MITRS Doesn’t Create New Tax Risks — It Makes Existing Ones Easier to See

By Kent Chia, Chartered Accountant (Malaysia), Managing Proprietor, KS Chia & Associates (AF001828)
MITRS series, Part 2 of 5  |  Published: 06/08/2026  |  Last updated: 27/09/2026

We have had this conversation with directors more than once.

Director: “My friend company claim this also. Never kena before.”

We do not answer “can claim or not”. We ask: “If LHDN reads your accounts, tax computation and schedules together next year, can we explain this claim?”

That question always mattered. MITRS brings it forward. In Part 1, we set out what the four MITRS documents show LHDN. This part is about the claims inside them. Part 3 sets out the five checks we run before submission.

Why Is Filing Form C First No Longer Enough?

Before MITRS, many SMEs worked to one target: get Form C in before the deadline. Form C went in based on the tax computation. The accounts were lodged with SSM. The schedules stayed with the company or the tax agent. The three sets of documents only met when LHDN opened a tax audit or issued a CP700.

MITRS closes most of that gap. The accounts, computation, capital allowance schedule and incentive computation must reach LHDN within 30 days after the Form C due date. So the real question at filing time is no longer “can we submit Form C?” It is “can these four documents stand together?” That work has to be done before the 30-day window opens, not during it.

Which Mindsets Put a Tax Claim at Risk?

Because of that gap, many businesses judged a tax position by one simple test: has anyone asked about it yet? If nobody asked, it felt safe. If a friend’s company did the same, it felt safer. That is the wrong test. We usually hear it in one of three forms.

“My friend company claim also”

What another company claims is not a defence. We see treatments passed on from business associates, previous accountants and “industry practice”. Whether another company claimed an item, whether LHDN queried it, and whether it was finally allowed are three separate questions. The first tells you nothing about the other two. An item nobody has looked at has not been accepted. It has simply not been reviewed.

“LHDN won’t know one lah”

This only worked while the documents sat in different places. Under MITRS they arrive as a set. An expense that used to disappear inside a Form C total such as “other expenditure” or “professional fees” may now be a named line in the notes to the accounts, sitting next to the computation that claimed it.

“Never kena before”

More information now reaches LHDN digitally around filing time, through e-Invoice and now MITRS. A position that was not queried in an earlier year is not protected for that reason. LHDN can generally raise an additional assessment within five years after the end of the year of assessment, and there is no time limit where there is fraud, wilful default or negligence (Section 91). YA 2021 and later years are still open today.

Which Expenses Usually Lead to Disputes?

In our experience, very few tax problems start with a dishonest transaction. Most start with an assumption. “The previous accountant never adjusted it.” “Last year no problem.” The expense goes in, nobody revisits it, and after a few years everyone treats it as deductible.

Disputes rarely come from salaries, rental or electricity. They come from expenses where the answer depends on the facts, the purpose, and the evidence.

None of these is automatically disallowed, and none is automatically allowed. The answer turns on the facts and whether you can prove them. Under Form C, most of these sat inside broad totals. Under MITRS, the accounts may show them separately. The supporting papers need to be ready before submission, not put together after a CP700 arrives.

Does MITRS Change What Is Tax Deductible?

No. Section 33(1) still sets the basic test: the expense must be wholly and exclusively incurred in the production of gross income. Section 39 still lists what cannot be deducted. The rules on capital allowances, withholding tax, transfer pricing and incentives are the same as before YA 2025.

What has changed is how much of the supporting information LHDN sees, and when. Take a company that claims RM200,000 of management fees. Before MITRS, LHDN saw a figure inside Form C item 15 and nothing more unless it issued a CP700. Under MITRS, the accounts submitted with the computation may show that the fee was paid to a related party, what the service was, and how much, all in one package.

The fee is no more and no less deductible than it was. But whether it can be supported is now a question LHDN can ask much earlier.

What Should You Ask Before Filing a Doubtful Claim?

Before a contested item goes into a computation, we do not ask whether it can be keyed into the ledger, whether someone else has claimed it, or whether anything was raised in past years. We ask one thing:

If LHDN reads the accounts, tax computation and schedules together, can this position be explained and supported?

If yes, because the expense is genuine, the papers are in order and the treatment follows the law, file it with confidence. If the honest answer is “probably, but not sure”, that is the gap to close before submission.

A tax position should not be judged by whether it can be claimed. It should be judged by whether it can be defended.

Frequently Asked Questions

Does MITRS change which expenses are tax deductible?

No. Deductibility is still decided by Sections 33(1) and 39 of the Income Tax Act 1967. MITRS changes when LHDN sees the supporting information: the financial statements, tax computation and schedules now reach LHDN within 30 days after the Form C due date.

If another company claims the same expense, is my claim safe?

No. Another company’s claim is not a defence. Whether it was claimed, whether LHDN queried it and whether it was finally allowed are separate questions. Each claim stands on your own facts and documents.

If LHDN never queried a claim before, can it still be challenged?

Yes. LHDN can generally raise an additional assessment within five years after the end of the year of assessment under Section 91 of the Income Tax Act 1967, with no time limit where there is fraud, wilful default or negligence.

Which expenses most often lead to disputes with LHDN?

In our experience, expenses where the answer depends on facts and evidence: motor vehicles, travel, entertainment, club membership, home utilities, management fees to related parties, and legal fees. None is automatically allowed or disallowed.

When should supporting documents for a claim be prepared?

Before the MITRS submission. The documents that support a claim should be on file when the accounts and computation are uploaded, not gathered after LHDN issues a CP700.

Sources: Income Tax Act 1967, Sections 33(1), 39, 82B and 91; LHDN Public Ruling No. 4/2015, Entertainment Expense; Section 82B introduced by the Finance (No. 2) Act 2023; LHDN, Filing Programme for Documents Specified Under Section 82B through MITRS. This article is general information and is not tax advice for any specific company.

MITRS series: Part 1: What your financial statements tell LHDN  |  Part 2: Can you defend the claim?  |  Part 3: Five checks before submission  |  Part 4: MITRS and e-Invoice  |  Part 5: MITRS readiness review  |  MITRS Section 82B deadline and penalties