27/04/2026

BIZ & FINANCE MONDAY | APR 27, 2026

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Market fatigue setting in, says economist

Bad debt deductions – understanding the restrictions

showing signs of fatigue amid heightened geopolitical uncertainty. “Market exhaustion is setting in as geopolitical dynamics turn more complex and

unpredictable. The market is no longer being driven by directional conviction, but is now shaped by an erosion of confidence.”

From Page 13

ANY enterprise carrying on a genuine business does not deliberately create bad debts to obtain a tax advantage. In commercial reality, busi nesses expect their debts to be settled in full. It is only when a debtor defaults or is unable to meet its obligations that a business may consider making a provision or, as a last resort, writing off the debt. Recently, it has become common for the Inland Revenue Board (IRB) to challenge the deductibility of bad debts, often due to lack of appreciation of com mercial realities faced by taxpayers. A typical basis for disallowance is that no legal action was taken, notwithstanding that the taxpayer may have undertaken follow-ups, issued reminders, and actively engaged the debtor to recover the outstanding amount. From a commercial perspective, businesses are cost-conscious. Where the debtor’s financial position clearly indicates that recovery is minimal, pursuing legal action may not be practical. Engaging legal counsel and com mencing proceedings can result in additional costs without meaning ful prospect of recovery.

claimed at the time the “irrecover ability” is established. What are “reasonable steps” in recovering a debt? The law does not pre scribe a fixed checklist, though guidance is available in the Public Ruling. Reasonable steps may include issuing re minders, restructuring or rescheduling debts, negotiation or arbitration and legal action. The extent of these efforts will vary depending on the circumstances. What is reasonable for a large, secured debt may differ from a small, unsecured balance. The role of legal action There is a misconception by IRB officials in placing undue emphasis on legal action when determining deductibility, rather than focusing on a qualitative and quantitative assessment of whether the debt is irrecoverable. Instituting legal action is not, in itself, proof that a debt has become irrecoverable. What is more important is a holistic evaluation of the facts. Bad debts involving related parties Where the debt involves a related or connected party, scrutiny is higher. The decision to write off or make a

is allowed where the debt can be reasonably estimated to be partly or wholly irrecoverable, provided

specific be supported by rigorous and well documented assessment. Taxpayers must demonstrate that the write-off is made on an arm’s length basis, supported by genuine commercial consider ations, reflecting what independent parties would agree under similar circumstances. A matter of judgment Ultimately, the deductibility of a bad debt is not determined by any single factor, but by an overall assessment of whether the taxpayer has acted reasonably and in line with commercial reality. A mere write-off in the accounts is insufficient. There must be evidence that the debt is genuinely irrecoverable and that appropriate recovery steps have been taken. The timing of the claim is also critical, as errors may result in penalties for understatement of tax. The law does not require taxpayers to pursue recovery at all costs. Rather, it expects that any write-off is properly supported, commercially justifiable and grounded in facts. This article is contributed by Thannees Tax Consulting Services Sdn Bhdmanaging director SM Thanneermalai (www.thannees.com). provision must

it has been recognised as income in the prior year of assessment. Public Ruling No.

PETALING JAYA: Malaysia’s push towards a low-carbon economy is placing increasing demand on the country’s electricity grid and energy storage capacity as new carbon compliance requirements reshape the industrial landscape. Energy Transition and Water Transformation Ministry Secretary General Mad Zaidi Mohd Karli said the country must strengthen its grid infrastructure and invest in battery energy storage systems to ensure a stable and reliable power supply. Zaidi said industries account for about half of Malaysia’s electricity consumption, making them central to efforts to improve efficiency and reduce emissions while maintaining competitiveness. He said the Energy Efficiency and Conservation Act, which came into force in 2025, promotes efficiency and regulates power consumption among large industrial consumers. Data from the Department of Statistics Malaysia show that the electricity supply sector generated RM90.6 billion in output in 2022, reflecting the scale of the sector within the broader economy. Under the National Energy Transition Roadmap, Malaysia has set a target for renewable energy to make up 70% of its installed capacity by 2050. The country had reached about While the recent brief reopening of the Strait of Hormuz initially triggered a relief rally in US markets, regional markets including Malaysia were unable to price in the gains and are now more exposed to downside risks following renewed tensions. Mohd Sedek said Brent crude has climbed towards US$95 (RM377) per barrel, reflecting a renewed geo political risk premium, while the US dollar has stabilised and regional currencies, including the ringgit, remain under pressure. Despite these developments, he added, Bursa Malaysia remains range bound, with the benchmark index struggling to break above key levels as investors adopt a more defensive stance. “This is not a market searching for direction, but one actively avoiding commitment,” Mohd Sedek said. He added that while higher oil prices may support energy-related stocks, broader economic effects could be negative as rising costs fuel inflation and delay global monetary easing. “Malaysian equities are therefore likely to remain range-bound with a defensive bias, characterised by narrow leadership, lower risk tolerance and persistent caution in foreign flows,” Mohd Sedek said. Ű BY T.C. KHOR newsdesk@thesundaily.com

4/2019 provides guidance on reasonable recovery steps, when a debt may be considered irrecoverable, and circumstances where deductions are not allowed, such as waived debts and non-trade debts. Understanding “irrecoverable” Irrecoverable means the debt is incapable of being recovered and that recovery is unlikely. When claiming a bad debt, the claimant must be satisfied that reasonable avenues for recovery have been exhausted. This assessment is factual and may depend on indicators such as the debtor’s financial position or insolvency, prolonged default despite follow-ups, failed nego tiations, or absence of assets or enforceable means of recovery. It includes situations where the debtor is deceased with no estate, bankrupt or under liquidation with insufficient assets, cannot be traced despite reasonable efforts, or where the debt is statute-barred. The deduction should be

The legal framework Under Section 34(2) of the Income Tax Act 1967, a bad debt deduction ‘Malaysia must strengthen electricity grid, energy storage capacity’

31% renewable installed capacity as of end-2025, indicating the scale of expansion required. Zaidi said electricity demand is expected to rise as Malaysia’s population grows, urbanisation increases and new industries expand. He said demand from data centres alone is expected to grow five-fold between 2025 and 2030, while electric vehicles, which are projected to make up about 15% of total industry volume by 2030, along with auto mation and digitalisation, will add further pressure on the power system. Zaidi added that energy costs can account for up to 40% of business operating expenses, adding pressure on manufacturers and high-energy industries. He said a stable and reliable energy supply is also a key factor in attracting foreign investment. “To support this transition, we must invest in technologies that are not only effective today but scalable for the future,” he said during the launch of ABB Malaysia’s customer experience centre in Petaling Jaya. He said it is now urgent to strengthen the resilience of the national grid and enhance Malaysia’s battery storage capabilities to support the growing share of renewable energy. The national power grid, originally designed for centralised fossil fuel generation, faces increasing require ments for storage and system

From right: ABB motion services vice-president Kanavati S, Zaidi, Moser, Ho, Wiberg and ABB Malaysia product marketing manager Jamaluddin Hasan Mydin at the launch of ABB’s customer experience centre.

while reducing environmental impact through advanced electrification, automation and digital solutions. She said technology will play a key role in helping businesses optimise energy use, enhance pro ductivity and meet long-term sustainability goals. Also present were Swedish ambassador Niklas Wiberg, Swiss ambassador to Malaysia Chantal Moser and Energy Commission Malaysia deputy director of energy efficiency and conservation Zulkiflee Umar.

ABB found that while a majority of Malaysian firms have begun investing in energy efficiency, many face challenges in implementation due to gaps in execution, skills and coordi nation. Large-scale grid upgrades and storage deployment require signi ficant capital, raising questions over financing and the role of public private partnerships in accelerating the transition. Meanwhile, ABB Malaysia country holding officer Ho Siew Kim said industries can improve performance

flexibility to handle intermittent renewable energy sources such as solar. Zaidi said the government is modernising the grid in Peninsular Malaysia to improve flexibility, security and its ability to integrate higher levels of renewable energy. He said the MyBEST programme, with a capacity of 400MW, is part of efforts to deploy battery energy storage systems to manage the growing share of renewable energy, particularly solar. A March 2026 industry report by