“Boss, business already stop.
Factory I keep under the Sdn Bhd first. Should be okay, right?”

A lot of SME owners get into trouble because of this one line:

“Should be okay.”

Last month, one client stopped his manufacturing business because market was bad.

Business stopped.
Factory still there.
Sdn Bhd still there.

He thought he was only keeping the asset.

I told him :

You are not only keeping the factory.
You may generate new tax problem.

Why?

Because once the company no longer runs active business,
and only keeps assets, rental, dividends or interest income,

the tax treatment may quietly change.

It may become an Investment Holding Company (IHC).

And once that happens, a few things may hit:

Lose SME preferential tax rate (ie tax at 24% now)
Some expenses may not be deductible like before
Tax treatment for rental, foreign income, or share disposal may become more tricky

After I explained, he went quiet.

Then he asked me:

“Company no business already, why tax become more complicated?”

Fair question.

Because tax does not only look at whether your factory is still running.

Tax also looks at what type of income your company is earning now.

So I always remind clients that :

Closing the factory is a business decision.
Keeping it in the same company is another tax decision.

Many bosses only realise the second part much later.

By that time, the cost of being blur may already be real.

An inactive company is not always a simple company.
Sometimes it becomes an even more technical one.

Read the full content in our blog
https://www.ktp.com.my/blog/investment-holding-company-malaysia/06mar2026