Partnership Tax in Malaysia: Form P, CP30 and Divisible Income

The partnership files, the partners pay

Section 55 of the Income Tax Act 1967 treats each partner as if they carried on their share of the partnership business as a sole proprietor. The partnership computes one set of accounts and one adjusted income figure, then splits it; each partner takes their slice into their own return and is taxed on it at their own personal rates, alongside their salary, rental or any other income.

So two returns are involved every year. The partnership lodges the Form P — an information return showing total income and expenses, with no tax payable on it. Each partner then lodges a Form B (not the Form BE, which is for employment income only), because a share of partnership profit is business income. A partner that happens to be a company files its own Form C instead.

The partnership needs its own tax file, which carries a 'D' prefix — separate from each partner's 'SG' or 'OG' file. Register it through e-Daftar on MyTax before the first filing season, not during it.

The precedent partner carries the obligation

Form P is filed once for the whole partnership by the precedent partner: the partner named first in the partnership agreement, or where there is no agreement, the active managing partner resident in Malaysia. That one person is personally on the hook for lodging the Form P on time and for issuing a CP30 to every partner.

The CP30 (Apportionment of Partnership Income) is the slip that tells each partner the exact figure to carry into their own return. Without it, partners are declaring from memory — and LHDN already has the Form P numbers, so a mismatch is easy for the system to spot. Issue the CP30s as soon as the partnership accounts are final, well before the partners' own 30 June deadline.

Divisible income: what actually gets split

This is the part that trips up most partnerships. A partner's salary, the interest the partnership pays a partner on capital they advanced, and any private expenses of a partner charged to the partnership accounts are not deductible business expenses — a partner cannot be an employee of their own partnership for tax purposes.

The mechanics are a two-step: those amounts are stripped out of the provisional adjusted income to leave the divisible income, which is then shared in the profit-sharing ratio. Each partner's own salary, interest and private expenses are then added back to their share. Nothing is lost — it is simply re-attributed to the partner who received it, so the partner drawing the larger salary carries the larger tax bill.

Capital allowances and losses follow the same ratio

Capital allowances on the partnership's plant, machinery and vehicles are computed once at partnership level, then divided among partners in the profit-sharing ratio. Each partner deducts their share from their adjusted income to arrive at statutory income — the partnership itself claims nothing, because it has no tax to reduce.

A loss year works the same way. The divisible loss is apportioned, and each partner's share becomes their own adjusted loss, available to set against their other income for that year and then carried forward in their personal file. One partner may fully absorb their share against employment income while another carries it forward — the position is individual from that point on.

Because partners have business income and no PCB is deducted at source, LHDN will usually issue each partner a CP500 notice to collect tax in six bi-monthly instalments. Those are personal obligations, not partnership ones.

Deadlines, penalties and partnership changes

• Form P is due 30 June following the year of assessment, with the usual e-Filing grace period to 15 July. The partners' own Form B carries the same 30 June deadline — so the CP30s must be out before then.
• Failure to furnish the Form P is an offence under Section 112 of the Act, and it is the precedent partner who is prosecuted or penalised — not the partnership and not the passive partners.
• A partner joining or leaving does not automatically end the partnership for tax, but where there is no continuing partner in common the old partnership is treated as ceasing and a new one as commencing — which triggers a fresh basis period and can bring balancing charges on assets.
• A partnership that drops to a single owner ceases to be a partnership; the remaining owner continues as a sole proprietor and files Form B only.
• An LLP (PLT) is a different animal entirely. It is a chargeable entity in its own right, files Form PT, pays tax at company rates, and profit distributed to partners is exempt in their hands — there is no Form P and no CP30.

Important caveats

This guide describes the general treatment of a conventional partnership under Section 55 of the Income Tax Act 1967 and LHDN's partnership guidance; it is information, not tax advice. Whether a payment to a partner is remuneration, a profit share or a private expense is decided on substance, and partnership changes, mixed corporate-and-individual partners, and professional practices with salaried partners all have wrinkles this summary does not cover. Confirm your figures with LHDN or a licensed tax agent before filing. Use the calculator below on your own adjusted income from the partnership, combined with your other income, to estimate what you will personally owe.