7% Retention Sum And Over-Taxation

7% retention sum and over-taxation by LHDN officers is what you need to read about if you are a foreigner and you are investing or planning to invest in a property in Malaysia. This is what foreigners who own Malaysia properties will be dealing with upon disposing such properties.

To begin with, it is easy for foreigner to buy and own a property in Malaysia. But from the anecdotes from all previous foreign owners, owning, maintaining and disposing the property is a huge challenges.

Apart from dealing with the lack of security where your whole property could be stripped of everything, there is also the bureaucratic LHDN officers waiting to pounce on you for a piece of your flesh.

You will have to face the ever-changing RPGT law applicable to foreigner as well as the conniving LHDN officers. To know why is that so, read on for the story of my encounter and experience with these LHDN officers.

I have documented the process of the Real Property Gain Tax (RPGT) law as applied by the LHDN officers here. We can also see the kind of irresponsible and unresponsive attitude from them.

Dealing with LHDN officers after property disposal

I made a move in June 2010 to own a Malaysia property in the state of Johor. In June 2019 I disposed this property and received the LHDN notice for RPGT in 2020. By a stroke of the pen, the then-Finance Minister changed the rule for foreigner owing Malaysia property.

Effective from 1st January 2018, there is two new rules in place. The first new rule requires an upfront payment of 7% of selling price retention sum. The second new rule is a higher tax rate will be levied.

After the sale, LHDN sent me their Notice of Assessment (NOA) for the RPGT. This NOA contained a host of issues which was detailed out on my lawyer’s appeal letter. One of which was the deduction of RM380,610 consisting of renovation costs and other allowable deductibles. This was arbitrarily disallowed with no reason given.

I then pursue LHDN for their legal justification for such arbitrary action or rectify this. I was then ignored till Dec 2020.

Finally I filed a complaint on 23-12-2020 with the Director-General of Public Complaint Bureau on this matter. Below is a snippet (the attached letter and all the attachments removed).

Official complaint to Director General of Public Service Bureau

Complaint dated 23-12-2020 to DG of PCB

After this complaint was sent, a confirmation that it had been seen by the DG was that a sum of RM2,329.96 was returned to us, though unwillingly. Apart from this rectification action by the LHDN officers, there was no reply nor response as seen from my first follow-up email dated 19-01-2021.

First follow-up email dated 19-01-2021 showing sum of RM2,329.96 returned.

After having no reply nor response for about ten weeks, a second follow-up email, dated 04-03-2021 was sent. This email now includes and is specific directed to the competent person who is referred to by LHDN officer.

Second follow-up email, dated 04-03-2021, which specific directed to LHDN’s competent person.

LHDN officer’s attempt to scuttle this matter

Finally, this LHDN officer replied by sending a simple email message addressed to me only. He was attempting to scuttle my email chain of events, hoping that I would be replying to that email and start another communication channel instead of this email chain.

To which I replied on 04-03-2021 @6.43 pm as below:

“Please reply to the main email in which all recipients will be in the loop, else any reply is a non-reply.
But before you reply to the main email, please note all my points below in response to this non-reply:

1. What has happened to me is “highly unreasonable”, not what you have claimed to be as “reasonable”. 
2. All my claims are detailed and laid out and supported with all the facts, findings and proofs. 
3. Such facts, findings and proofs are shown on the attachments which I have provided. I am waiting for your reply to every single point as presented.
4. Your reply will prove how reasonable or unreasonable is LHDN (as represented by your good self).
5. Please support all your claims with objective proof and facts, not empty meaningless statements.
6. If this matter is not closed properly and officially, this matter will escalate further and higher up. It does not matter how long it takes.
7. This ends the email correspondence between us and I am awaiting for your official reply through the main email.” Unquote

Another email reminder dated 20-05-2021 after winning my high court case

LHDN officers tactics of stonewalling

Despite this LHDN officer stonewalling instead of addressing my concerns, I persisted in sending another email reminder dated 20-05-2021. I escalated and copied many other recipients. This is a message that this matter will not be ignored but still remained on the table.

I have an added impetus to drive this as the Malaysia high court had ruled that my detention was illegal and unconstitutional on 04-05-2021. Without this high court win, there will be little interest and support from anyone because I was portrayed as someone who have gotten into trouble with the Malaysia law.

It is apparent now that these LHDN officers are arrogant towards foreigners in that they have no regards for us, refused to reply nor acknowledge receipt of my sent emails. By doing so, they can ignored the matter rather than addressing the matter. This is despite escalating the matter to Singapore authorities.

Nothing happened till about seven months later when I decided to escalate this matter to the Malaysia High Commission (MHC) in Singapore. It was replied using my last email to this LHDN officer. This officer was the same officer trying to scuttle this matter by replying in a private manner. His purpose was to create another communication channel so as to scuttle my attempt seeking to resolve this matter.

Escalation of matters to Malaysia High Commission

Email reminder dated 23-12-2021, escalated to MHC

Having escalated to MHC, I sent another email reminder dated 03-01-2022 promising to escalate further beyond MHC if he did not replied. As MHC is in the loop, he had little choice but to reply in order not to concede the matter.

Another follow-up email reminder dated 03-01-2022, after escalation to MHC

This conniving LHDN officer responded with an email that is meant to side-track to other matter as well as a diversionary tactics. Soon after, it was another LHDN lady officer who replied on 06-01-2022.

LHDN lady officer replied on 06-01-2022

Making some headway with LHDN officers

So I finally received an email that sounds like and seems like from a reasonable LHDN lady officer. She was asking for certain documents from my lawyer. This lawyer had already discharged her scope of work more than a year ago and it is not right to inconvenience her now. And I sent the document that this LHDN lady officer was requesting from my lawyer.

Replied on 06-01-2022 to attach the document the LHDN lady officer requested for.

Again I noticed that this LHDN lady officer was trying to do the same as the earlier officer to reply using another email communication channel. By going to this new channel, I would have lost visibility of the earlier emails messages and the issues. Furthermore there is no need to involve my lawyer as she had completed her scope of work around June 2020. Whatever outstanding documents needed by LHDN would have been resolved then. I reiterated that all communication to be on this email chain channel and there is no necessity to involve my lawyer.

Email dated 06-01-2022, insisting to keep all communication on this email chain.

Futile attempt by LHDN officers to change official story

Then this LHDN lady officer suddenly claimed, quote: “there is no records of your invoices & receipts for claiming expenses.” unquote, in her email dated 15-01-2022. And she puts in a request to email her all the documents for her further action. To me this is so obviously untrue as I had sent all the whole lot of documents as attachments in the first few emails to support my case. This claim smells very fishy though some tax table is shown to make it looks more believable.

An email dated 09-01-2022 with a fishy claim of “missing” records

In order not to be tricked and fell for this fishy story, I direct this request to my lawyer to answer this LHDN lady officer’s claim. This will prevent an unnecessary dispute between me and the LHDN lady officer.

Email dated 10-01-2022 to direct the fishy claim to my lawyer to answer

My lawyer provides all the proof of the submission of all the documents that were requested and a courier receipt as proof that it was delivered to LHDN. Therefore it is not necessary to send any attachments/documents now. By sending new attachments/documents to them now will change the whole story, i.e. that they did not received these attachments/documents and therefore there was no action by LHDN to rectify.

Lawyer’s email to show proof of submission of all documents in June 2020 and courier receipt as proof

Now that the unsubstantiated claim of “missing” receipts and invoices or the tax authority officers not sighting of the receipts and invoices has nothing to do with me, it is back to LHDN to justify the legal justification for the over-taxation or to rectify the over-taxation.

Email dated 13-01-2022 to reject the claim of “missing” receipts and invoices

Harassment of my lawyer

Though the lady LHDN officer failed to trick me to send the so-called “missing” receipts and invoices, she then attempted using another email to my lawyer telling her to send.

Email dated 13-01-2022 to my lawyer asking her to send the receipts and invoices on the pretext of allowing the expenses.

I step in with an email, dated 13-01-2022, to disagree and prevent my lawyer from sending any document to LHDN. This stopped LHDN from changing the story entirely.

Email dated 13-01-2022 to all questioning the request for documents to be sent by my lawyer.

It is obvious that there is an attempt by LHDN to scuttle my email chain and changed the story that will allowed these LHDN officers from being accountable for their actions. In other words, by twisting the whole story, it can be used to backfire on me.

However from their emails, LHDN has confirmed that they will allowed the deduction only if they received these “missing” receipts and invoices which were claimed “not sighted by LHDN officers” and an “incomplete computational form”. Both claims were not substantiated.

Judging from all the emails that the LHDN officers had sent, there is much doubt about their sincerity to rectify. With their kind of scheming moves seen throughout, it is better to forego the claim than to fall into their trap.

Email dated 17-01-2022 reiterating my case and their confirmation that there is no legal justification

Their last and final attempt by harassing my lawyer through a phone call, getting her to re-send over those receipts and invoices. But I have always maintained that the LHDN already had these documents.

I challenge LHDN that the only way to settle this dispute is to make a police report on “missing” documentation that were submitted. Alternatively, LHDN can carried out an internal audit. To audit their process to find out why their officers did not sighted these receipts and invoices, were these receipts and invoices “missing” and why was the uncompleted computational form not resolved with my lawyer in June 2020.

Lawyer’s email acknowledging my instructions after being told via telephone to submit documents to LHDN

So from reading through all these, it can be seen how conniving these people are and how difficult for most of us to deal with them. I understand from a few sources that there are many cases just like mine.

Many face difficult challenges to hold these LHDN officers accountable in similar situation. I have to be tenacious and refusing to let them walk all over me that I persisted on and exposed their conniving actions to over-tax me.

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