What is the penalty of late filing to IRB and SSM for my Sdn Bhd?

1) Late Filing to IRB/LHDN

Generally, the standard penalties that will be imposed by IRB for late submission of tax return form is according to:

Section 112 of Income Tax Act 1967 - Failure to furnish return or give notice of chargeability

a) Section 112 (1) Failure to furnish return for one (1) YA

Penalty: RM200 – RM20,000; or

Imprisonment: not exceeding 6 months; or Both

b) Section 112 (1A) Failure to furnish return for two (2) YAs or more

Penalty: RM1,000 – RM20,000 and triple of tax payable with DG best judgement; or

Imprisonment: not exceeding 6 months; or Both

c) Section 112 (3) of Income Tax Act 1967

Penalty: Triple of the tax payable for the YA

However, in normal practice, IRB will charge the penalties based on the:

Operational Guidelines GPHDN 3/2020 - Guidelines on the imposition of penalties for failure to furnish tax returns

The Inland Revenue Board (IRB) has issued Operational Guidelines GPHDN 3/2020 - Imposition of penalties under subsection 112(3) of the Income Tax Act 1967, subsection 51(3) of the Petroleum (Income Tax) Act 1967, and subsection 29(3) of the Real Property Gains Tax Act 1976, dated 13 August 2020.

It replaced the earlier issued GPHDN 5/2019 of the same title that revokes Operational Guidelines GPHDN 1/2015 dated 5 March 2015, which only covered penalties under subsection 112(3) of the Income Tax Act 1967.

The following table set out the penalty rates for late filing as provided in the new guidelines.

Late filing period Penalty rate (%)

Within 12 months 15%
More than 12 months to 24 months 30%
More than 24 months 45%

• In normal practice, LHDN will directly impose a 45% penalty on the tax payable amount when a taxpayer has failed to furnish the return form in the prescribed time limit.

• LHDN will then issue a Form J letter detailing the penalty amount to the taxpayer and the amount must be paid within 30 days from the date of the letter.

• If the taxpayer fails to remit the tax amount before the due date, the Company will be liable for a penalty of 10% on unpaid tax.

• If the late filing period is less than 24 months, the taxpayer can submit the tax appeal to LHDN to request for the reduction of the penalty rate from 45% to 15% or 30% depending on the actual period the tax return form was submitted.

2) Late Filing to SSM

i) Lodgement of Annual Return (AR)

Section 68(1) of Companies Act, 2016 require a company to lodge the AR to SSM not later than 30 days from the anniversary of its incorporation date.

Penalty: Fine not exceeding RM50,000.00

ii) Prepare Financial Statements

Section 248(1) of Companies Act, 2016 require a company to prepare the financial statements within 6 months of its financial year end.

Penalty: Fine not exceeding RM500,000.00 or imprisonment not exceeding 1 year or both

iii) Circulation of Financial Statements

Section 258(1) of Companies Act, 2016 require a company to circulate the financial statements within 6 months of its financial year end.

Penalty: Fine not exceeding RM50,000.00

iv) Lodgement of Financial Statements

Section 259 (1) of Companies Act, 2016 require a company Lodge the financial statement to SSM within 30 days from the circulation date.

Penalty: Fine not exceeding RM50,000.00 and if continuing offence, a further fine not exceeding RM1,000 for each day

In addition to the penalties as stated above, SSM also issued a Practice Directive No.1/2017 – The Lodgement Requirements and Related Matter that further details out the penalty for late lodgement of documents.

For any documents that is lodged to SSM later than the prescribed timeframe as per stipulated in the Act, the following late lodgment penalty shall apply:

After deadline Penalty(RM)

7 days to 3 months 50
4 months to 6 months 100
7 months to 12 months 150
13 months onward 200

The Company is required to pay this penalty amount on the spot at the time filing for the documents to SSM.

Authored by Kam Shi Zhen (Bryan), a junior associate with the Firm.

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