Capital statement tax investigations are among the most sensitive and complex reviews conducted by the Inland Revenue Board of Malaysia (LHDN). These investigations focus on identifying discrepancies between a taxpayer’s declared income and their actual accumulation of wealth over a period of time. When LHDN determines that assets, expenditures, or lifestyle indicators cannot be reasonably supported by reported income, additional tax assessments and penalties may be imposed. Such cases often involve long historical reviews and require precise explanations supported by credible documentation.
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Preparation and reconstruction of detailed capital statements covering assets, liabilities, income, and expenditure over the investigation period
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Review of historical income sources including employment income, business profits, dividends, rental income, and investment returns
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Identification and documentation of legitimate non-taxable or previously taxed sources such as savings, gifts, inheritances, insurance proceeds, and asset disposals
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Reconciliation of asset acquisitions including properties, vehicles, investments, and major personal expenditures
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Analysis of bank statements, loan agreements, and financial records to support funding sources
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Preparation of clear and consistent written explanations addressing LHDN’s queries and assumptions
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Representation during clarification meetings and interviews with investigating officers
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Negotiation of additional assessments and penalties where explanations are disputed
Capital statement cases require more than technical knowledge; they demand careful presentation, consistency, and credibility. Our team has extensive experience handling these investigations and understands how LHDN evaluates explanations, supporting documents, and taxpayer behaviour. We work closely with clients to reconstruct financial histories accurately, address weaknesses proactively, and ensure explanations remain aligned throughout the investigation process.
If you are facing a capital statement investigation or have been asked to explain your sources of funds, professional assistance can significantly reduce the risk of adverse findings and help you resolve the matter with confidence and clarity.
