Disagree With Your Tax Assessment? The Court Says Pay First, Dispute Later

Many business owners and finance heads assume that if they disagree with LHDN's tax bill, they can hold off paying until the dispute is settled.

A recent Kuala Lumpur High Court decision shows the risk.

What happened?

The Government, through LHDN, sued a company and two individuals for RM5,151,252.59 in income tax, including penalty increases. LHDN asked the court for summary judgment, meaning a decision without a full trial.

The company argued that the amount was wrong, that the tax notices were never received, and that LHDN acted in bad faith.

What did the court decide?

The court allowed LHDN's claim in full, with RM5,000 in costs, in its grounds of judgment dated 11 November 2026.

The judge said Malaysia's tax system works on a "pay first, dispute later" basis. When LHDN sues to recover tax, the court cannot consider arguments that the tax is excessive, wrongly assessed or under appeal. A certificate from LHDN stating the tax due was enough evidence. The court also found no evidence of bad faith.

Does this mean you cannot dispute your tax?

No. The court said the right to challenge the assessment remains. The proper route is an appeal to the Special Commissioners of Income Tax, and in exceptional cases, judicial review.

What does this mean for you?

If you are a business owner or director: disagreeing with an assessment does not stop the tax from being due. Unpaid tax can be recovered through the courts without a trial.

If you handle the finances: keep every tax notice, track payment dates, and raise disputes through the proper appeal channel early, while planning cash flow for the amount due.

In simple terms, appeal if you disagree, but do not stop paying.

If you need help with tax audit and investigation support or planning for tax payments, our Taxation Services and CFO Advisory teams can assist. Feel free to WhatsApp us at 010-246 2151 or visit augustadvisory.com.my.