This article first appeared in The Edge Financial Daily on May 11, 2017

KUALA LUMPUR: Country Heights Holdings Bhd says its executive chairman and major shareholder Tan Sri Lee Kim Yew’s fixed deposits of some RM126 million placed in a foreign-owned bank have been seized by the Inland Revenue Board (IRB).

Lee notified the company via a letter dated May 8 that he “understands” the seizure was in relation to RM22.5 million worth of tax liabilities incurred by Country Height’s wholly-owned unit, Country Heights Sdn Bhd (CHSB), according to Country Height’s Bursa Malaysia filing on Tuesday.

The tax liabilities were accrued from the years of assessment of 1997 and 1998, said Country Heights. CHSB is a major subsidiary of the company.

Lee further informed that he had requested a confirmation from the IRB of the seizure, and whether the seized funds have been, or will be, applied to settle the tax liability, but the IRB has yet to respond.

“Notwithstanding the absence of acknowledgement from the IRB, Tan Sri Lee has informed that he is agreeable to allow his fixed deposits seized by the IRB to be used to settle the tax liability provided the company acknowledges the sum used to settle the tax liability as an amount due and owing to Tan Sri Lee, and that the company undertakes to settle the amount as soon as the company has sufficient funds to do so,” said Country Heights.

Country Heights added that Lee, who has a 58.3% stake in the company, “has further agreed that the sum will be non-interest bearing”.

Country Heights’s board of directors, which convened a meeting on Tuesday, has agreed to the above, the filing read.

Just last December, Lee loaned Country Heights RM10.76 million, interest-free, to settle tax liabilities of three of the group’s subsidiaries in a lump-sum payment to IRB.

As for CHSB’s tax liabilities, which were incurred during the Asian financial crisis, Country Heights had appealed to the ministry of finance (MoF) against IRB’s decision to impose the sum mentioned.

In an announcement last month, Country Heights said MoF had accepted a cash settlement proposal from CHSB in January, but IRB declined and counter-proposed a settlement of either cash from Lee or shares from Country Heights to IRB.

Though CHSB agreed to go with either of the proposals, IRB later rejected it and at a meeting with CHSB’s legal advisers on April 6, it was suggested that the sum be settled via cash payment within four months. CHSB agreed to that, but was suddenly slapped with a winding-up petition from the government in mid-April.

Country Heights, which has been in the red since financial year ended Dec 31, 2015 (FY15), saw its cash pile shrink to RM12.87 million at end-2016, from RM20.81 million a year ago.

Country Heights shares slid one sen or 0.78% to RM1.27 on Tuesday, giving it a market capitalisation of RM350.15 million.