LHDN Penalties & Tax Offences in Malaysia 2025: Complete Guide

The IRBM, commonly known as LHDN, oversees the administration and enforcement of Malaysia’s national tax system. Its responsibilities extend beyond revenue collection to include audits, investigations, and the imposition of penalties designed to safeguard financial integrity.

As Malaysia strengthens compliance under the Income Tax Act 1967 and supporting legislation, the 2025 penalty framework reflects a firm approach toward tax governance.

Income Tax Related Penalties

General Tax Offences

1. Failure to furnish income tax return (Section 112(1)) Fine between RM200 and RM20,000 and/or imprisonment up to six months.
2. Failure to give notice of chargeability (Section 112(1)) Same penalty range as above.
3. Incorrect return or understatement of income (Section 113(1)(a)) Fine between RM1,000 and RM10,000 plus 200% of tax undercharged.
4. Providing incorrect information (Section 113(1)(b)) Same penalties as incorrect return submission.
5. Wilful tax evasion (Section 114(1)) Fine between RM1,000 and RM20,000, imprisonment up to three years, and 300% penalty on tax undercharged.
6. Assisting in tax under-declaration (Section 114(1A)) Fine between RM2,000 and RM20,000 and/or imprisonment up to three years.
7. Leaving Malaysia with unpaid tax (Section 115(1)) Fine between RM200 and RM20,000 and/or imprisonment up to six months.
8. Obstructing authorised officer (Section 116) Fine between RM1,000 and RM10,000 and/or imprisonment up to one year.
9. Failure to maintain records (Section 119A) Fine between RM300 and RM10,000 and/or imprisonment up to one year.
10. Failure to comply with notice or update address (Section 120(1)) Fine between RM200 and RM20,000 and/or imprisonment up to six months.

Penalties on Income Tax Return Filing

Late submission of Income Tax Return Forms may result in prescribed tax increases or penalties under the Income Tax Act.

Late payment of tax attracts an automatic 10% penalty. If unpaid after sixty days, an additional 5% penalty is imposed.

Late Payment Related Penalties

1. Non-business income paid after 30 April attracts a 10% increase under Section 103(3).
2. Business income paid after 30 June attracts the same 10% increase.

Estimated Tax Payment Penalties

1. Late instalments beyond 30 days incur a 10% penalty under Section 107B(3).
2. If actual tax exceeds revised estimate by 30% or more, a further 10% penalty applies on the difference under Section 107B(4).

E-Invoicing Non-Compliance

Under Section 120(1), failure to issue an E-invoice, self-billed invoice, or consolidated transaction invoice is an offence. Penalties range from RM200 to RM20,000 and may include imprisonment up to six months.

Withholding Tax Non-Compliance

Under Section 107D, failure to deduct or remit withholding tax results in liability equal to the unpaid tax plus a 10% surcharge. Continued default may result in the expense being disallowed until settlement.

Transfer Pricing Penalties

Failure to prepare or furnish Transfer Pricing Documentation under Section 113B may result in fines between RM20,000 and RM100,000 and imprisonment up to six months.

Stamp Duty Penalties (Stamps Act 1949)

1. Within 3 months: RM25 or 5% of deficient duty (whichever higher).
2. Between 3–6 months: RM50 or 10% of deficient duty (whichever higher).
3. After 6 months: RM100 or 20% of deficient duty (whichever higher).

RPGT Act 1976 Penalties

1. Failure to submit CKHT forms within 60 days may result in penalty up to three times the tax charged.
2. Incorrect return under Section 30(2) may attract penalty equal to tax under-declared.
3. If incorrect return causes failure to remit tax, a 10% increase applies under Section 14(5).

Conclusion

Malaysia’s 2025 penalty framework reflects an increasingly structured and assertive tax governance environment. Businesses and individuals must remain diligent in meeting filing obligations, maintaining accurate records, and complying with e-invoicing and withholding tax requirements.

As compliance becomes more data-driven, organisations benefit from adopting systems that reduce operational risk and improve accuracy. Platforms such as Accqrate support this shift by enabling consistent and compliant financial processes.