LHDN overtaxes company RM286m!

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Small taxpayers are squeezed till kingdom come in Malaysia.

LHDN overtaxes company RM286m!

KUALA LUMPUR, May 27, 2024: Malaysia’s Inland Revenue Revenue Board (LHDN) is really a joke to the rest of the world.

It does not even know what is taxable and what is not. And it is super efficient in going after the ikan bilis (anchovies), not the ikan jeru (sharks) or the super rich.

Go ask how much tax does the disgraced and shameless former prime minister Najib “1MDB” Razak pays and all other super rich. His wife, Rosmah Mansor, can afford to buy hundreds of luxury handbags worth hundreds of millions Ringgit.

The Court of Appeal today ordered the LHDN to refund a company RM286 million for imposing additional tax and penalties!

The LHDN management should take responsibility for such a shameless boo-boo and a complete revamp is in order.

No News Is Bad News reproduces below a news report on the court proceedings:

LHDN told to refund company RM286mil for imposing additional tax, penalties

V Anbalagan-27 May 2024, 12:57 PM

Court of Appeal unanimously rules that the proceeds from the sale of intellectual property rights are a capital receipt, not income.

The Inland Revenue Board had assessed the proceeds from Keysight Technologies Malaysia Sdn Bhd’s sale of intellectual property rights as income. (Bernama pic)

PUTRAJAYA: The Court of Appeal has ordered the Inland Revenue Board (LHDN) to refund a Penang-based manufacturer RM286 million for additional taxes and penalties imposed for the year 2008.

Justice Collin Lawrence Sequerah, in delivering the unanimous decision of a three-member bench, held that the High Court and Special Commissioners of Income Tax (SCIT) had erred in upholding the tax assessment issued by LHDN.

The bench agreed with electronics manufacturer Keysight Technologies Malaysia Sdn Bhd that the proceeds from the sale of intellectual property (IP) rights are a capital receipt instead of income.

“The receipt from the sale of such capital assets constitutes capital receipt. It was not income in nature, and therefore not taxable,” Sequerah said in the ruling delivered on Friday.

Justice Kamaludin Said, who chaired the three-member bench, and Justice Abu Bakar Jais were also on the panel that heard the appeal last year.

LHDN was also ordered to pay Keysight RM20,000 in costs.

Keysight had sold its IP in the form of technical know-how under a global restructuring programme.

LHDN then initiated an audit and eventually assessed the proceeds from the sale of IP as income.

LHDN alleged that the proceeds received represented compensation for the loss of the taxpayer’s income.

Keysight paid the RM286 million assessment to LHDN and filed an appeal to the SCIT, which was dismissed in March 2020. The High Court affirmed the decision in May 2021.

The Court of Appeal, in overturning the earlier judgments, further found that LHDN’s assessment was time-barred as it was issued past the expiry of the five-year limitation period under the Income Tax Act 1967.

LHDN issued the tax assessment and demanded payment in 2017, although the five-year limitation expired in 2013.

The bench held that LHDN had failed to establish the negligence exception required to lift the time bar under the Income Tax Act 1967.

The bench also affirmed that the mere act of claiming a tax treatment with which LHDN disagreed could not amount to negligence.

The bench observed that the taxpayer had made full and frank disclosure of the receipt in the tax returns and sought professional advice in preparing its tax returns.

Lawyers Cyrus Das, Jason Liang, Yeoh Yao Huang, Jeff Sum and Tan Wen Ying represented Keysight while senior revenue counsels Normareza Mat Rejab and Syazana Safiah Rosman appeared for LHDN.