Kuala lumpur: Registering companies under the names of local Malaysians, including homeless individuals, has been identified as one of the tactics employed by certain foreigners to evade taxes through shadow economy activities. Inland Revenue Board (LHDN) Foreign Taxpayer Branch director Syarein Abu Samah revealed that investigations conducted jointly with the Royal Malaysia Police (PDRM) last year found that about 90 per cent of shadow economy cases involved the use of proxies for company ownership. These companies were registered under the names of locals, while the actual operations were run by foreigners to mislead the authorities.

According to BERNAMA News Agency, Syarein highlighted that these locals are merely nominees and often belong to underprivileged groups, such as homeless individuals. He emphasized that the perception that the majority of foreigners do not pay taxes is inaccurate, as they also contribute to the country's income tax collection. However, a handful of parties fail to declare income, under-report earnings, or deliberately evade taxes through unrecorded transactions, proxies, and third-party accounts known as Alibaba users.

Syarein stressed that all foreigners generating income in Malaysia are subject to the country's tax laws. He also commented on the role of employers, stating that they are responsible for ensuring foreign workers are registered as taxpayers and for making Monthly Tax Deduction payments if the workers' income exceeds the taxable threshold. Employers must ensure proper registration and tax compliance for the workers they hire, regardless of their citizenship status.

The government agreed at the end of 2024 to establish the Foreign Taxpayer Branch under LHDN, which officially began operations on January 1 of the previous year to manage taxation issues involving foreign individuals and companies conducting business in Malaysia. Syarein noted that Department of Statistics Malaysia data for 2025 indicates approximately 3.38 million legal foreign workers in the country, with the total number of foreigners, including undocumented migrants, estimated at between four and six million people.

Bank Negara Malaysia estimated that annual outflows involving foreigners reached approximately RM61 billion in 2025. Syarein also shared that LHDN is leveraging e-Invoicing to detect transactions and income recipients more accurately, while collaborating with BNM and PDRM to trace suspicious transactions, including money transfers through illegal channels.