Last year, a new transferred client told me something many SME bosses will recognise :

Then they placed the past year tax incentive form Claim for Reinvestment Allowance (RA) under Schedule 7A, Income Tax Act 1967 on the table with confidence.

“Boss, our previous tax agent not so troublesome. This Reinvestment Allowance (RA) claim is simple.”

I smiled. But inside, I already knew this story.

Because RA is never just “submit form”. RA is a project claim.
And LHDN will ask: show me the project, not just the invoice and the claim form.

So we started asking many questions. Not to make them stress. But to make the claim survive an audit.

Here are the 5 things, based on our 25 years experience, that usually kill an RA claim when LHDN comes.

1) Invoice is there. Project file is missing. Many companies only keep purchase invoices. But no project paper, no budget, no director resolution, no plan, no explanation.

In audit, LHDN will say: “Where is the qualifying project story?”

2) Documents cannot be found after a few years. Tax work is not for today only. If you cannot keep records properly for at least 7 years, you are gambling.

3) The company that pays is not the company that uses. Sometimes Group A pays, Group B uses.

“Same boss, same factory” thinking. But tax law follows the company, not the boss.

4) Related party transfer looks like double-claiming.

If an asset was transferred from related party, and someone already claimed RA before, claiming again becomes a red flag.

5) No payment proof, no strong claim. Invoice without payment trail is weak. Audit officers love to ask: “Show me bank proof.”

6) The missing piece many SMEs don’t expect: production flow. LHDN may ask for a written or pictorial production flow.
How the machine links to the process.
How the project improves production.
How it supports the qualifying activity.

Many SMEs have the operations in their head. But when asked to put it on paper, suddenly it becomes quiet.

Then the client asked the question I expected.

“Boss… our tax saving is less than one hundred thousand ringgit. HASiL will audit meh?”

I answered calmly: “Not about the amount lah. Tax incentive claiming is red flag to HASiL. If you cannot back up your claim, confirm cari pasal.”

They nodded. Meeting ended nicely.

We completed their tax compliance for the year. Everything proper.

Next month, they terminated us and went back to the old tax agent.

I felt disappointed, yes. Not because we lost a client.

Because we lost them for doing the exact thing that protects them.

Many SME bosses want a tax agent who is “not troublesome”. I understand that running business already very tiring.

But here is the truth:

Tax incentives are not claimed by shiok shiok. They are claimed by supporting written evidence. “If HASiL asks next year, can you prove it ?”