Casting a Wider Net against Tax Defaulters
26 November 2025
The Malaysian Government has in the past launched various measures to improve revenue collections. These measures include imposing personal liability on company directors and prohibiting tax defaulters from travelling abroad. In recent years, the Inland Revenue Board has also intensified conducting tax audits on taxpayers.
In 2011, the Malaysian Government amended the following legislation
1 to introduce a set-off clause into each of the said legislation:
- Income Tax Act 1967;
- Real Property Gains Tax Act 1976; and
- Petroleum Income Tax Act 1967,2
(individually “Initial Act” and collectively “Initial Acts”).
The set-off clauses, inter alia, provide that where an excess amount of tax has been paid and a refund is due to the taxpayer:
- under an Initial Act (“Relevant Initial Act”), the Director General of Inland Revenue (“DG”) may, instead of refunding the excess amount, utilise the same to pay any other amount of tax due and payable by that taxpayer under the Relevant Initial Act or any other Initial Act; and
- under any Initial Act other than the Relevant Initial Act, the DG may, instead of refunding the excess amount, utilise the same to pay any other amount of tax due and payable by that taxpayer under the Relevant Initial Act.
In its latest move to improve tax collections and to align the Stamp Act 1949 and the Labuan Business Activity Tax Act 1990 (individually “Additional Act” and collectively “Additional Acts”) with the Initial Acts, the Government proposes to introduce similar set-off provisions into the Additional Acts under the Finance Bill 2025 (“2025 Bill”).
The 2025 Bill will amend the Additional Acts to provide, inter alia, that any excess amount of stamp duty or tax that is refundable to the taxpayer:
- under an Additional Act (“Relevant Additional Act”) may be utilised by the Collector of Stamp Duties or the DG, as the case may be, to pay any other amount of stamp duty or tax which is due and payable by that taxpayer under any of the Additional Acts or the Initial Acts;
- under the other Additional Act or any of the Initial Acts may be utilised by the Collector of Stamp Duties or the DG, as the case may be, to pay any other amount of stamp duty or tax which is due and payable by that taxpayer under any of the Relevant Additional Acts.3
Concurrently, and in addition to the existing powers of set off relating to the Initial Acts, the 2025 Bill will expand the scope of the set-off clauses in the Initial Acts to empower the DG to utilise any amount to be refunded under an Initial Act to pay any stamp duty or tax that is due and payable under any of the Additional Acts. The amendment will also empower the DG to utilise any amount to be refunded under any of the Additional Acts to pay any other amount of tax due and payable by that taxpayer under the Relevant Initial Act.
The 2025 Bill has been tabled before the
Dewan Rakyat (House of Representatives) of the Malaysian Parliament on 18 November 2025 and is expected to come into operation on 1 January 2026.
4
Comments
The proposed amendments to be introduced under the 2025 Bill in relation to the set off provisions will align the provisions in the Initial Acts and the Additional Acts and extend the options available to the DG and the Collector of Stamp Duties in their tax-recovery toolkits against defaulting taxpayers.
Alert by Sheba Gumis (Partner) and Joey Tiw (Senior Associate) of the Tax Practice of Skrine.
1 The amendments to the Initial Acts were made pursuant to the Finance Act 2011.
2 Refer to section 111 of the Income Tax Act 1967, section 24 of the Real Property Gains Tax Act 1976 and section 50 of the Petroleum Income Tax Act 1967.
3 Refer to proposed new section 80C of the Stamp Act 1949 and proposed amendment to section 12 of the Labuan Business Activity Tax Act 1990.
4 After the Bill is passed by the
Dewan Rakyat, it will be tabled before the
Dewan Negara (Senate) and, if passed, for Royal Assent. Thereafter, it will be gazetted into law and the provisions thereof will come into operation on the respective dates stated in the Bill.
This article/alert contains general information only. It does not constitute legal advice nor an expression of legal opinion and should not be relied upon as such. For further information, kindly contact skrine@skrine.com.