Astro Malaysia Holdings Bhd has recently made headlines, but not for favorable reasons. The company was served additional assessment notices by the Inland Revenue Board, locally known as Lembaga Hasil Dalam Negeri (LHDN), amounting to a staggering RM734.88 million. This development has consequently led to a company’s share price drop.
Below, Astro Malaysia’s share price one day after the notice:
(Source: Google)
The assessment notices were issued due to LHDN’s disallowance of production costs incurred by Astro during the years of assessment from 2019 to 2023. These disallowed costs totaled RM22.01 million, with an additional RM712.87 million including penalties. As of now, further details and the outcome of this case remain unknown.
Read more: Why, When and How Tax Audits Are Conducted
Such cases are not uncommon, as there are often discrepancies between LHDN’s interpretation of taxable income and tax deductions and that of the public. Business owners frequently need to engage professionals to assist in appealing against these additional assessments by LHDN. These appeals can be time-consuming and resource-intensive, often tarnishing the reputation of businesses by painting them as tax evaders.
Understanding LHDN’s Advance Ruling Process
However, these situations can sometimes be avoided with proper management. Since January 1, 2007, LHDN has provided a channel for taxpayers or their representatives (tax agents or tax lawyers) to request an advance ruling on the interpretation and application of income tax provisions under the Income Tax Act 1967. The issuance of an advance ruling aims to ensure clarity and certainty of tax treatment and consistency in applying income tax law. This initiative helps promote compliance and minimize disputes between LHDN and taxpayers.
An advance ruling is a written statement by the Director General of Inland Revenue (DGIR) that provides an interpretation of how any provision of the Act applies to a proposed arrangement described in an application. It is binding on the person related to the specified arrangement and is valid only for the period or year of assessment indicated in the ruling.
LHDN has made its guidelines on advance rulings publicly available for applicants keen to learn more about this procedure.
You Can Rectify Tax Errors by Appealing To LHDN
In the world of taxation, missing a deadline to communicate with LHDN can feel catastrophic. However, Astro Malaysia Holdings Bhd’s case illustrates that there are still opportunities to rectify the situation. Taxpayers can await LHDN’s findings and subsequently appeal against the assessment based on provisions within the tax law (Section 99 of the Income Tax Act 1967 (ITA)). Despite this, not all cases proceed smoothly. There are often scenarios where income or expenses are contested, and neither the Act nor the guidelines provide clear answers.
In such contentious cases, taxpayers must take timely action. One essential step is filing a Form Q, which must be submitted within 30 days of the additional assessment being issued. This formal appeal process allows taxpayers to contest LHDN’s assessment and present their case for review.
(Source: LHDN, Malaysia. Download Form Q here)
How To Appeal Tax Assessments in Malaysia
When faced with a tax assessment that you believe is incorrect or unfair, understanding the appeal process is key:
- Assessment Notification: LHDN will issue an additional assessment, detailing the tax owed.
- Review Period: The taxpayer can review their assessment and prepare grounds for an appeal.
- Filing Form Q: Within 30 days of the assessment notice, the taxpayer must file Form Q to initiate the appeal. This form is crucial for officially challenging LHDN’s findings.
- Appeal Review: The case will be reviewed, and both parties may present their arguments. The taxpayer can provide evidence and legal arguments to support their position.
- Resolution: The appeal process aims to resolve, whether through negotiation or a formal decision by the authorities.
Taxpayers can challenge assessments and seek fair outcomes by understanding the appeal process and taking prompt action. Filing Form Q within the designated 30-day period is a critical step in this process, offering a pathway to resolve disputes even when the tax laws and guidelines are vague or ambiguous.
Tax Appeal FAQs
- Which provision of the law allows a taxpayer to appeal against a tax assessment?
Section 99 of the Income Tax Act 1967 (ITA) gives the taxpayer a right to appeal an assessment made by the Inland Revenue Board of Malaysia (LHDN) to the Special Commissioners of Income Tax (SCIT).
- What is the time period to file an appeal?
The appeal must be filed within 30 days from the date the Notice of Assessment is served to the taxpayer.
- How to file an appeal according to Section 99 of the ITA?
Prepare a total of four (4) copies of Form Q for each year of assessment. At least one (1) copy needs to be the original form while the other three (3) may be photocopies.
Compile them together with attachments (if any) that sets out the grounds of the appeal and submit them to your respective HASiL office that handles your tax file. No other documents are required to be submitted together.
- Who can sign the Form Q?
Form Q must be signed by the taxpayer i.e the person being assessed and chargeable to tax. In the case of companies and limited liability partnerships, Form Q must be signed by a person authorized under Sections 75 and 75B of the ITA respectively.
A tax agent or lawyer cannot sign on behalf of the taxpayer.
- What important details need to be included in the Form Q?
A completed Form Q must contain the following :
a. The date and amount of tax payable under the disputed notice of assessment;
b. Detailed grounds of appeal containing other particulars as may be required by that form.
- What happens after the Form Q is filed?
In general, there are two possible outcomes. Firstly, LHDN may accept the appeal and make the necessary amendments. On the other hand, if LHDN disagrees, the case proceeds to a scrutiny review by both the state office and LHDN’s technical department. If no conclusion can be reached, the case will proceed to be heard by the Special Commissioner of Income Tax.
Once Form Q is submitted, it typically takes 3 to 6 months to process. If no resolution is achieved, the hearing by the state head officer and the technical department may take an additional 6 to 12 months. Further hearings depend on a case-by-case basis.
Get Favorable Outcomes
In any tax dispute, preparation, timely action, and a clear understanding of legal rights are indispensable for achieving a favorable resolution. If you need guidance to navigate a tax audit, Bispoint Group is here to help.
We provide a range of comprehensive business and financial solutions for small and medium-sized enterprises (SMEs) in Malaysia, including tax compliance, accounting, company incorporation, and financial due diligence. Our team of highly skilled professionals can swiftly and expertly implement solutions to meet your business needs. Currently, we have over 70 dedicated teams, including Chartered Accountants, managers, supervisors, and junior associates in our offices serving over 1,000 private companies.
Speak to us to understand how we can provide strategic tax support for your company.