In Malaysia, a Reduced Assessment occurs when the Director General of Inland Revenue (DGIR) issues a revised tax notice showing a lower amount of tax payable than the original assessment.

However, under Section 2 of the Income Tax Act 1967 (ITA), a Reduced Assessment does not fall within the legal definition of an “assessment.”
This means that it cannot normally be appealed under Section 99 of the ITA.

Nevertheless, if the Reduced Assessment arises from an Amended Assessment — for example, following a tax audit — and the taxpayer disagrees with the audit findings or adjustments, the taxpayer may still file an appeal under Section 99 limited to those disputed issues.

Example: Corporate Taxpayer

Everpro Industries Sdn Bhd, a Malaysian manufacturer of electronic components, closes its financial accounts on 31 December each year.

The company was granted an Investment Tax Allowance (ITA) for a five-year period in respect of its new automated production line. The Malaysian Investment Development Authority (MIDA) determined that the ITA would take effect on 15 April 2018, as stated in a confirmation letter dated 20 March 2019.

During the 2018 financial year, Everpro incurred qualifying capital expenditure of RM2.5 million.

The Inland Revenue Board of Malaysia (IRBM) later conducted a tax audit on the company’s YA 2018 return on 5 February 2020. In the audit findings, an expense of RM120,000 was disallowed. MIDA subsequently issued a compliance letter on 25 February 2020 confirming that the company’s investment qualified for ITA.

When the audit adjustments were applied, the unutilised investment tax allowance exceeded the amount of disallowed expenses, resulting in the DGIR issuing a Reduced Assessment.

If Everpro Industries Sdn Bhd disagrees with the audit findings or amended computation, it may appeal against the Reduced Assessment for YA 2018, but only in relation to the disputed adjustments.

Key Takeaway

A Reduced Assessment generally cannot be appealed under Section 99 of the Income Tax Act 1967, as it is not classified as a standard “assessment.”
However, if the reduced amount stems from a disputed amended assessment — such as one made after a tax audit or field review — the taxpayer may still challenge specific issues through an appeal.

If you have received a Reduced Assessment Notice and are unsure whether you can appeal, seek immediate legal advice from a tax lawyer familiar with the DGIR appeal process. Acting within the prescribed timeframe is crucial to safeguard your rights.

Contact Our Tax Appeal Lawyers

📞 Lawyer Khoo, Managing Partner
📧 [email protected]
📱 +6016-557 4789

At NZSK Legal, we specialise in tax audit defence, DGIR investigations, and appeals under the Income Tax Act 1967, helping businesses and individuals protect their interests and ensure fair tax treatment.