Dormant Company in Malaysia? Why You May Still Owe LHDN — and What to Do About It

By Kent Chia, Chartered Accountant (Malaysia), Managing Proprietor, KS Chia & Associates (AF001828)
Published: 22/05/2026  |  Last updated: 28/09/2026

Directors often tell us, “The company never did anything, so there’s nothing to file.” LHDN does not see it that way. It does not know a company is dormant unless the company tells it, and the way a company tells LHDN is by filing. Silence is treated as non-compliance, not as inactivity.

What Must a Dormant Company in Malaysia Still File?

A point often misunderstood about 2014. LHDN’s website says dormant companies must furnish the return form, including Form E, from YA 2014. Some directors read this as “Form C only started in 2014”. That is not the law. Section 77A has always required every company to file Form C for each year of assessment. What changed in 2014 was administrative: before then, LHDN gave some dormant companies exemption letters on application, and those letters were cancelled from 18/08/2014. At the same time, LHDN made clear that every company, dormant or not, must file Form E. A company that never held an exemption letter was always required to file Form C.

For the audit exemption rules, see our article on audit exemption and what your bank may still require.

How Does a Dormant Company End Up With Tax Arrears?

There are two common routes. The one in our case above is the simpler one: Form E not filed → late filing penalty → penalty unpaid → CP270. The heavier route starts with Form C:

1. Form C is not filed. LHDN has no return from the company.
2. LHDN raises an estimated assessment. Section 90(3) allows LHDN to assess chargeable income on its best judgment where no return has been furnished. The figure is LHDN’s, not the company’s. Once issued, the company must prove it wrong.
3. A penalty is added. For failing to file, LHDN can impose a penalty under Section 112(3) instead of prosecuting.
4. The unpaid amount becomes tax arrears. LHDN issues a CP270, a notice of tax arrears (Makluman Tunggakan Cukai Pendapatan). It states the amount owed up to a given year of assessment and gives 21 days to pay or contact the LHDN branch.
5. Recovery action. The CP270 warns that if the arrears are not settled, LHDN may take civil recovery action under the Income Tax Act 1967 without further notice.

Either way, a CP270 is not the first warning. It means a penalty or assessment has already been raised and left unpaid. The same best judgment power is what LHDN uses in its means test cases; see our article on the LHDN means test.

How fast do the amounts build up? The figures below come from an LHDN tax position statement (Penyata Kedudukan Cukai) for a company in our files that did not file its YA 2024 return:

That is one year of assessment, reaching almost RM38,500 within four months of the estimated assessment. Note that the instalment penalties are raised immediately for each missed month. They do not wait for the year end. A company that stops paying its CP204 instalments because it believes it is inactive starts collecting penalties from the first missed month.

Can the directors be made to pay? Yes, in some cases. Under Section 75A, a director is jointly and severally liable with the company for tax due and payable by the company. For this purpose, “director” means a person who is concerned in the management of the company and who, alone or with associates, owns or controls at least 20% of its ordinary share capital. The liability applies to whoever was a director during the period the tax was payable. LHDN can recover from the director through civil action under Section 106, and can also restrict the director from leaving Malaysia under Section 104. This is the stoppage order in Case 2 above. The 20% threshold has applied since the Finance Act 2014; before that, it was more than 50%.

How Do You Close a Dormant Company Properly?

The order matters. SSM’s strike-off guidelines require that the company has no outstanding tax or other liabilities with any government department or agency, no assets and liabilities, and no legal proceedings. So SSM comes last.

Before a notice, the company controls the timing and the figures. After a notice, it is working to LHDN’s timeline and starting from LHDN’s estimate.

What Happens If You Apply to SSM for Strike-Off First?

Many directors start with SSM, because that is where the company was registered. The application then stalls. SSM requires the company to have no outstanding tax or other liabilities with any government agency, so unfiled Form C and Form E, a CP270, or any tax arrears must be dealt with before the strike-off can go through.

Starting with SSM also does not stop LHDN. Penalties and recovery action carry on while the strike-off is pending. The practical order is always LHDN first, then EPF and SOCSO if registered, and SSM last.

Frequently Asked Questions

Does a dormant company in Malaysia need to file Form C?

Yes. Section 77A of the Income Tax Act 1967 requires every company to file Form C for each year of assessment, whether or not it has any business or income. Dormancy is not an exemption.

Does a dormant company need to file Form E?

Yes. From 2014, every company must file Form E each year, including dormant companies and companies with no employees.

What is a CP270 notice from LHDN?

A CP270 is a notice of tax arrears (Makluman Tunggakan Cukai Pendapatan). It states the income tax owed up to a given year of assessment and asks the company to pay within 21 days or contact the LHDN branch. If the arrears are not settled, LHDN may take civil recovery action without further notice.

Why would a dormant company with no income owe tax?

Because penalties for not filing are raised whether or not there is income. A missed Form E alone can lead to late filing penalties. If Form C is not filed, LHDN can also raise an estimated assessment under Section 90(3). Unpaid penalties and assessments become tax arrears, even for a company with no income.

Can directors be personally liable for a company’s unpaid tax?

Yes. Under Section 75A of the Income Tax Act 1967, a director who is concerned in management and owns or controls at least 20% of the ordinary share capital, alone or with associates, is jointly and severally liable for tax payable by the company. LHDN can recover from the director through civil action and may restrict the director from leaving Malaysia.

Can LHDN stop directors of a dormant company from travelling?

Yes. Where a company has unpaid tax, LHDN can recover it from certain directors under Section 75A, and can restrict those directors from leaving Malaysia under Section 104. We have seen this happen to directors who stopped filing for a company they considered inactive.

What happens if a company misses a CP204 monthly instalment?

LHDN adds a 10% increase on each instalment not paid on time under Section 107C(9), and it is raised for each missed month, not at the end of the year. If the company then does not pay the tax by the due date, a further 10% increase under Section 103 can apply.

Can a dormant company be struck off with unfiled tax returns?

No. SSM’s strike-off guidelines require that the company has no outstanding tax or other liabilities with any government department or agency. LHDN matters must be cleared before applying to SSM.

Do I need to close EPF and SOCSO if the company never had employees?

Only if the company registered with EPF or SOCSO. A registration stays open until it is formally closed, whether or not any contributions were made. If the company never registered, there is nothing to close.

Does a dormant company still need to lodge financial statements with SSM?

Yes. A dormant company must still lodge its annual return and financial statements with SSM each year. It may qualify for audit exemption, but it must still prepare financial statements.

Sources: Income Tax Act 1967, Sections 75A, 77A, 90(3), 103, 104, 106, 107C and 112(3); LHDN, company taxpayer responsibilities; LHDN form CP270 (Makluman Tunggakan Cukai Pendapatan); CTIM technical circular on dormant companies and filing of ITRF (2014); SSM, guidelines for application to strike off under Section 550. This article is general information and is not tax advice for any specific company.