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August Advisory Sdn. Bhd., No. 12-1, Jalan Astaka 1C/KU2, Bandar Bukit Raja, Klang (2026)

17/07/2026

Today's case has nothing to do with business, tax or finance matters. However, it is something we should all take note of, because it touches on our rights over our own assets when dealing with the government.

𝐁𝐚𝐜𝐤𝐠𝐫𝐨𝐮𝐧𝐝 𝐨𝐟 𝐭𝐡𝐞 𝐜𝐚𝐬𝐞
A police report accusing the respondent's mother of criminal breach of trust led to a separate investigation, this time under anti money laundering law. Based on that investigation, a police officer froze four of the respondent's bank accounts in June 2014. A prosecutor later seized one of those accounts. The respondent was never charged with anything. Under the law, once twelve months pass without a charge, the money is supposed to be released automatically. That did not happen here. The respondent had to go to court just to force the bank to hand back his own money, and even then he only got it back in August 2018, more than three years after he was legally entitled to it. He then sued the police officers, the prosecutor, the police chief and the Government, saying the account freeze was never valid in the first place because the officer never gave a proper reason for it.

𝐏𝐨𝐬𝐢𝐭𝐢𝐨𝐧 𝐨𝐟 𝐭𝐡𝐞 𝐀𝐩𝐩𝐞𝐥𝐥𝐚𝐧𝐭
The government side argued two things. First, the officer who originally lodged the police report said he had nothing to do with freezing or seizing the accounts, so he should not be blamed. Second, everyone on the government side argued that the prosecutor could not be sued at all, because the actual person holding that job was never named in the lawsuit, and the law requires the specific officer to be named before the Government itself can be held responsible.

𝐏𝐨𝐬𝐢𝐭𝐢𝐨𝐧 𝐨𝐟 𝐭𝐡𝐞 𝐑𝐞𝐬𝐩𝐨𝐧𝐝𝐞𝐧𝐭
Lim Hui Jin argued that the officer who actually froze his accounts never gave proper reasons for doing so, as the law requires. He also argued that once a year passed with no charge and no application to keep the money, it should have been returned to him straight away, and the fact that it was not amounted to serious wrongdoing that deserved higher compensation.

𝐃𝐞𝐜𝐢𝐬𝐢𝐨𝐧 𝐨𝐟 𝐭𝐡𝐞 𝐂𝐨𝐮𝐫𝐭
The court agreed the officer who only lodged the original report should not be held responsible, and agreed the prosecutor could not be sued since he was never properly named. But the officer who actually froze the accounts was found to have done wrong. She never gave proper grounds for the freeze, she failed to release the money on time, and the evidence showed she acted with bad intent, so she could not use the usual legal protection given to officers acting in good faith. Because of this, the police chief and the Government were held responsible for her actions. The court also raised the compensation from RM200,000 to RM500,000, since four accounts were frozen wrongly for a year and the seized money was kept from him for almost four years. A further RM100,000 in punitive damages was kept in place, legal costs were reduced to RM50,000, and interest of 5 percent a year was ordered on the full amount until it is fully paid.

If you wish to focus on running and growing your business, our CFO advisory team can take care of your accounting, payroll, tax planning and compliance matters for you. Feel free to WhatsApp us at 010-246 2151.

Follow our WhatsApp Channel for regular updates: https://august.short.gy/whatsapp-channel

16/07/2026

Earlier we discussed how a discount given to a related party has to be reasonable and commercially justifiable. Today, we look at the actual legal case where this principle played out.

𝐁𝐚𝐜𝐤𝐠𝐫𝐨𝐮𝐧𝐝 𝐨𝐟 𝐭𝐡𝐞 𝐜𝐚𝐬𝐞
Silverdrum sold two units of the Imperiale Residence Project Phase 2 to its own directors. LHDN treated this sale as not at arm's length under Sections 140(1) and 140(6) of the Income Tax Act 1967 and adjusted the taxable profit accordingly. Silverdrum also claimed a Section 33(1) deduction for stamp duty and conversion premium. These adjustments led LHDN to find the tax return understated, resulting in a Section 113(2) penalty of RM197,216.13. The High Court ruled against Silverdrum on all three issues, and Silverdrum appealed.

𝐏𝐨𝐬𝐢𝐭𝐢𝐨𝐧 𝐨𝐟 𝐭𝐡𝐞 𝐭𝐚𝐱𝐩𝐚𝐲𝐞𝐫
Silverdrum relied on Ketua Pengarah Hasil Dalam Negeri v Rainforest Heights Sdn Bhd, where a 10% discount to directors was found not to fall under Section 140(6). It argued the assessment should follow the private valuer's figures, which the Special Commissioners had preferred. It also said the stamp duty and conversion premium became due once the sale agreement was signed, since that was the point the company committed to the transaction. It also argued that the penalty was unfair since it relied on its tax agent's advice.

𝐏𝐨𝐬𝐢𝐭𝐢𝐨𝐧 𝐨𝐟 𝐋𝐇𝐃𝐍
LHDN said Rainforest Heights was different. Here, the government valuer found a discount of over 35%, and even the private valuer's figures showed the price was more than 30% below market value, with no commercial reason given. On the deduction, LHDN agreed stamp duty and conversion premium are deductible, but pointed out that signing a sale agreement only creates a commitment between the buyer and seller. It does not create a debt owed to the government. That debt only arises once the relevant authority actually issues a demand, and no demand had been issued when Silverdrum claimed the deduction.

𝐃𝐞𝐜𝐢𝐬𝐢𝐨𝐧 𝐨𝐟 𝐭𝐡𝐞 𝐂𝐨𝐮𝐫𝐭
The Court of Appeal agreed with LHDN on all counts. The size of the discount, with no commercial justification, meant the sale was correctly caught under Section 140(6). The deduction was disallowed as no obligation to pay existed yet. The penalty under Section 113(2) was upheld. The appeal was dismissed with costs of RM15,000.

If you wish to focus on running and growing your business, our CFO advisory team can take care of your accounting, payroll, tax planning and compliance matters for you. Feel free to WhatsApp us at 010-246 2151.

Follow our WhatsApp Channel for regular updates: https://august.short.gy/whatsapp-channel

15/07/2026

Many SME owners are also directors of their own companies, and it is common for a company asset such as property to eventually be sold to one of its directors. What often gets overlooked is that this kind of sale is not treated the same way as a sale to an unrelated buyer.

Under Sections 140(1) and 140(6) of the Income Tax Act 1967, LHDN has the power to disregard or adjust a transaction between related parties if it is not conducted at arm's length. Arm's length simply means the price and terms are what two unrelated parties would reasonably agree to in the open market. The reason this power exists is straightforward. Without it, a company could sell valuable assets to its own directors at a steep discount, reducing the company's declared profit and quietly shifting value out of the business in a way that distorts the true tax position.

A discount by itself does not automatically fail this test. A reasonable discount can be accepted where there is genuine commercial justification for it, such as a legitimate business reason tied to the circumstances of the sale. What tips a transaction into non arm's length territory is usually a combination of two things, a discount that is unusually large compared to market value, and no credible reason offered for why that discount was given.

There is a second, related principle worth understanding here too. When a company provides for a future statutory payment, such as stamp duty, and wants to claim it as a deduction, the timing matters. A provision is only deductible once an actual legal obligation to pay exists. For statutory payments, that obligation typically only arises when the relevant authority issues a formal demand, not simply when an agreement is signed or a transaction is planned. Claiming the deduction earlier than that can result in the deduction being disallowed, even if the payment is genuinely owed later.

These principles played out together in one dispute, Silverdrum Corporation Sdn Bhd v Ketua Pengarah Hasil Dalam Negeri. I will be sharing the case separately soon.

If your business is planning a related party transaction or unsure when a provision becomes deductible, our team at August Advisory can help you think it through properly. WhatsApp 010-246 2151.

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15/07/2026

Most business owners know that collecting payment from customers is important. What they underestimate is exactly how much money they are losing every extra week that a customer takes to pay. This is not just a cash flow inconvenience. It is a real, measurable cost to your business.

Here is how to think about it. Every ringgit sitting in your accounts receivable is a ringgit your business has already spent but has not yet recovered. You paid your suppliers, your workers, and your overheads to produce that sale. The customer is essentially using your money, interest free, until they pay. The longer they take, the more capital you need to keep the business running, whether through bank borrowing or the owners' own money.

There is a simple measure you should track every month. Take your accounts receivable balance and divide it by your average weekly sales. This tells you how many weeks of unpaid sales you are carrying. A business with RM5 million in receivables and RM1 million in average weekly sales is carrying five weeks of uncollected revenue. If you can bring that down to four weeks without losing customers, you free up RM1 million in cash. That is money you could use to reduce your bank borrowing or invest back into the business.

The cost of not doing this is real. If that RM1 million is funded by a bank overdraft at 6% per year, you are paying RM60,000 in unnecessary interest charges. Multiply this across years of neglect, and you can see how loose credit management quietly erodes profitability.

The right response is not to refuse credit to all customers. Credit terms are often necessary to win and keep business. The right response is to know your numbers, set clear credit terms, enforce them consistently, and identify which customers are persistently slow payers so you can make deliberate decisions about whether to continue extending them credit.

Business owners also need to watch for a sudden increase in their receivable days. If it was four weeks last quarter and it is now six weeks this quarter without a change in your credit policy, that is a red flag. Either some customers are struggling to pay or your collection process has weakened.

Want to know your true receivable position and what it is costing you? Our CFO advisory team can run the numbers and show you exactly where the leaks are. WhatsApp us at 010-246 2151.

Follow our WhatsApp Channel for regular updates: https://august.short.gy/whatsapp-channel

14/07/2026

Many owner-directors of Malaysian companies pay themselves informally: no board resolution, no proper record, sometimes structured to reduce the appearance of taxable income. Under Malaysian law, each of these practices carries specific legal consequences that most business owners are unaware of until they face an audit or a dispute.

Under Section 230 of the Companies Act 2016, a private company board must formally approve all director fees and benefits, record the approval in board minutes, and notify shareholders in writing within 14 days. If shareholders holding at least 10 percent of voting rights object within 30 days of being notified, they can require the company to pass a resolution to approve the payment. If no approval is ultimately obtained, the payment becomes a debt the director owes back to the company under Section 230(5). For public companies, the requirement is stricter: all director fees must be approved at a general meeting, and contravention carries a fine of up to RM3 million.

Section 226 of the same Act goes further. A company is absolutely prohibited from paying any director remuneration described as tax-free or calculated by reference to the director's income tax rate. Any such arrangement is automatically recharacterised as a gross sum subject to income tax in full, and both the company and every officer involved commit a criminal offence carrying up to five years imprisonment or a fine of up to RM3 million.

On the income tax side, Section 13(1) of the Income Tax Act 1967 makes every component of director remuneration taxable: salary, fees, bonuses, commissions, perquisites, and the value of non-monetary benefits such as free accommodation or use of a company vehicle. Section 13(2)(d) confirms that this charge applies for any period in which the person is a director of a Malaysian-resident company, regardless of whether formal employment terms exist.

Paying yourself as a director is not just an internal business decision. It is a legal act with obligations that span the Companies Act and the Income Tax Act simultaneously.

Structure your director remuneration correctly from the start with our CFO advisory team. WhatsApp 010-246 2151.

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12/07/2026

For decades, dividends received by Malaysian shareholders from Sdn Bhd companies were largely tax-free in the hands of the recipient under the single tier system. That changed. The Finance Act introduced Part XXII to Schedule 1 of the Income Tax Act 1967, and individual shareholders receiving large dividends from Malaysian companies now face a direct personal tax charge they may not have planned for.

Under Part XXII of Schedule 1, where a dividend paid, credited or distributed by a company is deemed derived from Malaysia under Section 14, and the total dividend received by an individual exceeds RM100,000 in a year of assessment, the excess above RM100,000 is subject to income tax at 2 percent. The first RM100,000 remains exempt for eligible individuals.

One point that often gets overlooked: this 2 percent tax applies only to individuals. The law specifically uses the word "individual" throughout Part XXII and in the amended Section 6(1)(r) of the ITA. If the shareholder receiving the dividend is a company rather than a person, the dividend remains fully exempt under the existing single tier system, as it has been since 2008. This distinction matters for business owners who hold shares personally compared to those who hold through a corporate holding structure.

In practical terms, if you are an individual shareholder of your own Sdn Bhd and the company declares a dividend of RM500,000 to you in a year, the first RM100,000 is exempt and the remaining RM400,000 is taxed at 2 percent, resulting in RM8,000 of additional personal tax. This may seem modest, but for business owners who have built up retained earnings over many years and plan to declare a large distribution in one go, the exposure accumulates quickly.

Planning the timing, amount, structure, and recipient of dividend declarations now carries direct tax consequences. For business owners considering a large payout from years of accumulated profits, the difference between declaring the dividend personally versus through a holding company is not a minor detail. It is a decision with real tax implications.

If you wish to focus on running and growing your business, our CFO advisory team can take care of your accounting, payroll, tax planning and compliance matters for you. Feel free to WhatsApp us at 010-246 2151.

Follow our WhatsApp Channel for regular updates: https://august.short.gy/whatsapp-channel

12/07/2026

A High Court judgment delivered on 31 May 2026 serves as a timely reminder for business owners and directors. When a senior person uses your staff and resources to build his own business on the side, that is not just a management problem. It is a legal breach. This case looked at what happens when a trusted Executive Director crosses that line.

𝐁𝐚𝐜𝐤𝐠𝐫𝐨𝐮𝐧𝐝 𝐨𝐟 𝐭𝐡𝐞 𝐜𝐚𝐬𝐞
Hartalega Holdings Berhad is a Bursa Malaysia listed nitrile glove manufacturer. The defendant, Dr Danaraj a/l Nadarajah, held three positions at the same time across the Hartalega group, and was in practice the person running the group's India and China operations with full control over staff, bank accounts, and daily affairs. The question before the court was whether, while still serving in all three roles, he had used the Indian subsidiary's employees and resources to secretly build his own businesses called Snap Asia, Snap Trade, and Snap Home, without Hartalega's knowledge or consent.

𝐏𝐨𝐬𝐢𝐭𝐢𝐨𝐧 𝐨𝐟 𝐭𝐡𝐞 𝐀𝐩𝐩𝐞𝐥𝐥𝐚𝐧𝐭 (Hartalega Holdings Berhad and related companies)
Hartalega's case was about what Dr Danaraj did while still employed. Employees testified that he directed them to prepare purchase orders on Snap Asia's letterhead for glove deals with outside suppliers, asked accounts staff to prepare financial projections for Snap Asia to obtain a bank loan, involved staff in company name searches for his new ventures, and made the Indian subsidiary pay for technology work meant for his own projects. A Deloitte forensic report, tested against WhatsApp messages and Dr Danaraj's own answers in cross-examination, supported these findings.

𝐏𝐨𝐬𝐢𝐭𝐢𝐨𝐧 𝐨𝐟 𝐭𝐡𝐞 𝐑𝐞𝐬𝐩𝐨𝐧𝐝𝐞𝐧𝐭 (Dr Danaraj a/l Nadarajah)
Dr Danaraj defended himself on three points. He argued his duties to each Hartalega entity were separate, so liability should not cross from one company to another. He said his contract had no clause stopping him from planning a new business. And for each allegation, he had an explanation. The purchase orders were to help an old partner source gloves during the Covid-19 shortage. The financial projections were a training exercise for a staff member done in her own time. He also pointed out that his name never appeared as shareholder or director of Snap Asia, arguing there was no real business connected to him.

𝐃𝐞𝐜𝐢𝐬𝐢𝐨𝐧 𝐨𝐟 𝐭𝐡𝐞 𝐂𝐨𝐮𝐫𝐭
The High Court ruled fully in favour of Hartalega. The court found that a person in a senior position of trust has a duty to act loyally and in the best interests of the company at all times during employment. Using company staff and resources for private purposes without consent is a serious breach of that duty, regardless of what the employment contract says or whose name appears on the business register. Damages were to be assessed, with interest at 5% per annum and costs of RM90,000.00 awarded against Dr Danaraj.

If you wish to focus on running and growing your business, our CFO advisory team can take care of your accounting, payroll, tax planning and compliance matters for you. Feel free to WhatsApp us at 010-246 2151.

Follow our WhatsApp Channel for regular updates: https://august.short.gy/whatsapp-channel

11/07/2026

A new regulation gazetted on 10 July 2026 gives certain training providers a real cost saving when applying for skills training accreditation.

The National Skills Development (Waiver of Fee to Registered Training Provider) Regulations 2026, published as P.U. (A) 253, comes into operation on 15 July 2026.

Under this regulation, a training provider that is registered under section 31C of the Occupational Safety and Health Act 1994 will no longer need to pay the fee prescribed under items 1(c)(i) and (ii) of the First Schedule to the National Skills Development (Fees and Charges) Regulations 2016.

This waiver applies specifically to applications for skills training accreditation. It is not a permanent waiver. It only applies to applications made within a fixed three year window, from 15 July 2026 to 14 July 2029.

If your business operates as a registered training provider under the Occupational Safety and Health Act, or is planning to apply for skills training accreditation soon, this is a good time to check whether your application falls within the waiver period, so you do not miss out on the cost saving.

Our CFO advisory team helps businesses stay ahead of regulatory changes without disruption. WhatsApp 010-246 2151.

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09/07/2026

When a business buys or sells property, the stamp duty is not simply calculated on the purchase price stated in the agreement. Under Item 32(a) of the First Schedule, the duty is calculated on either the consideration (the price you paid) or the market value of the property, whichever is higher. The government is not going to let buyers under-declare the transaction value to reduce their stamp duty bill.

The rates under Item 32(a) are tiered. You pay RM1 for every RM100 on the first RM100,000 of value, RM2 per RM100 on the next band up to RM500,000, RM3 per RM100 on amounts between RM500,000 and RM1 million, and RM4 per RM100 on anything above RM1 million. On a commercial property transaction worth RM3 million, for instance, this adds up to a significant sum that needs to be planned for in your cash flow.

What many businesses do not anticipate is the additional assessment process under Sections 36A, 36AA, and 36B. The Collector of Stamp Duties (IRB) can assess what they call advance duty or initial duty based on the consideration price, and then come back later with an additional assessment if their government valuer determines the market value is higher than what was declared. If you used the initial duty assessment under Section 36A, and the final assessed duty is more than 30% above what was already paid, a further 10% surcharge applies on the excess. For advance duty under Section 36AA, the surcharge applies only if you fail to pay the additional duty within 30 days. This can catch businesses off guard, especially in commercial property deals where market values can differ significantly from transacted prices.

There is also a notably higher rate for foreign buyers. Under Item 32(aa), transfers of property to a foreign company or a non-citizen, non-permanent resident attract a flat rate of RM4 for every RM100, regardless of which value band the price falls in. If your business structure involves foreign shareholders taking property in Malaysia, this is a cost you must account for upfront.

My little suggestion is never budget for stamp duty based purely on your agreed transaction price. Always get a sense of the current market value of the property and factor in the possibility of an upward revision by the IRB. Surprises here come in the form of additional assessments with a short payment window.

If any of your business documents from this period were not properly stamped, there is currently a window to put things right. LHDN has extended the Stamp Duty Special Voluntary Disclosure Programme by six months, now running from 1 July 2026 to 31 December 2026. Documents executed between 1 January 2023 and 31 December 2025 can be regularised within this period without facing the usual penalty. Our CFO advisory team helps businesses stay ahead of regulatory changes without disruption. Reach us on WhatsApp at 010-246 2151.

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08/07/2026

If your company is planning to fund the education of staff, their children, or promising students in the community. A new gazette order makes this kind of support more rewarding at tax time.

Under the Income Tax (Deduction for Sponsorship of Scholarship to Malaysian Student Pursuing Studies at Technical and Vocational Certificate, Diploma, Bachelor's Degree or Professional Certificate Levels) Rules 2026, a Malaysian resident company sponsoring a qualifying scholarship can claim a deduction equal to twice the amount it spends.

The scholarship agreement must be signed with the student between 1 January 2026 and 31 December 2030. The student must be a Malaysian citizen resident in Malaysia, studying full time at technical and vocational certificate, diploma, bachelor's degree, or recognised professional certificate level, with no income of their own, and parents or guardian earning not more than RM15,000 a month combined.

The deduction covers institution fees and reasonable living and study costs throughout the course. Inland Revenue can disallow any portion it sees as unreasonable. Companies must report each sponsorship to the Ministry of Higher Education. Any amount later repaid by the student becomes taxable income for the company.

This rule takes effect from year of assessment 2026, a real incentive to invest in young Malaysian talent while managing your tax position wisely.

Our CFO advisory team helps businesses stay ahead of regulatory changes without disruption. Reach us on WhatsApp at 010-246 2151.

Follow our WhatsApp Channel for regular updates: https://august.short.gy/whatsapp-channel

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