Closing a Company? LHDN's Tax Clearance Rules Have Changed

LHDN has issued a new operational guideline on applying for a Tax Clearance Letter, effective 20 October 2026. It replaces the 2022 guideline. A Tax Clearance Letter is LHDN's confirmation that all tax matters of a company, LLP or Labuan entity have been settled before it is dissolved.

The biggest change is for dormant companies. The 2022 guideline listed the closing of a dormant company as a separate category. The new guideline drops it, and states that tax returns and Form E must be filed up to the latest year even if the company is dormant. It also defines dormant for the first time. This includes a company that has never operated since it was set up, or one that has stopped operating. However, a company that still holds shares, real property, fixed deposits or similar investments is not treated as dormant.

The application form is also stricter. The old company form let the person signing, whether a director, liquidator or tax agent, declare that returns "will or have" been submitted. The new form only says they "have" been submitted, so all returns must be filed before applying.

Applications go through e-SPC, the online service on MyTax, which has been compulsory since 1 January 2024. Companies limited by guarantee and Labuan entities still apply on paper for now. The guideline adds that e-SPC for these two, and for LLPs, is not yet available in TAeF, the e-filing system used by tax agents, so applications through TAeF stay manual until it is ready.

Two new situations are now covered. In an amalgamation and merger, the transferor company, whose assets and liabilities move to another company, must apply before the vesting date set in the court order. A company converting to an LLP must get the Tax Clearance Letter before the conversion at SSM, and submit it to SSM.

LHDN still aims to issue the letter within 14 working days, but only when all documents are complete and no tax issue arises.

If you wish to focus on running and growing your business, our CFO advisory team can take care of your accounting, payroll, tax planning, e-stamping, corporate secretarial and compliance matters for you. Feel free to WhatsApp us at 010-246 2151.