{"id":215,"date":"2025-02-25T08:38:20","date_gmt":"2025-02-25T08:38:20","guid":{"rendered":"https:\/\/hba.com.my\/tax\/?p=215"},"modified":"2025-03-05T00:13:44","modified_gmt":"2025-03-05T00:13:44","slug":"the-case-of-the-extra-tax","status":"publish","type":"post","link":"https:\/\/hba.com.my\/tax\/the-case-of-the-extra-tax\/","title":{"rendered":"The Case of the Extra Tax"},"content":{"rendered":"\t\t
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A Tax Surprise for a Property Developer<\/h3>

\"\"<\/p>

A property development company in Johor had just finished a major project, building condominiums from\u00a02013 to 2018<\/strong>. Their profits were tax-exempt under a special order in Malaysia’s\u00a0Income Tax Act<\/strong>. Everything seemed to be going according to plan.<\/p>

The Problem Arises<\/h3>

Not all buyers were able to pay in full. Some sales had to be cancelled, and the company received:<\/p>

  • Forfeited deposits<\/strong>\u00a0(non-refundable down payments)<\/li>
  • Cancellation fees<\/strong><\/li>
  • Late payment charges<\/strong><\/li><\/ul>

    In\u00a0November 2020<\/strong>, the tax department delivered an unexpected letter:<\/p>

    “These forfeited deposits, cancellation fees, and late payment charges do not qualify for the tax exemption. They are additional income and must be taxed.”<\/p><\/blockquote>

    The Dispute<\/h3>

    \"\"<\/p>

    The company disagreed, arguing that these payments were part of their regular property sales and should be included in their tax-exempt income.<\/p>

    But in\u00a0April 2021<\/strong>, the tax department issued an official notice demanding\u00a0extra taxes for 2015 to 2019<\/strong>.<\/p>

    The Legal Battle<\/h3>

    \"\"<\/p>

    Frustrated by the decision, the company sought a\u00a0judicial review<\/strong>\u00a0in the High Court, hoping to overturn the extra tax assessment.<\/p>

    The tax department countered:<\/p>

    “This case should be heard by the\u00a0Special Commissioners of Income Tax (SCIT)<\/strong>, where witnesses and evidence can be fully examined\u2014not the High Court.”<\/p><\/blockquote>

    The Court\u2019s Decision<\/h3>

    \"\"<\/p>

    The High Court agreed with the tax department:<\/p>

    “This matter must be handled by the\u00a0SCIT<\/strong>, where detailed evidence can be considered.”<\/p><\/blockquote>

    The company\u2019s request to cancel the tax assessment was dismissed. They were ordered to pay\u00a0RM5,000 in costs<\/strong>.<\/p>

    Next Steps for the Company<\/h3>
    • The company could apply for a\u00a0temporary pause<\/strong>\u00a0on the tax payment within one month.<\/li>
    • They also had\u00a030 days<\/strong>\u00a0to appeal to a higher court.<\/li><\/ul>

      Lessons Learned<\/h3>

      This case highlights key takeaways for businesses:<\/p>

      • Know the Right Forum:<\/strong>\u00a0Tax disputes often need to be resolved by specialized courts like the SCIT.<\/li>
      • Tax Exemptions Have Limits:<\/strong>\u00a0Even with exemptions, businesses must justify all types of income.<\/li>
      • Be Prepared for Scrutiny:<\/strong>\u00a0Every financial detail can be examined closely by tax authorities.<\/li><\/ul>

        In the world of taxation, understanding the rules and the proper channels for dispute resolution is crucial for success.<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t

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