FEDERAL agencies and government-interest companies operating in Sabah have their income tax files centralised at the Inland Revenue Board (LHDN) Large Taxpayer Branch in Kuala Lumpur, the Dewan Rakyat was told.
The arrangement means their income tax payments are recorded according to the location where their tax files are registered, rather than where their business activities or operations are carried out.
The matter was raised by Ranau MP Datuk Jonathan Yasin, who asked whether Federal agencies and government-interest companies operating and generating profits in Sabah had been directed to pay their taxes through LHDN Sabah.
Jonathan also questioned whether failure to do so was inconsistent with the Malaysia Agreement 1963 (MA63) and the Federal Constitution.
In a written reply dated Oct 22, the Government said the registration of income tax files for Federal Government agencies and government-interest companies is centralised at the LHDN Large Taxpayer Branch in Kuala Lumpur.
It said the Income Tax Act 1967 sets out the procedures and responsibilities to be complied with by taxpayers, including income tax file registration, tax assessment, submission of income tax returns and payment of taxes to LHDN.
Under Section 66A of the Act, income tax file registration can be carried out together with registration of a Tax Identification Number (TIN), either through the e-Daftar application or physically at an LHDN office.
The Government explained that for individual taxpayers, the location of an income tax file is determined by the postcode of the registered address.
For companies, the tax file is generally registered according to the postcode of the registered headquarters.
Companies may, however, apply to transfer their tax files where there is a specific need, such as the relocation of their headquarters.
The Government said income tax payments could be made through prescribed channels, including electronic platforms and appointed collection agents, and were not restricted to the locality or State where business activities were conducted.
“Payment of income tax is recorded based on the location of the taxpayer’s registered file and not based on the location where business activities or operations are carried out,” it said.
The explanation comes against the backdrop of Jonathan’s long-standing calls for greater clarity over revenue generated in Sabah and its implications for the State’s constitutional financial rights.
Jonathan had previously called for agencies operating in Sabah, as well as companies from outside the State conducting business there, to pay taxes through LHDN Sabah so that there would be clearer records of income generated in the State.
He has argued that clearer records would assist in determining the revenue generated from Sabah and the amount relevant to the State’s 40 per cent entitlement.
The latest written reply, however, sets out the Federal Government’s existing tax administration mechanism and does not provide a specific direction requiring Federal agencies or government-interest companies operating in Sabah to register their tax files with LHDN Sabah.
The Government said the centralised arrangement was intended to ensure taxpayer files were managed efficiently and systematically, while enabling income tax collection to be carried out effectively in accordance with existing tax laws.
For Sabah, the issue remains significant because the location of tax-file registration affects where income tax payments are administratively recorded, even though the businesses concerned may operate and generate income in the State.
The response therefore provides clarification on the existing tax administration system, while leaving the broader question of how income generated in Sabah is captured for purposes of the State’s constitutional revenue rights as an issue of continuing public and parliamentary interest.
