Many charity operators (Institutions/Organisations/Tabung) (IOT) breathe a sigh of relief once the approval letter under Section 44(6) of the Income Tax Act 1967 arrives.

Approval obtained.
Donors reassured.
Committee members move on to the next urgent task.

I understand this very well.

Most IOTs operate with very limited staff and rely heavily on volunteers who are already stretched thin. Compliance work often sits quietly at the bottom of the to do list.

But LHDN has just sent a very clear and worrying signal.

Tax exemption is not permanent.
Compliance is being watched continuously.

In a recent media statement dated 2 December 2025, HASIL clarified several points that every IOT operator, trustee and director should pay close attention to.

First, tax exemption approvals are now capped at a maximum of 10 years starting 27 November 2025. After that, the exemption does not continue automatically.

It must be reviewed again by HASIL. For approvals granted earlier, the existing validity remains but renewal expectations are changing.

Second, HASIL may conduct comprehensive compliance reviews at any time during the approval period.

This includes checking whether approval conditions are followed, whether income and spending truly match approved charitable purposes, and whether records are properly retained in line with the Income Tax Act.

This is not a one off audit.
It applies throughout the entire approval period.

The most serious part is this.

If an IOT breaches any approval condition, the exemption can be withdrawn.

Once withdrawn, the charity’s income becomes taxable. Back taxes may be imposed. For organisations already operating on tight funds, this can be financially devastating.

This is why I am concerned.

Many charities are doing genuine good work. But with small teams, volunteer turnover and constant operational pressure, compliance risks are real and often unintentional.

Doing charity is noble.
But doing charity without strong tax governance is dangerous.

My professional advice to IOT operators is simple.

Do not treat tax exemption as approved once and safe forever.

This is not meant to scare.
It is meant to protect the work you care about.

If you sit on a charity board, manage an IOT, or advise one, now is the time to pay attention.

Compliance may not be visible to donors.
But it is very visible to LHDN.

And once something goes wrong, it is often too late to fix.