Introduction

A Limited Liability Partnership (LLP) Malaysia is a flexible business structure that combines the benefits of a company and a traditional partnership. It offers limited liability protection to partners while allowing operational flexibility. This guide explains what an LLP is, how it is taxed under the Malaysia Income Tax Act 1967, and the compliance obligations every LLP must follow.

What is a Limited Liability Partnership (LLP)?

A Limited Liability Partnership (LLP) is a body corporate under the Limited Liability Partnerships Act 2012 (LLPA) and recognized under Section 2 of the Income Tax Act 1967 (ITA).
It provides a hybrid business model combining features of a company and a traditional partnership, offering limited liability protection to its partners while maintaining internal management flexibility.
An LLP can:

• Sue or be sued;
• Own, acquire, and dispose of property;
• Conduct lawful business activities as a separate legal entity.

Number of Partners

An LLP must have at least two partners, with no limit on the maximum number.
If the LLP operates with fewer than two partners, it can continue business for up to six months or longer if approved by the Registrar.

Financial Statements

An LLP is not required to prepare audited financial statements, but it must maintain proper and sufficient accounting records to reflect its true financial position.

Change of Partners

Any change in partners — due to retirement, death, or admission of new partners — does not affect the continuity of the LLP. The entity remains an ongoing business.

Residence Status of an LLP in Malaysia

The residence status of an LLP determines its tax obligations under Subsection 8(1A) of the ITA.
An LLP is considered resident in Malaysia if the management and control of its business are exercised in Malaysia at any time during the basis year.

i. LLP carrying on business

If management and control of the LLP’s business occur in Malaysia, the LLP is considered a resident.

ii.Other LLPs

Even if an LLP is not actively trading, it can still be resident if the management and control of its affairs are exercised in Malaysia.

iii.Foreign LLPs

A foreign LLP must register with the Companies Commission of Malaysia (CCM). Its residence status depends on where management and control are exercised, not where business operations occur.

Management and Control

The location of management and control is crucial in determining residency:

• If at least one partner’s meeting relating to policy decisions is held in Malaysia, the LLP is treated as resident.
• Merely appointing a local compliance officer does not make the LLP resident if decisions are made abroad.
• Physical operations or trading activities in Malaysia do not automatically imply Malaysian residence.

Partners’ Capital Contribution

Partners may contribute cash or assets (in kind) to the LLP.

• Loans from partners are not considered capital.
• Only the actual amount contributed is recognized.
• For contributions in kind, the market value of the asset is recorded.

Compliance Officer Responsibilities

Under Section 75B of the ITA, every LLP must appoint a compliance officer from among its partners (or all partners if none is appointed).
The officer is responsible for:

• Maintaining full accounting records for seven years (even after conversion from a partnership or company);
• Filing the Income Tax Return Form (ITRF) and amendments on time;
• Estimating and paying tax instalments under Section 107C;
• Notifying the Director General of Inland Revenue (DGIR) of accounting period changes using Form CP204B;
• Ensuring timely tax payments;
• Performing other obligations under the ITA.

Taxation of LLPs

LLPs are taxed similarly to companies under the ITA.

• Tax Rate: 24% on chargeable income.
• Basis Period: Follows the accounting year.
• Tax Return: Form PT for LLPs.
• Distribution: Profit distributions to partners are not subject to further tax.

Key Takeaways

• LLPs combine the advantages of companies and partnerships.
• Residency depends on where management and control occur.
• LLPs enjoy limited liability but must comply with ITA filing rules.
•  A compliance officer plays a vital role in tax and legal compliance.

ANC Group – Your Personal Tax Advisor

Tax consulting is the core service of ANC Group. Our tax professionals provide clients with comprehensive tax support and guidance. We offer tax consulting and compliance services for expatriates, entrepreneurs, and listed and non-listed companies.

Our tax consulting services include business tax, transaction tax, personal tax, and corporate income tax. We don’t just guide you in interpreting and applying complicated taxation rules, but to explore new opportunities and business trends.

ANC Group keep you abreast with Malaysia tax updates and any changes in the local regulations.

We work closely with industry specialists, authorities, and associated professionals within ANC Group to provide the best-in-class integrated tax planning solutions. ANC specialists coordinate the accounting and taxation services to bring your business to success.

If you need professional tax advisory services regarding the Malaysia Income Tax Act 1967, our team is ready to assist you. Contact us here to discuss how we can support your business.