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Deep analysis based on LHDN Borang C — tax adjustments, capital allowance & SME rates
The tax rules are tied to a year of assessment, not to the date you run this report. Pick the YA this computation is for; the report stamps it and quotes the rates for that year.
Basis period: the accounting period for which the income is assessed. If your financial year straddles two calendar years, the year the basis period ends is normally the year of assessment.
💡 LHDN's SME (SMKS) criteria, Ketetapan Umum No. 8/2025 (22 December 2025), paras 5.2 and 5.3: the company must be resident and incorporated in Malaysia; paid-up ordinary share capital ≤ RM2.5 million at the beginning of the basis period; gross income from its business source(s) ≤ RM50 million for the basis period; and it must pass the shareholding tests — ≤20% held directly or indirectly by a foreign company incorporated outside Malaysia or a non-citizen individual (this limb applies from YA 2024), and (para 5.3.3(a)) not more than 50% of its paid-up ordinary capital held by a related company, and not more than 50% of a related company's capital held by it — where "related company" for those tests means one whose paid-up ordinary capital exceeds RM2.5 million (para 5.3.3 clarification (A)), traced to the ultimate holding company. Failing any one test makes the company Non-SME (flat 24%).
Other statutory income is taxed in full: business capital allowances and brought-forward business losses cannot be set off against it (they are restricted to the business source).
These are expenses in your P&L that LHDN does not allow as deductions. They will be added back to your adjusted profit.
Add each policy the company paid for as its own row. The tax treatment depends on the nature and business purpose of that policy, not on the fact that the company pays it, and no policy label is automatically deductible. Deductibility follows the purpose test in S.33(1) ACP 1967, and for key person ("key-man") cover the conditions in Ketetapan Umum No. 2/2003 (30 December 2003). Enter every premium here — do NOT also put it in Operating Expenses (Step 2).
Ketetapan Umum No. 2/2003 asks four questions about a key person policy. Answer them for the person insured on this row. Any "Not sure" leaves this premium to your tax agent instead of this estimate.
Ketetapan Umum No. 2/2003 para 7: in a controlled company the premium on the life of a director or employee who holds shares is not allowed, and a policy on a partner or sole proprietor is not allowed either.
How each row is treated: group medical / hospitalisation, group personal accident, and fire / business property are treated as potentially deductible — subject to the nature and business purpose of the policy (S.33(1) ACP 1967). Public / professional liability is the same, and for professional indemnity Ketetapan Umum No. 1/2019 (18 February 2019) confirms that a company's premium is deductible where it relates to its business. A key person policy is treated as potentially deductible only when it has no investment element, the company is entitled to the proceeds, and it protects the company against loss of business income — and it is not deductible where the insured holds shares in the company or is a partner or sole proprietor (Ketetapan Umum No. 2/2003, paras 4.3, 5.1–5.3 and 7). Any row left as "Not sure", and every "Other" row, is listed for your tax agent rather than guessed. If a key person premium is allowed, the proceeds are taxable on the company when a term or accident policy pays out; if the premium was not allowed (whole life or endowment), the proceeds are not taxed (Ketetapan Umum No. 2/2003, para 6).
Enter the actual amount the company paid — the figure on the company's official zakat receipt issued by the state zakat authority (Majlis Agama Islam Negeri / Pusat Zakat). The computation then allows the lower of that amount and 2.5% of aggregate income, which is the limit under S.44(11A) ACP 1967.
⚠️ Do not also put the zakat in Operating Expenses (Step 2) — it is deducted here as its own line, and entering it in both places would deduct it twice. If the accounts charged zakat as an expense, it must be added back and claimed here. ⚠️ The receipt must be in the company's own name: zakat paid personally by a director or a shareholder is not the company's deduction. Keep the receipt — LHDN can ask for it, and records must be kept for 7 years. ⚠️ Only zakat paid to an approved state religious authority qualifies, the deduction cannot exceed 2.5% of aggregate income, and any excess is not carried forward.
Instead of accounting depreciation, LHDN grants Capital Allowance (IA + AA) on qualifying assets.
A company normally buys more than one kind of asset in a year, and each class carries its own annual allowance. Add a row for each class (or each asset) and the calculator applies that class's rate before adding the allowances together — the way a Borang C CA schedule works. Applying one class's rate to the whole year's CAPEX would understate or overstate the allowance whenever more than one class was bought. Renovation and refurbishment is not offered as a row: it is not ordinary qualifying plant expenditure and is claimable only under specific provisions.
Standard rates used: Motor Vehicle / Heavy Machinery IA 20% + AA 20% · Plant & Machinery IA 20% + AA 14% · Office Equipment, Furniture & Fittings IA 20% + AA 10%, each under Jadual 3 ACP 1967 (prepared as in Ketetapan Umum No. 5/2014 on plant and machinery claims). Small Value Assets (each costing up to RM2,000): 100% special allowance, but the aggregate for the year is capped at RM20,000 — any excess is not lost, it is estimated at the ordinary Plant & Machinery rates (IA 20% + AA 14%). Source: Ketetapan Umum No. 4/2026 "Elaun Khas Aset Bernilai Kecil" (30 September 2026), para 8.6. Enter the total cost of such assets in ONE row (no amount above RM2,000 per item qualifies for the 100% rate). Computer / ICT and "Other" rows are listed but not estimated. Their treatment depends on the specific asset and on any special or accelerated allowance in force — for example there are special accelerated allowances for specified assets and periods on qualifying automation expenditure, YA2023–YA2027) — so they are left to your tax agent and excluded from this estimate rather than guessed. A real Borang C needs the asset-by-asset schedule.
The tax figure above is the tax charged. What you still have to pay LHDN is that figure less the instalments you have already made and any credits. Leave both at 0 if you want to see the tax charged only.
