Foreigners Using Malaysians as Company Proxies to Evade Taxes, Says LHDN

The Inland Revenue Board of Malaysia (LHDN) has revealed that certain foreigners are using Malaysians, including homeless individuals, as proxy owners to register companies and evade taxes through shadow economy activities.

According to LHDN Foreign Taxpayer Branch director Syarein Abu Samah, investigations conducted jointly with the Royal Malaysia Police (PDRM) found that approximately 90% of shadow economy cases involved the use of nominee company owners. While companies were officially registered under the names of locals, the actual business operations were managed by foreigners to mislead authorities.

He explained that many of the local individuals involved came from underprivileged backgrounds and were merely being used as nominees without actual control over the businesses. Authorities also identified practices such as unreported income, under-declaration of earnings, unrecorded transactions, and the use of third-party accounts known as “Alibaba accounts”.

LHDN stressed that all foreigners earning income in Malaysia, whether through employment, business, or other activities, remain subject to Malaysian tax laws. Employers are also responsible for ensuring foreign workers are properly registered as taxpayers and that monthly tax deductions are made where applicable.

The implementation of e-Invoicing is expected to strengthen tax monitoring efforts by improving transaction traceability and helping authorities detect suspicious financial activities more effectively.

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