IRB serves close to RM4b tax bill to TNB

by MARK RAO / pic by HUSSEIN SHAHARUDDIN

TENAGA Nasional Bhd (TNB) was served a tax bill totalling close to RM4 billion by the Inland Revenue Board of Malaysia (IRB) with the power company said it would appeal against the demand.

Malaysia’s national utility company said it received the notices of additional assessment yesterday, which cover the assessment years of 2015, 2016 and 2017.

TNB is said to owe RM1.43 billion for 2015, RM1.24 billion (2016) and RM1.3 billion (2017), bringing the total to RM3.98 billion, according to the notices sent to the utility giant.

“Based on the legal advice obtained from our tax solicitors, TNB has a good basis to contend that there is no legal and factual basis for IRB to issue the said notices,” the company told the stock exchange yesterday.

“Accordingly, TNB will be appealing against the said notices,” the company said.

This is not the first time Malaysia’s leading power company was served such notices by IRB.

On Nov 23, 2015, the company received additional assessment notices for 2013 and 2014, for a sum of RM985.57 million and RM1.08 billion respectively by the tax authority.

TNB said IRB had approved, in principal, the company’s reinvestment allowance claim for the assessment years in question.

IRB, however, had subsequently reversed the approval on the basis that the company is not in the business of manufacturing that allowed such exemptions.

A year later in December, TNB and IRB agreed to not commence any proceedings against the assessments totalling RM2.07 billion until the matter is determined by the special commissioners of income tax and the High Court on a subsequent appeal.

The recent assessment served on TNB came shortly after the company posted a 140% year-on-year jump in net profit to RM1.2 billion for its third quarter ended Sept 30 this year.

This was largely owing to the lower operating expenses and fuel cost incurred, though revenue dipped 3.3% over the same period to RM12.64 billion on regulatory adjustments made.

The performance helped the company’s shares gain 32 sen or 2.4% in value since Tuesday to close at RM13.72 yesterday, giving the company a market capitalisation of RM78.07 billion.

However, news of IRB’s latest notices of assessment could dent TNB’s shares prospects.

When TNB announced that it received the RM2.07 billion tax bill by IRB on Nov 27, 2015, the company’s share price lost 24 sen or 1.8% during the next trading day.

Meanwhile, TNB is also bracing for changes to the domestic electrical supply market which will see the opening up of the electricity retail market to new players.

This is aimed at bringing down costs for consumers, while creating a more competitive and sustainable market.

TNB announced in July that it will transfer the assets, business undertakings and liabilities of its domestic power generation and electricity retail divisions to two newly-incorporated but wholly-owned companies respectively.