How many years can unabsorbed business losses can be carried forward?

01Public Ruling 1/2022 - Time limit on unabsorbed adjusted business losses carry forward

IRB has produced the first public ruling of 2022 !

The objective of this Public Ruling (PR) is to provide an explanation on the time limit for unutilised or unabsorbed adjusted business losses arising from a business of a person to be carried forward.

02Background

Effective year of assessment 2019, unabsorbed adjusted business losses carried forward for a period of 7 consecutive years of assessment.

But…subsequently.

The time limit for unabsorbed adjusted business losses carried forward arising from a relevant year of assessment change from a 7 consecutive years of assessment to 10 consecutive years of assessment through the Finance Act 2021 [Act 833] effective year of assessment 2019.

03Tax Implication

Any balance of unabsorbed adjusted business losses after the

end of the period of 10 consecutive years of assessment is to be disregarded (ie lost).

04T & C on Dormant Companies Solely

There has been no substantial change in the company’s shareholding.

By shareholding, Compare the last day of last YA and the first day of next YA on shareholding.

• More than 50% of the paid-up capital.
• More than 50% of the nominal value of the allotted shares.

05Sections 44(5A) to (5D) – shareholder continuity rules

In a nutshell, where the shareholding of a company was changed substantially during a basis period, any unabsorbed loss and capital allowance brought forward were disregarded – ie were effectively lost forever.

These provisions have been somewhat suspended or deferred as it has been confirmed by the tax authorities that these rules are only applicable in the case of a substantial change of shareholding in dormant companies.

This is further validated via

• Form C guidebook page 8
• Post budget technical
• LHDN dasar dan garis panduan untuk menbenarkan kerugian terkumpul dan elaun modal yang tidak diserap dibawa ke hadapanhttps://phl.hasil.gov.my/pdf/pdfam/GP_Membenarkan_kerugianterkumpul.pdf

06Source

Public Ruling 1/2022 Time limit on unabsorbed adjusted business losses carry forward

https://phl.hasil.gov.my/pdf/pdfam/PR_01_2022.pdf

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