Indirect Tax Alert
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Issue No. 16/2025 | 26 August 2025
Tax exemptions sought by manufacturers must be viewed narrowly or strictly
It was reported in a recent news that the Federal Court has ruled that the interpretation of tax exemptions given to manufacturers should be viewed narrowly or strictly in its provision. The Federal Court held that the onus is on the manufacturer to prove they meet all the necessary requirements for the tax exemption and if the court is in doubt whether the exemption covers the goods, the claim must be rejected.
The Federal Court’s decision has clarified and reinforced the principle which provides that ambiguities in taxing statutes generally favour taxpayers, but not for provisions granting relief/exemptions from an otherwise clear liability.
PwC Comment
Following the above Federal Court’s decision, we expect the Royal Malaysian Customs Department (RMCD) to have a tighter scrutiny of exemption claims by businesses. In this regard, businesses should:
- ensure that their claims of tax exemptions are carefully prepared and submitted with documentable compliance to the relevant legislation;
- sought clarifications from RMCD and tax professionals if there are ambiguities in the tax exemptions;
- ensure that their staff are equipped with the knowledge to claim the exemptions correctly; and
- continuously update themselves with the latest development in the tax exemptions.
If your business faces any difficulties in ensuring the above, we can assist you in the following:
- provide consultation to your business to ensure that the exemptions claimed are correctly prepared and properly documented;
- clarify the ambiguities in the tax exemptions or assist in writing to RMCD for clarifications;
- provide necessary training or coaching to your staff to equip them with the right knowledge to carry out their duties in preparing the claims of tax exemptions;
- update your business and staff on the latest development in the tax exemptions.
If you have any questions on the above or would like to know more of how we can help your business, please do not hesitate to contact us and we would be happy to assist you.
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