(TAX UPDATE) From FAM to LHDN : What “Technical Errors” Really Mean

(TAX UPDATE) From FAM to LHDN: What “Technical Errors” Really Mean

The Football Association of Malaysia (FAM) now blames its administrative staff for “technical errors” in documents submitted to FIFA. Classic move!

When things go wrong, the easiest escape hatch is to point the finger at the back office and technical erorrs. After all, who can argue with the mysterious world of paperwork and clerical mistakes?

But here’s the thing: whether it is football administration or tax compliance, blaming “technical errors” is not new.

What Counts as a Technical Error?

Section 131 of the Income Tax Act 1967 (ITA) recognizes what we call technical errors. These are non-deliberate mistakes in your tax return : errors of fact, arithmetic, misinterpretation of law, or simple omissions. In many cases, they can form the basis for relief or even remission of penalties.

Common scenarios include:

  • Forgetting to claim allowable deductions (insurance, zakat, donations, children’s relief).

  • Misstating income or expenses because of wrong facts.

  • Typing or computation mistakes in tax calculations.

  • Misunderstanding a tax provision or incentive.

  • Omissions that happened by accident, not design.

The law is clear : these errors must be unintentional. Any act of negligence or deliberate evasion will not qualify.

Can Penalties Be Waived?

Yes! Technical errors are a recognized ground for penalty remission. The Inland Revenue Board (IRB) for direct taxes allow remission if the taxpayer can prove the error was genuine.

IRB may waive penalties if the mistake was due to a technical reason and not negligence or fraud.

Applications are assessed case-by-case. Strong evidence of the mistake, timely disclosure, and full payment of the corrected tax liability all improve your chances.

What You Need to Do

If you believe a penalty was triggered by a technical error:

  • Prepare a detailed explanation : What happened, why it qualifies as a technical error, and how you corrected it.

  • Provide supporting documents : Revised computations, correspondence, or records proving the error.

  • File a formal application : Use the appropriate forms (e.g., CP15C or relief letter) or remission program channels.

  • Act quickly : Relief applications generally must be made within five years after the year of assessment. For penalty remissions under Customs schemes, deadlines are strict.

The Reality: What’s the Success Rate?

Here’s the practical truth. While the law provides room for relief, approvals are not automatic. In practice:

  • Genuine, well-documented errors often succeed.

  • Late applications, vague explanations, or poor records face rejection.

  • Errors based on IRB’s known practice at the time of filing usually do not qualify for relief, since they are not considered “mistakes.”

Based on industry experience, remission applications citing technical errors see moderate success (susah) enough to make them worthwhile, but not guaranteed. Authorities weigh each case carefully, balancing fairness with the need to deter negligence.

Key Takeaway for SMEs

Technical errors are not a free pass, but they are a valid lifeline when penalties strike. If you can show the error was unintentional, properly explained, and backed by evidence, remission is possible.

For SMEs, the lesson is simple:

  • Keep detailed tax records.

  • Review returns carefully.

  • When mistakes happen, act fast and apply for relief.

A timely, well-prepared application can turn a costly penalty into a learning point—and keep your cash flow intact.

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