THE Inland Revenue Board (LHDN) will adopt a fairer and more equitable approach this year to speed up the settlement of excess tax refunds, with priority given to older cases and those involving small businesses, according to the Finance Ministry.
It said LHDN would implement a First In, First Out principle, under which older refund arrears will be prioritised throughout the 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 age, will continue to be distributed in a balanced manner among all taxpayers other than companies,” it said in a parliamentary written reply dated Wednesday.
The ministry said LHDN would also consider prioritising cases involving micro, small and medium enterprises (MSMEs) or companies currently facing cash flow problems.
“Amendments to tax legislation have been introduced to allow taxpayers to conduct a review in the 11th month, compared with reviews previously allowed only in the sixth or ninth month, or both.
“With this additional review facility, estimated tax payments are expected to more closely reflect companies’ actual tax liabilities, which will help reduce cases of excess refunds.
“Regardless, the government is committed to fully refunding excess taxes and ensuring 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 excess tax refund cases in 2025, involving 3.6 million taxpayers, including MSMEs, making it the highest level recorded in the past five years.
It was responding to a question from Datuk Seri Dr Wee Ka Siong (BN-Ayer Hitam) on the amount of excess tax arrears yet to be settled, as well as the government’s 2026 target, including the settlement period and mechanisms to prevent new arrears.
