Introduction

The conversion of partnership or company to LLP in Malaysia allows businesses to enjoy flexibility and limited liability protection under the Limited Liability Partnerships Act 2012 (LLPA).
Sections 29 and 30 of the LLPA outline the procedures and conditions for conversion, ensuring a smooth transition while maintaining business continuity under the Malaysia Income Tax Act 1967 (ITA).

Conversion from a Conventional Partnership to LLP

Under Section 29 of the LLPA, a conventional partnership can be converted into a Limited Liability Partnership (LLP) if:

• All existing partners of the conventional partnership become partners of the LLP;
• No new person is added as a partner during conversion;
• All business assets and liabilities are transferred to the LLP upon registration.

Once registered, the LLP assumes all rights, obligations, and liabilities of the former partnership.

Conversion from a Company to LLP

Under Section 30 of the LLPA, a company can convert into an LLP when:

1. All shareholders of the company become partners of the LLP;
2. There is no security interest (such as charges or liens) over the company’s assets at the time of conversion;
3. The company is in good financial standing with no outstanding statutory obligations.

After registration, the company is deemed dissolved, and all property, rights, and liabilities are automatically vested in the LLP.

Outstanding Debts or Taxes Due to Government

A company cannot convert to an LLP if it still owes taxes or debts to the Malaysian Government.
Before applying for conversion, it is strongly advised to obtain a tax clearance letter from the Director General of Inland Revenue (DGIR) to confirm no outstanding liabilities exist.
This letter must be submitted to the Companies Commission of Malaysia (CCM) during registration.

✅ Reference: Income Tax Act 1967 — administrative guidance for conversion and tax clearance.

 After Conversion

Once the conversion is completed, the LLP is considered a continuation of the existing business.
Under the Malaysia Income Tax Act 1967, the LLP inherits all tax positions, assets, and liabilities from the previous entity.

For income tax purposes:

• The basis period continues without interruption;
• The value of trading stocks, debtors, and creditors at the conversion date will carry over;
• The LLP will file Form PT for tax returns, replacing the old Form P or Form C of the prior entity.

Compliance After Conversion

After conversion, the LLP must:

• Appoint a Compliance Officer from among the partners (per Section 75B ITA);
• Maintain proper accounting records for at least seven years;
• File Form PT annually with Lembaga Hasil Dalam Negeri (LHDN);
• Submit Annual Declaration to Companies Commission of Malaysia (CCM);
• Continue fulfilling tax payment obligations under Section 107C ITA.

Key Takeaways

• Conversion allows smoother business transition to LLP while keeping continuity.
• All assets, liabilities, and tax positions transfer automatically to the LLP.
• Tax clearance is required before conversion to avoid rejection.
• LLP enjoys limited liability and operational flexibility.
•  LLP must follow ITA 1967 and LLPA 2012 for 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.