 31 December 2027.
- What should I do when LHDN sends my company an audit or query letter?Read the deadline, appoint a tax adviser if needed, collect the documents requested, reply on time, and correct any errors you find. Ignoring a notice for information can itself be an offence with a fine of RM200 to RM20,000.
- What is the penalty for understating income or giving incorrect information on a tax return?On prosecution, s.113(1) carries a fine of RM1,000 to RM10,000 plus 200% of the tax undercharged. Wilful evasion under s.114 can mean 300%, a fine of RM1,000 to RM20,000 and up to three years in prison. LHDN can instead require a penalty of 100% of the tax undercharged under s.113(2).
- What is the corporate tax rate for a small company in Malaysia?A Malaysian resident company normally pays 24% income tax. A company that meets the SME conditions pays 15% on the first RM150,000 of chargeable income, 17% on the next RM450,000 (up to RM600,000), and 24% on anything above that.