'Just because you've received a donation, doesn't mean it's not taxable' — tax expert

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KUALA LUMPUR (April 3): Just because you received a donation, it doesn't mean that it is not taxable, said Axcelasia Inc chairman Dr Veerinderjeet Singh.

This was following reports that former Prime Minister Datuk Seri Najib Razak had claimed that political contributions are not taxable under the law, when responding to news that he had been slapped with a RM1.5 billion tax bill.

Veerinderjeet explained that if one were to have rendered any services or provided some services in the country, then it is considered like a payment or commission, thus making it taxable.

"The fact that the payment is overseas, doesn't mean that it is exempted. If you did the services overseas, and gotten the payment overseas, then yes... you're exempted, because it's considered overseas income," Veerinderjeet told reporters by the sidelines at the Malaysian Tax Conference 2019.

"Income is taxable as long as it is derived from the country, not received in the country. Derived in the country means you've done most of the work to generate that income here," he added.

"It doesn't matter that it is paid overseas," said Veerinderjeet.

He made it clear that if the services are rendered in the country, but the payment is made overseas, it means that it is still taxable here.

He pointed out that the Inland Revenue Board has to establish a clear tax structure about this matter. "But, I think they had, if not, they wouldn't have raised an assessment [on the former premier]," he added.

Notably, in a Facebook post on Monday, Najib wrote: "First of all, political contributions including from the Ministry of Finance of Saudi Arabia are not subject to or taxed under the law. Secondly, as it is general knowledge, income derived from foreign countries is not taxable under the law."

The Edge Financial Daily reported on Monday that the IRB slapped Najib with an extra tax bill of around RM1.5 billion for 2011-2017, and the amount is on top of what Najib had paid based on his declared income for those seven years.

The report, citing sources, said the IRB has assessed that Najib had not declared taxable income of close to RM4 billion for the period, including the infamous RM2.6 billion that Malaysian and US investigators say originated from 1Malaysia Development Bhd.