(TAX UPDATE) What is Tax Corporate Governance (TCGF) Malaysia?

(TAX UPDATE) What is Tax Corporate Governance Framework (TCGF) Malaysia?

From 2025 onwards, the corporate tax return (Form e-C) includes a new question : “Has your company implemented tax governance?”

If you tick “No”, the company might appear as a higher-risk taxpayer.

If you tick “Yes” without proper governance in place, you risk making an incorrect declaration—and potential penalties.

This makes tax governance more than just compliance. It is about transparency, risk management, and readiness.

Why Did IRBM Introduce TCGF?

The Inland Revenue Board of Malaysia (IRBM) has launched the Tax Corporate Governance Framework (TCGF) to encourage companies to adopt structured processes to identify, assess, and mitigate tax risks.

A “Yes” in the Form e-C declaration means the organisation has proper governance in place, backed by documentation and verification.

What is TCGF?

TCGF is a structured framework built on six principles:

  • Tax strategy established

  • Applied comprehensively

  • Responsibility assigned

  • Governance documented

  • Testing performed

  • Assurance provided

The aim is to make tax governance systematic, transparent, and aligned with good corporate practices.

Why Join?

Companies that adopt TCGF can enjoy:

  • Reduced tax audit scrutiny

  • Faster tax refunds

  • A dedicated IRBM officer

  • Priority consideration on compliance issues

  • Lower penalties for voluntary disclosure

Who Can Apply?

  • Public Listed Companies (PLCs)

  • Government-Linked Companies (GLCs) and State-Owned Enterprises (SOEs)

  • Large companies with turnover of RM100 million and above

  • Compliant taxpayers with a proper Tax Control Framework (TCF)

Exclusions:

  • Investment holding companies

  • Dormant companies

What You Need to Do

  • Publish your tax strategy every year (on your website, annual report, or another public medium)

  • Submit participation form and TCGF checklists (Appendix 1 and 2 of the guidelines)

  • Undergo IRBM’s review on adequacy and effectiveness of your Tax Control Framework

Bonus : Tax Relief

Expenses incurred in implementing TCGF may qualify for tax deduction up to RM50,000 per year (YA 2024–2027), recognised as ESG-related costs.

Should SMEs Join TCGF?

The TCGF was primarily designed for large corporations such as PLCs, GLCs, SOEs, and companies with turnover above RM100 million.

SMEs are not the main target group, but the principles are still useful.

Why SMEs Should Care

  • Builds a culture of compliance

  • Reduces audit risk through better documentation

  • Prepares for possible future regulations

  • Enhances credibility with banks, investors, and business partners

Challenges for SMEs

  • Resource Intensive: Setting up governance, documentation, and reviews can be costly.

  • Not Mandatory: SMEs are not officially included in the TCG Programme, so the incentives may not apply.

  • Proportionality: A “lightweight” governance approach may be more practical than full compliance.

Final Thought

The new “Yes/No” on tax governance in Form e-C is not just a formality.

Tick “No” … will LHDN see you as high-risk?
Tick “Yes” without proof … are you exposing yourself to penalties?

We’ll have to wait for clearer guidance from LHDN.

KTP Current Tax Opinion

For SMEs, joining the TCG Programme may not be practical due to resource constraints.

In such cases, the correct approach is to tick “No” in the Form e-C declaration unless the company has comprehensive tax governance documentation that has been reviewed and verified by an auditor, tax agent, or independent third party.

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