Even in Loss, Your Business May Still Be Taxable In The Following Situation!

Company Losses ≠ Tax Exemption!
Even when a business is operating at a loss, the following situations may still be taxable

1. Bad Debt Written Off

If a customer goes bankrupt or disappears, uncollectible debts can only be deducted if:

1. The income was previously declared.
2. There’s solid proof it’s unrecoverable (e.g., demand letters, legal or bankruptcy documents).

**Without sufficient evidence, LHDN will disallow the deduction — even loss-making companies may still be taxed.

2. Advance Income

Customer deposits for services not yet delivered:

1. Accounting: Recorded as a liability.
2. Tax: If non-refundable, it’s taxable in the year received.

**Tax applies even before the service is provided.

3. Deemed Interest

When directors use company funds (“Amount Owing from Director”), LHDN treats it as a loan, assuming interest income.

Example: RM100,000 × 6% = RM6,000 taxable interest.

**Last Updated on 08.10.2025