Many businesses rent machines, vehicles or other equipment from overseas companies. Sometimes the overseas company also sends its own people to operate them.

So is the payment a fee for a service, or rent for using the equipment? The answer can change whether withholding tax applies.

A recent High Court decision gives a clear example. LHDN has published its case summary of PT Travira Air v Director General of Inland Revenue, decided on 2 November 2026.

What happened?

An overseas company owned helicopters and supplied pilots and crew for offshore work. A local company had the contract to provide helicopter transport to an oil and gas project owner, and it rented the helicopters from the overseas company. The project owner paid the overseas company directly, as monthly fees and flying hour charges.

LHDN treated these payments as rent for using equipment, which is subject to withholding tax, and raised extra tax for 2013 to 2015.

The overseas company said it was really running an air transport business, so different tax rules should apply. It also said it was being taxed twice.

What was decided?

LHDN pointed to the agreements. The helicopters were rented to the local company, the crew were under a separate arrangement, and the local company was the one providing the transport service. The 5% already deducted earlier was counted when the tax at 10% was worked out, so nothing was taxed twice.

The Special Commissioners of Income Tax agreed with LHDN, and the High Court dismissed the appeal. The company can still appeal within 30 days.

What does this mean for your business?

How the agreements are written, and who provides what, can decide the tax treatment. What the overseas company calls its business may not matter much.

If your company pays an overseas supplier for equipment, with or without its people, it may be worth checking the agreement and how the payments are made, so withholding tax is handled on time.

Our team can help with withholding tax calculations and submissions, and support you during a tax audit. Feel free to WhatsApp us at 010-246 2151.