A tax fraud case involving two foreign workers has raised serious questions about employer practices, regulatory oversight, and the reputational impact such incidents can have on Malaysia’s largely law-abiding expat community.
Two Chinese nationals working in Malaysia are facing unexpected and eye-watering tax demands of RM748,073.84 and RM842,118.84 after their employer allegedly submitted false salary information to the Inland Revenue Board (LHDN). The case, now under investigation, has sparked wider concerns about how foreign workers are employed, monitored, and protected – and how isolated abuses can unfairly reflect on the broader expatriate population.
The women, identified as Li Juan, 42, and Chen Bi Ling, 40, only became aware of the problem during routine immigration processes. Li discovered the issue while attempting to renew her work permit, while Chen, who is married to a Malaysian citizen, uncovered it during the renewal of her spouse visa. In both cases, LHDN records reportedly showed them earning close to RM1 million annually – figures wildly at odds with their actual salaries.
According to MCA Public Services and Complaints Department head Datuk Seri Michael Chong, both women were employed by the same individual, a 43-year-old Chinese national identified as Mr Yu, who operates several mini markets and a steamboat restaurant in the Kuchai Lama area of Kuala Lumpur. Li was employed as a sales and marketing manager, while Chen worked part-time as a cashier – roles that make the alleged income declarations immediately implausible.
Chong alleged that the employer misused the women’s identities and passport details to submit falsified tax filings, dramatically inflating their reported salaries. Their actual monthly earnings were said to range between RM7,000 and RM10,000. The suspected motivation was straightforward: by overstating salary expenses, the business could artificially reduce declared profits and, in turn, lower its corporate tax liability.
James Ee Kah Fuk, president of the Malaysia-China Friendship and Mutual Aid Association (MCFAMAA), described the case as a double-edged fraud. Not only was the employer allegedly evading taxes, but he was also placing employees in severe legal and financial jeopardy. Ee noted that several other staff members from the same company may be facing similar issues, suggesting the problem may be systemic rather than isolated.
Datuk Goh Boon Keng, a retired deputy police commissioner in Perak and deputy president of MCFAMAA, confirmed that investigations are ongoing. He urged foreign workers to exercise heightened caution when accepting employment, particularly in smaller or informally run businesses.
Beyond the immediate legal implications, the case raises uncomfortable but necessary questions. How and why were expatriates employed in what appears to be a relatively small-scale retail operation? Were proper checks conducted when work permits were issued? And were employment terms, job scopes, and tax responsibilities clearly documented and understood by all parties?
These questions matter not just for enforcement, but for perception. Incidents like this, while rare, risk casting a shadow over Malaysia’s expat community as a whole. The overwhelming majority of foreign professionals and workers in Malaysia comply fully with local laws, immigration rules, and tax obligations. They contribute to the economy, create jobs, transfer skills, and play by the rules. When abuses occur, they are typically the result of individual bad actors – not widespread misconduct.
That distinction is important. Tax fraud of this nature is not an “expat problem”; it is an employer problem. In this case, the alleged perpetrator is himself a foreign national, but the victims are also foreigners – highlighting that exploitation can occur within communities, not just across them.
The case also serves as a practical warning. Foreign workers are strongly advised to insist on formal offer letters, written contracts, and regular payslips. Even when employers claim to handle tax matters, employees should independently file their own tax returns and periodically check their records with LHDN. Reliance on informal arrangements, verbal assurances, or messaging apps for employment details leaves workers dangerously exposed.
As investigations continue, this case may yet prompt closer scrutiny of small-scale employers, improved cross-checks between immigration and tax authorities, and renewed outreach to foreign workers about their rights and responsibilities. That would be a welcome outcome.
Malaysia’s reputation as a welcoming, well-regulated destination for expatriates depends on transparency, fairness, and enforcement that targets wrongdoing without unfairly stigmatizing those who follow the law. Cases like this should be addressed firmly – but also carefully – to ensure accountability without collateral damage to the overwhelming majority who do things right.
