You are on page 1of 31

Responsibility of taxpayer & employer

Self-assessment system for individuals


Types of assessment
Keeping sufficient records
Tax avoidance vs. tax evasion
Tax audit
Tax investigation

Register as a taxpayer when having a


chargeable income
Submission of tax return (Form B/ Form
BE) for each YA.
Pay the tax liability
Keep sufficient records/documents
Change of address notify tax authorities

Furnish

the details of the remuneration paid to


each individual employee i.e EPF, STD
Notice of employee commencing the
employment
-

Notify IRB not later than 30 days from the


commencement of employment

Notice

of cessation of employment

Notify IRB not later than 1 month prior the cessation.

Employees

leaving Malaysia (if the employee is


leaving Malaysia > 3 months)
Retention of money -

Retain whatever amount of money due to the


employee (cessation case) at least 90 days from the
period of notification of cessation

STD

(Schedular Tax Deduction)

Withhold tax under STD system and remit the amount


to tax authorities.
4

The SAS for salaried individuals,


businesses and partnership was
implemented from YA 2004.
File & Pay concept
File completed income tax return forms (Form
BE or Form B) to the IRB together with the
payment of the balance of tax payable (if any);
Pay income tax liability through monthly salary
deductions for individuals having employment
income or through bimonthly installments for
individuals having business income.

Who must file a tax return?

Every individual who:


Has chargeable income for a YA; or
Has no chargeable income for that YA but:
Has chargeable for the YA immediately preceding
that YA; or
Has furnished a return for the immediately preceding
year; or
Has been required to furnish a return (but failed to
furnish a return) for the immediately preceding year
6

When is the dateline to file a return and


what form to file?

For individuals having employment and other


non- business income
30 April / Form BE

For individuals having business and other


income
30 June / Form B

Original assessment
Reduced assessment
Additional assessment
Composite assessment
Increased assessment
Advance assessment
Protective assessment

(For details, refer pg 538 541, CKF 2010)


8

Under SAS, no supporting documents need


to be submitted to the IRB.
But sufficient supporting documents should
be kept for 7 year for the purpose of tax
audit (PR 5/2000 revised).
In cases where the taxpayer receives
dividend income which results in a tax
repayable position, only then should the
original dividend vouchers be submitted
together with HK-3 (Helaian Kerja 3).
The taxpayer also has to indicate whether
he/she has complied with the Public Rulings
issued by the IRB.
9

Employment income:

Business income:

Form EA/EC, pay slips etc.


Sales and purchase invoices, cash bills, payment
vouchers, official receipts for payments, bank
statements, cheque butts and other relevant
documents

Original receipts to substantiate all


expenses or claims made.
10

Bank account
Trading stocks & work in progress
Personal money used in the business
Personal drawings
Non-trade debtors & creditors
Contract & subcontract payments
Partners capital & current accounts

11

The individual carrying on business may be


required by the DG, at the expense of that
individual, to have his accounts audited by a
professional accountant.
The chargeable income of the individual may be
determined according to the best judgment of the
DG & an assessment made accordingly
The individual may be prosecuted &, on
conviction, may be liable to a fine of not less than
RM300 & not more than RM10,000 or to
imprisonment for a term not exceeding 12
months, or to both.
12

There are 2 ways/modes of filing tax


returns:

Manually

E-filing

13

W.e.f. YA 2009, taxpayers are allowed to


make self amendments for additional
assessment under the following conditions:
In respect of errors resulting in increased
assessment such as errors committed in reporting
income or claims on deductions or expenses.
Self amendment be allowed only once for each YA.
Self amendment be allowed within a period of 6
months from the due date of furnishing the tax
form.
The amendment is made in specified forms.

14

1. Failure to submit a return


A fine of RM200-RM2,000 or
Imprisonment for a term not more than 6 months
Or both
The IRB is allowed to impose a penalty of up to 3
times the amount of tax payable if no
prosecution action is taken against the taxpayer.

2. Failure to make tax payment

A penalty of 10%. A further 5% penalty will be


imposed on any balance remaining unpaid after
60 days.
15

3. Under-declaration of income or excessive


claim on deductions or expenses
Taxpayer who make self amendment will not be
subject to a penalty for under-declaration of
income or excessive claim on deductions or
expenses.
However, will be subject to a late payment
penalty equivalent to the penalty imposed on a
taxpayer who files a correct return but defaults in
paying tax due within the stipulated period.

4. Other Offences

See summary of offences (pg 596-599, CKF 2010)


16

Individuals with Employment Income:


Income tax is deducted through monthly salary
deduction under the Schedular Tax Deduction
(STD) scheme.
After calculating the tax payable, if the amount
of tax payable > the STD paid, the balance
must be paid upon submission of Form BE.
If the STD paid > the tax payable, the IRB will
refund the balance to the taxpayer.

17

Individuals with Business Income:


The IRB will issue Form CP500 setting out the
estimate of tax payable under an installment
scheme.
The estimate is determined based on the tax
assessed in the preceding year.
The individual must pay the estimated tax
payable in 6 bi-monthly installments commencing
from March of the year following the YA.
Each payment must be accompanied by a
remittance slip (Form CP 501).
Installment payment must be paid to the IRB
within 30 days from the due date.
18

Individuals under installment scheme (having


business income) may apply to revise the
installment payment not later than 30 June.

If the application is successful, the IRB will issue a


revised notice of installment payments.

Where the revised estimate > the amount of installment


paid to date, the difference shall be payable in the
remaining months of the installment scheme.
Where the installment paid > the revised estimate, stop the
payment.

If the application is not successful, the IRB will


notify the taxpayer through the Form CP 504.
19

Late payment of installment

If any installment due and payable on the date


specified by IRB has not been paid within 30 days
from the due date, a penalty of 10% shall be
imposed on the amount unpaid without any
further notice.

Difference between the revised estimate and


final tax liability

If the tax payable (excluding tax attributable to


employment income) if any, > the revised
estimate (if a revision is submitted) by an amount
> 30% of the tax payable, the difference > the
30% will be subjected to a penalty of 10%.
20

Tax avoidance

It is the legal utilization of the tax regime to


ones own advantage, in order to reduce the
amount of tax that is payable by means that
are within the law.

Minimizing taxes through legal, but


aggressive, tax planning strategies.

Tax evasion

Efforts to not pay taxes by illegal means


(wilful evasion)
21

Wilful evasion of tax means any action or deed


deliberately performed or done with the purpose
or intention of evading or assisting any other
person to evade tax (PR 8/2000) which include:

Omission of income in tax return


Making false statement or entry in a return
Giving false answer (orally or in writing) to a question
asked by IRB
Preparing/maintaining or authorizing the
preparation/maintenance of false books of account or
other records
Falsifying or authorizing the falsifying of books of account
or other records
Making use or authorizing the use of any fraud, art or
contrivance
22

What is the objective of tax audit?

What is tax audit?

To enhance voluntary compliance with the tax


laws and regulations and to ensure that a higher
tax compliance rate is achieved under SAS.
It is an examination of a taxpayers business
records and financial affairs to ascertain that the
amount of tax due should be reported and paid
are in accordance with tax laws and regulations.

How many types of audit carried out by the


IRB?

2 types: desk audit and field audit


23

Desk audit is held at the IRBs office. It is


concerns with straightforward issues or
tax adjustments which are easily dealt
with via correspondence.
A taxpayer may be called for an interview
if further information is required.
It involves checking all information on
income and expenses as well as various
types of claims made by a taxpayer in his
income tax return.
24

It is one that takes place at a taxpayers


premise. It involves the examination of
the taxpayers business records.
For a sole proprietor or partnership, if the
taxpayers business records are
incomplete it may involve the
examination of non-business records such
as personal bank statements etc.
A notice will be given prior to a field
audit.
25

The selection process is based on various


criteria, i.e.
Selection through risk analysis
Manual checking of returns forms
Examination of third party records
Previous records on return form
compliance
Selection based on specific industries
Selection based on specific issues to a
particular group of taxpayers
Selection based on locality

26

Upon completion of an audit:


If there is no adjustment to the tax
computation, the taxpayer will be informed via
letter that the case has been finalized without
any adjustment.
If there are adjustment to be made, the IRB will
issue a tax computation summarizing the tax
adjustments based on their findings.

If an appeal is not made within a specified time,

an additional assessment will be issued with


appropriate penalties where applicable.

27

Penalties for omission/understatement of income

S112(3) or S113(2) of ITA 1967: 300% of the tax


payable or 100% of the tax undercharged respectively.
The DG may impose a lower penalty of 45% for the first
offence.
If the taxpayer makes voluntary disclosure of the
omitted income before the commencement of the tax
audit, the DG may impose the concessionary penalty
rates.
For each repeated offence, the rate of penalty shall be
increased by 10% as compared to the last penalty rate
imposed for the previous offence but is restricted to a
sum not exceeding 100% of the amount of tax
undercharged.
28

Penalty for not providing reasonable


facilities and assistance

PR 7/2000 providing reasonable facilities and


assistance also applicable to individuals.
A fine of RM1,000 RM10,000 or to imprisonment
for a term not exceeding 1 year or both.

Penalty for failure to keep sufficient records

PR 5/2000 (revised) sole proprietor or


partnership are required to keep sufficient
records.
A fine of RM300 RM10,000 or to imprisonment
for a term not exceeding 12 months or both.
29

It is an examination of taxpayers business


and/or individual books, records and
documents.
It is carried out where it is suspected based
on precise and definite evidence that the
taxpayer is deliberately trying to avoid
paying tax or has committed an act of
wilful evasion.

30

Public Ruling
5/2000 (revised)
7/2000
8/2000
3/2001 & 3/2001 addendum

Tax Audit Framework


Tax Investigation Framework
(please find from the IRBs website)

31