THE Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM) recently released its survey report on Malaysia’s business and economic outlook for the second half of 2025 and the first half of 2026. Conducted in December 2025, the survey found that 42.3% of respondents reported having overpaid corporate income tax.
Although the Inland Revenue Board (IRB) stipulates under its client charter that tax refunds should be processed within 30 working days after submission, delays in corporate income tax refunds remain widespread.
Among the affected companies, 22.3% waited between seven and 12 months after filing, 20.6% waited between 13 and 24 months, while a further 22.9% reported waiting more than two years. While the impact varies across businesses, 23.2% of respondents said the delays had significantly affected their cash flow.
It should be noted that this survey was conducted in December, prior to Prime Minister-cum-Finance Minister Datuk Seri Anwar Ibrahim’s announcement on Dec 7 to increase the allocation for tax refunds from RM2bil to RM4bil in order to expedite the settlement of long-standing corporate refund cases.
Due to timing, the impact of this measure was not reflected in the survey results. However, if we consider the government’s projected income tax revenue for 2025 of RM177.1bil, the RM4bil allocation accounts for only 2.3% of the total.
Coupled with accumulated backlogs spanning several years, this amount is clearly insufficient. According to statements issued by the IRB, a total of RM22.45bil in tax refunds was processed in 2025, involving 3.6 million taxpayers.
I believe that many outstanding cases remain unresolved, and I hope the government will continue to take this issue seriously, not only by clearing the backlog, but also by reviewing the refund mechanism going forward.
The IRB should adhere strictly to its own client charter by refunding overpaid taxes within 30 days, adopting a “refund first, audit later” approach to address delays at their root.
This would prevent unnecessary pressure and financial strain on compliant taxpayers who fulfil their obligations in good faith.
Overpayment of tax often stems from overly conservative estimates of annual taxable income. Under current regulations, companies are required to estimate their tax payable at no less than 85% of the previous year’s tax.
Although businesses are allowed up to three adjustments thereafter, the increasingly volatile economic environment warrants a review of this minimum threshold, especially for industries that are highly sensitive to external conditions.
Businesses have no control over sudden external shocks, and when such disruptions occur, their revenue is inevitably affected.
For export-oriented industries, for instance, abrupt tariff changes in major markets such as the United States can significantly impact revenue and profitability.
In recent years, disruptions such as delays at the Panama Canal and the Red Sea crisis have severely affected global logistics and supply chains, particularly for seasonal goods and perishable products.
These events are neither controllable nor foreseeable. For industries affected by such circumstances, the IRB should exercise greater flexibility and allow wider adjustments to estimated tax payments.
That said, businesses themselves must also act responsibly when submitting their estimates, ensuring that accurate bank account details are provided to avoid refund delays.
Companies should strengthen internal controls and improve forecasting of revenue and profits, making full use of the adjustment windows in June, September and November to submit the most accurate estimates possible, thereby avoiding both overpayment and underpayment of taxes.
According to the 2026 budget, more than half of government revenue is expected to come from income tax.
A series of tax reforms implemented in recent years has already increased compliance costs for businesses. If refund issues are not effectively addressed, this will negatively affect business sustainability, efforts to attract foreign investment and overall economic development.
In essence, the system of estimated tax payments made in instalments is intended to prevent businesses from facing a large lump-sum tax burden at year-end that could strain cash flow.
By paying estimated taxes in advance, businesses are fulfilling their responsibilities as taxpayers. This relationship should be one of partnership and mutual trust.
When businesses discover they have overpaid and seek a refund, the government should respond with sincerity, issuing refunds promptly and conducting targeted audits only where necessary.
If trust is eroded and taxpayers fear they may not recover excess payments, they may resort to deliberately minimising taxable amounts. This would, in turn, force the government to expend more resources on audits, creating a vicious cycle in which both sides lose.
Finally, many small and medium enterprises (SMEs) tend to focus on short-term financial planning and lack comprehensive, long-term financial management.
This makes them especially vulnerable when delays or disruptions occur, potentially breaking the cash flow chain.
SMEs must, therefore, leverage technology, establish sound management systems and make better use of digital tools and software to reduce reliance on manual processes and minimise human error.
This, ultimately, is key to overcoming cash flow challenges.
Datuk Koong Lin Loong is managing partner at Reanda LLKG International and treasurer general-cum-chairman of SME Committee, The Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM). The views expressed here are the writer’s own.
