How long can a Malaysian company carry forward its tax losses?
Unused business losses can be carried forward for up to 10 consecutive years of assessment, against income from the same business. They cannot be carried back. A dormant company loses its losses if more than half of its shareholders change.
A loss on the tax computation is not wasted, but there are limits.
Time limit: PwC's summary says unutilised business losses can be carried forward for up to ten consecutive years of assessment. Budget 2022 extended the limit from seven years, and LHDN Public Ruling 1/2022 covers the details. Some older guides still show seven years.
Same business source: carried-forward losses are generally offset only against income from the same business. They cannot be carried back.
Capital allowances: unabsorbed capital allowances can be carried forward without a time limit, subject to the same business-source rule (PwC).
Dormant company rule: if a dormant company has a substantial change in shareholders (more than 50%), brought-forward losses are disregarded unless the continuity test is met. Public Ruling 1/2022 treats a company as dormant where it had no significant accounting transactions beyond minimum compliance costs in the year before the change.
Practical tip: record the year each loss arose so you know when each layer expires.
Buying or selling a loss-making company needs tax advice before signing.
Legal basis
- Income Tax Act 1967, s.44(5) and s.44(5F)
- LHDN Public Ruling No. 1/2022
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
- How long must a Malaysian company keep its accounting and tax records?Seven years. LHDN tells employers to keep records for seven years and to make them easy to retrieve. Failing to keep proper records without reasonable excuse is an offence, with a fine of RM300 to RM10,000, up to a year in prison, or both under s.119A.
- 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.
- What conditions must my company meet to get the SME tax rates in Malaysia?To use the lower 15%/17% rates, the company must be resident, have ordinary paid-up capital of RM2.5 million or less, and gross business income of RM50 million or less. It must also pass the related-company test and, from YA 2024, a foreign-ownership test.
- Does a dormant company with no income still have to file a tax return in Malaysia?Yes. LHDN says companies that are dormant or have not started business must still register a tax file and file returns. A nil return tells LHDN there is no taxable income, and failing to file can be an offence even when no tax is due.
- What is the Year of Assessment and how does it relate to my financial year?The Year of Assessment (YA) is the calendar year in which your company's accounting year (the basis period) ends. A company with a financial year ending 30 June 2025 reports that income in YA 2025.