Customs: Tan Chong owes RM 180 million in excise tax

Tan Chong Motor Assemblies (TCMA), the manufacturing subsidiary of Tan Chong Motor Holdings (TCMH), has been slapped with a bill of demand by the Royal Malaysian Customs Department, asking for RM 180,105,596.86 in unpaid taxes.

In an announcement made to Bursa Malaysia earlier, the listed parent company TCMH said:

“The Board of Directors would like to announce that Tan Chong Motor Assemblies Sdn Bhd (“TCMA”), a subsidiary of the Company, has on 22 May 2020 received bills of demand dated 15 May 2020 from the Royal Malaysian Customs Department (“RMCD”) amounting to RM180,105,596.86 for excise duty in respect of periods from 1 November 2016 to 31 October 2019.

“TCMA does not admit to any liability on the demands made by the RMCD and will take the appropriate measures upon seeking further advice on the matter.

“The Company will update any material developments on the above matter from time to time.”

No further details were provided but excise tax disputes are typically related to the so-called Energy Efficient Vehicles (EEVs) incentives, which allows for rebates in excise tax, subject to compliance to fuel consumption (by weight category, tested using UN Regulations 101 test cycle) as well as value of local investment.

TCMA currently manufactures three EEV-compliant models, the Nissan Serena S-Hybrid and X-Trail, as well as its sister company's Renault Captur.

Since 2018, after the first change in government, the Ministry of Finance have been conducting audits in many car companies and some car companies found themselves in an uncomfortable position of having to defend the incentives given to them by the previous government.

The problem was that EEV incentives were negotiated behind closed doors and specifics behind the requirements to qualify were rather vague.

The national automotive policy doesn’t explicitly say how the calculations are done and when there is a change in government, the definitions and considerations were changed as well.

Previously, Honda Malaysia too was forced to revise the selling price for some of its models upwards, following removal/adjustment of EEV incentives.