Group Relief (s.44A): Surrendering Adjusted Business Losses within a Group of Companies

Introduction

Companies in the same group may surrender current-year adjusted business losses to related companies under group relief under section 44A of the Income Tax Act 1967 (ACP 1967). This article explains the concept of group relief, the meaning of a related company, the other conditions, the surrender limit, and situations where it does not apply.

What is group relief (s.44A)?

Group relief under section 44A of the ACP 1967 allows companies in the same group to surrender current-year adjusted business losses to related companies. Key points:

• From YA2006, it is open to all resident companies incorporated in Malaysia.
• From YA2009 (Finance Act 2009 [Act 693]), the surrender limit was raised to 70% of adjusted business losses (previously 50%).

From YA2019, a newly incorporated surrendering company may only surrender current-year adjusted business losses limited to three (3) consecutive YAs (section 5.1 of Public Ruling 2/2025).

Related company: 70% shareholding

To qualify, the claimant company and the surrendering company must be related companies:

• At least 70% of ordinary share capital (direct/indirect through resident companies incorporated in Malaysia) — subsection 44A(3).
• Additionally, a beneficial entitlement of ≥70% to the balance of profits and assets (44A(7)).

Other conditions

• Both companies are resident and incorporated in Malaysia.
• The basis periods of 12 months end on the same day.
• The election is irrevocable, made through forms C (RK-S)/C (RK-T) with the BNCP (s.77A).
• The losses surrendered must not exceed the determined aggregate income of the claimant company (44A(4)).

Losses not absorbed: 10-YA carry-forward limit

Unabsorbed adjusted losses are carried forward limited to 10 consecutive YAs (Public Ruling 1/2022; subsections 44(4)/(5)).

Situations where it does not apply (44A(10))

Group relief does not apply in certain situations, including pioneer companies / PIA ITA; exemptions under s.54A/127(3)(b); reinvestment allowance claims (Schedule 7A) etc. (44A(10)).

Additional assessments and penalties

• The DGIR may raise additional assessments within 5 years (44A(9)(a)).
• A penalty equal to the tax undercharged for incorrect information (44A(9)(b)).

FAQ

Q. What is the surrender limit under group relief? A. From YA2009 (Finance Act 2009 [Act 693]), the surrender limit is 70% of adjusted business losses (previously 50%).

Q. When did group relief open to all companies? A. From YA2006, it is open to all resident companies incorporated in Malaysia.

Q. What does related company mean? A. At least 70% of ordinary share capital (direct/indirect through resident companies incorporated in Malaysia) — subsection 44A(3); with an additional beneficial entitlement of ≥70% to the balance of profits and assets (44A(7)).

Q. Can unabsorbed losses be carried forward without limit? A. No — unabsorbed adjusted losses are carried forward limited to 10 consecutive YAs (Public Ruling 1/2022; subsections 44(4)/(5)).