The Background
In the high-stakes world of international business, a human resource provider for petroleum exploration operations in the Gulf of Thailand was confident its taxes were in order. For years, the company had claimed bilateral credit relief under Section 132 of the Income Tax Act 1967, arguing that its income had been taxed twice—once in Malaysia and again in Thailand. The numbers seemed solid, the calculations meticulous. But beneath this confidence lurked a looming shadow of missing documentation.
The Audit Unfolds
Everything changed when the Director General of Inland Revenue (DGIR) launched an audit. What should have been a straightforward review turned into a storm of unanswered questions. The taxpayer had no notices of assessment or receipts from the Thai Revenue Authority (TRA)—the key evidence needed to substantiate its claims.
When confronted, the taxpayer doubled down. “The withholding tax was paid,” their representative argued. “It was remitted by CHOCSB to the TRA before the funds reached us. The money was taxed in Thailand before it ever touched Malaysian soil.”
But the DGIR wasn’t swayed. “Where is the proof?” they asked, demanding the very documents the taxpayer had failed to produce. Without these, the DGIR asserted, the claim for bilateral credit was baseless. Their audit revealed that withholding tax was borne by CHOCSB, not the taxpayer, weakening the argument further.
The tension escalated. The DGIR accused the taxpayer of trying to benefit from relief meant for those who could prove double taxation. “This is a legal provision, not a guessing game,” they argued, invoking Public Ruling No. 11/2011, which requires taxpayers to provide notices of assessment or equivalent evidence from foreign authorities.
The Courtroom Drama
The case eventually landed before the Special Commissioners of Income Tax (SCIT). The taxpayer presented its case with urgency. “We’ve been doubly taxed,” their counsel argued passionately. “The withholding tax was deducted from our income—it’s an undeniable cost of doing business in Thailand!”
But the DGIR’s representative, calm and collected, dismantled the defense. “The taxpayer has failed to show evidence that the TRA taxed their income directly. Without this proof, they don’t qualify for bilateral credit relief. What they call withholding tax was borne by CHOCSB—it’s not their burden to claim.”
The Verdict
When the decision came, it was a blow. The SCIT ruled in favor of the DGIR, stating that the taxpayer had failed to meet the legal burden of proof. The bilateral credit relief was denied, and the additional assessments for the Years of Assessment 2013 to 2018 were upheld.
The commissioners didn’t mince words: “This isn’t about assumptions or inferences. The law is clear. Without the required documentation, no claim for relief can be allowed.” The taxpayer was left scrambling to appeal the decision, with just 21 days to file.
The Lesson Learned
This case is a sharp reminder that in the world of international taxation, confidence means nothing without evidence.
- Proof is Non-Negotiable: Claims for bilateral credit relief require ironclad documentation, including notices of assessment or receipts from foreign authorities.
- Understand Your Tax Burden: If withholding tax is borne by another entity, it cannot be used to claim relief.
- Compliance is Key: Double taxation agreements are not blanket protections—they come with strict conditions that must be met.
Relevant Laws
- Subseksyen 132, 113(2) & Jadual 7 Akta Cukai Pendapatan 1967
