In Malaysia, a company’s accounting period determines its basis period for income tax purposes under the Income Tax Act, 1967 (“the Act”). While companies may select their own financial year-end, any subsequent changes must be notified to the Inland Revenue Board of Malaysia (“IRBM”).
Timely notification ensures that the correct basis period is applied, preventing errors in tax filings, instalment payments or assessments. Failure to notify may expose the company to penalties, additional tax assessment or legal action.
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Basis Period Under the Act
A company’s taxable income for a particular Year of Assessment (“YA”) is determined on its basis period. Under Section 21 of the Act, this is generally the financial year ending within the calendar year.
Any change to the accounting period directly affects the applicable basis period. To prevent gaps or overlaps, transitional rules ensure that:
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All income is taxed;
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No period is omitted; and
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No period is taxed twice.
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Where adjustments are necessary, the IRBM may apply specific measures depending on the nature and timing of the accounting period change.
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Accounting Period Shortened
A shortened accounting period occurs when a company closes its financial year earlier than its previously established year-end. In this case, the basis period for the relevant YA is reduced accordingly and taxable income is computed based on the actual period of account.
If the new accounting period is less than 12 months, the company must notify the Director General of Inland Revenue (“DGIR”) via Form CP204B at least 30 days before the end of the new accounting period. Timely submission ensures that the correct basis period is applied and prevents discrepancies in tax filings, instalment payments and assessments.
Example
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Accounting Period Extended
An extended accounting period arises when a company lengthens its financial year beyond the previously established year-end. The basis period for the relevant YA is similarly extended and taxable income is calculated for the full duration of the new accounting period.
Where the new accounting period exceeds 12 months, the company must notify the DGIR via Form CP204B, at least 30 days before the end of the original accounting period. This ensures continuity in basis periods and prevents inconsistencies in tax filings and instalment payments.
Example
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Change of Accounting Period Following the Liquidation of the Company
During liquidation, a company’s accounting period is adjusted to reflect the closure of its operations. The liquidator must prepare accounts, including the Liquidator’s Account of Receipts & Payments and Statements of the Position in the Winding Up, for a period of six months from the date of appointment and for every subsequent six-month period.
The company’s basis period for the relevant YA is determined based on the actual period of account up to the liquidation date. Notification to the DGIR via Form CP204B must be made within 30 days of the liquidator’s appointment.
Timely submission, typically accompanied by a Director’s Resolution or appeal letter, helps prevent penalties or additional tax liability that may arise from failing to notify the change within the prescribed period.
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Preparation of Form CP204B
Traditionally, Form CP204B must be completed and submitted in hardcopy to the DGIR (signed in wet ink), accompanied by supporting documents to notify on the change of accounting period.
From 1 January 2025, electronic submission via e-CP204B via the MyTax Portal was introduced, while manual submission remains available during the transitional period.
Effective 1 July 2025, submission of Form CP204B is mandatory via e-CP204B, accessible to:
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Directors;
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Directors’ representatives; and
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Licensed tax agent under Section 153(3)
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For late cases (non-compliance with subsection 21A(3A) of the Act), Form CP204B must continue to be submitted manually until the electronic module for late-case filing is fully developed.
Entities intending to change their accounting period and revise their tax estimates concurrently should generally be made in the 6th, 9th or 11th month of the basis period for the relevant YA. In such cases, Form CP204B or e-CP204B must be submitted prior to the filing of Form CP204A.
In certain situations, where the revision falls outside these usual months, the revised tax estimate may still be submitted together with the Form CP204B or Form e-CP204B, accompanied by an appeal letter and any relevant supporting documents.
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Failure to Notify Change of Accounting Period
Effective YA2019, if a company, LLP, trust body or co-operative society fails to furnish Form CP204B within the prescribed period, the DGIR may take the following actions:
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10% increase under subsection 107C(9) for failure to make the instalment payments;
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10% increase under subsection 107C(10) on the 30% difference between actual tax payable and the revised or deemed revised tax estimate (whichever is later) or the original tax estimate if no revised estimate if furnished;
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Penalty under subsection 112(3) for estimated assessments raised under subsection 90(3); or
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Prosecution under Section 120(1)(i) for failure to notify the DGIR on the change in accounting period under subsection 21A(3A).
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Penalties or increases imposed on the original accounting period remain recoverable even after submission of a revised estimate or tax return.
If convicted of prosecution, the company or responsible officer may be liable to:
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A fine of RM200 to RM20,000;
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Imprisonment for up to 6 months; or
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Both.
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Presumption on existing year end
Under Section 21A(3A), if a company fails to notify the IRBM of a change in accounting date, the existing year-end is presumed to continue.
This has direct implications on tax compliance:
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Late payment of monthly instalments under Section 107C(11B); and
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Late submission of tax returns under Section 112(3A).
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Such penalties are recoverable as if they were tax due and payable.
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Failure Year and Determination of Basis Periods
A change of accounting period may result in a company failing to close its accounts on the corresponding date in the following year or failing to complete a full 12-month period. This gives rise to a failure year, for which the DGIR determines the basis period as well as the basis period for the subsequent YA.
The DGIR will generally accept the accounting period made up by the company for the failure year provided that:
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There is no missing YA; and
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There shall not be two or more accounts closed in the same YA.
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Where the failure arises from the change of accounting date itself, resulting in an accounting period shorter or longer than 12 months, the DGIR may issue directions to regularise the basis periods for the failure year and the following YA to ensure continuity and prevent overlaps or gaps.
The following scenarios illustrate how basis periods are determined in practice when the new accounting period ends in the same year, the following year or in the third year, and where the resulting period is shorter or longer than 12 months.
A.
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Scenarios for Companies with Financial Year-End Not in December
New accounts ending in the following year (>12 months)
Existing accounts: 01.07.2023 – 30.06.2024（12 months）
Subsequent accounts: 01.07.2024 – 31.05.2026 （23 months）
01.06.2026 – 31.05.2027 （12 months）
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Year of
Assessment
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Accounting
Period
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Basis Period
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Months
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2024
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01.07.2023 – 30.06.2024
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01.07.2023 – 30.06.2024
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12 months
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2025
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01.07.2024 – 31.05.2026
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01.07.2024 – 30.06.2025
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12 months
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2026
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01.07.2025 – 31.05.2026
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11 months
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2027
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01.06.2026 – 31.05.2027
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01.06.2026 – 31.05.2027
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12 months
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New accounts ending in the third year (>12 months)
Existing accounts: 01.12.2021 – 30.11.2022 (12 months)
Subsequent accounts: 01.12.2022 – 29.02.2024 (15 months)
01.03.2024 – 28.02.2025 (12 months)
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Year of
Assessment
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Accounting
Period
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Basis Period
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Months
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2024
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01.10.2023 – 30.09.2024
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01.10.2023 – 30.09.2024
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12 months
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2025
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01.10.2024 – 30.06.2025
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01.10.2024 – 30.06.2025
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8 months
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2026
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01.07.2025 – 30.06.2026
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01.07.2025 – 30.06.2026
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12 months
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New Accounts Ending in the Following Year (<12 months)
Existing accounts: 01.10.2023 – 30.09.2024 (12 months)
Subsequent accounts: 01.03.2024 – 31.12.2024 (10 months)
01.01.2025 – 31.12.2025 (12 months)
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Year of
Assessment
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Accounting
Period
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Basis Period
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Months
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2024
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01.03.2023 – 28.02.2024
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01.03.2023 – 28.02.2024
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12 months
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2025
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01.03.2024 – 31.12.2025
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01.03.2024 – 31.12.2025
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22 months
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B.
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Scenarios for Companies with Financial Year-End in December
New Accounts Ending in the Following year (<12 months)
Existing accounts: 01.01.2024 – 31.12.2024 (12 months)
Subsequent accounts: 01.01.2025 – 31.07.2025 (7 months)
01.08.2025 – 31.07.2026 (12 months)
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Year of
Assessment
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Accounting
Period
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Basis Period
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Months
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2024
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01.01.2024 – 31.12.2024
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01.01.2024 – 31.12.2024
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12 months
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2025
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01.01.2025 – 31.07.2025
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01.01.2025 – 31.07.2025
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7 months
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2026
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01.08.2025 – 31.07.2026
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01.08.2025 – 31.07.2026
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12 months
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New Accounts Ending in the Second year (>12 months)
Existing accounts: 01.01.2023 – 31.12.2023 (12 months)
Subsequent accounts: 01.01.2024 – 31.03.2025 (15 months)
01.04.2025 – 31.03.2026 (12 months)
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Year of
Assessment
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Accounting
Period
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Basis Period
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Months
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2023
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01.01.2023 – 31.12.2023
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01.01.2023 – 31.12.2023
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12 months
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2024
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01.01-2024 – 31.03.2025
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01.01.2024 – 31.08.2024
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8 months
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2025
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01.09.2024 – 31.03.2025
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7 months
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2026
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01.04.2025 – 31.03.2026
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01.04.2025 – 31.03.2026
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12 months
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Conclusion
Changes to a company’s accounting period in Malaysia directly affect the determination of the basis period for income tax purposes under the Act. Companies, LLPs, trust bodies and co-operative societies, must ensure timely submission of Form CP204B, accompanied by the supporting documentation, whenever the accounting period is altered.
Failure to notify the DGIR may result in penalties, additional tax assessments or prosecution. Adhering to the notification requirements ensures accurate computation of taxable income, continuity in basis periods and compliance with statutory obligations.
For further information, please visit the official website of the Inland Revenue Board of Malaysia at
KNOWLEDGE
