KUALA LUMPUR: The Inland Revenue Board (LHDN) will adopt a fairer and equitable approach this year to ensure more timely settlement of excess tax refunds with a focus on older cases and small businesses, says the Finance Ministry.
The ministry said LHDN would first adopt the First In, First Out principle in which older refund arrears are prioritised for this year.
LHDN’s priority this year is to settle corporate excess tax refunds for the 2023 year of assessment in the first quarter of 2026, followed by refunds for the 2024 year of assessment, which are to be completed by the end of the year.
At the same time, cases of excess tax refunds regardless of case age will continue to be distributed to all taxpayers other than companies in a balanced manner, it said in a parliamentary written reply dated Wednesday (Jan 28).
The ministry also said LHDN would consider giving priority to cases involving micro, small and medium enterprises or companies currently experiencing cash flow problems first.
Tax legislation amendments have been introduced to allow taxpayers to conduct a review in the 11th month, compared with reviews previously allowed only in the 6th or 9th month, or both.
With this additional review facility, the estimated tax payments required are expected to be closer to the actual tax liability payable by companies, which in turn will help reduce cases of excess tax refunds.
Regardless, the government is committed to fully refund excess taxes and to ensure that such refunds are made fairly and equitably, taking into account the interests of all taxpayers, it said.
The ministry also revealed that LHDN settled RM22.45bil in total excess tax refunds cases for 2025, which involved 3.6 million taxpayers, including micro, small and medium enterprises, making it the highest level in the past five years.
The ministry was responding to a question from Datuk Seri Dr Wee Ka Siong (Barisan Nasional-Ayer Hitam) on the amount of excess tax arrears that have not been settled for taxpayers as well as the government's target for 2026, including the settlement period and mechanisms to prevent new arrears.
