Running a business feels like a roller coaster. Some years you’re celebrating profits, and some years you’re staring at red numbers.

If you own a group of companies, chances are one is doing well, and another is struggling.

Here’s the good news. LHDN allows you to offset tax across companies within the group using something called “group relief”.

The latest guide from LHDN … Public Ruling No. 2/2025 issued on 31 July 2025, explains how it works.

Here’s what every SME boss needs to know, explained in plain English.

1. What is Group Relief?

Group relief allows a loss-making company to transfer up to 70% of its current year business losses to a profitable company in the same group. The profitable company can use this loss to reduce its tax bill.

Example:
Company A loses RM1 million.
Company B (same group) earns RM1.5 million.
Company A can surrender RM700,000 (70%) to Company B.
Company B is taxed only on RM800,000.
That’s cash saved within the group, not paid to LHDN.

2. Who Qualifies?

To qualify, both companies must:
Be incorporated and resident in Malaysia
Have the same 12-month accounting year (ending on the same day)
Maintain at least 70% ordinary shareholding throughout the basis period and the 12 months before
Have ordinary share capital above RM2.5 million
File the correct election in the Form C (once submitted, it’s final)
Be taxed at standard corporate rates

3. Two Tests to Pass
   First Test … 70% shareholding
   One company must hold at least 70% ordinary shares in the other. Foreign or non-resident shareholders are ignored.

Second Test … Beneficial entitlement
You must also show 70% control over profits and assets, after deducting fixed dividends and commercial loan payments. Fail either test = no group relief.

4. 3-Year Time Limit
   If your company started operations in 2019 or later, you only get 3 years to surrender losses.

Example :
Company X started in 2022 which can use group relief in 2023, 2024, and 2025 only.

From 2026 onwards, losses can still be carried forward but not shared with other companies.

5. Common Mistakes by SMEs

Wrong type of loss : Only current year business losses qualify.
Second test failure : Inter-company loans with profit-sharing may disqualify you.
Different year-ends : Group relief only works if all companies have the same year-end.
Forgot the election box : If you don’t tick it in Form C, the opportunity is gone.

6. Why Group Relief Matters
   Keeps more cash in your business
   Helps start-ups offset early-stage losses
   Reduces overall tax for the group
   Gives flexibility in tax planning

Final Word
Many SME bosses miss out on group relief simply because they assume it’s too technical. But the reward is real that losses become tax savings.

Done right, group relief can save your group hundreds of thousands in tax.

Read the full content in our blog
https://lnkd.in/gPQ5r_Ks