IRBM Launches Special Program for Voluntary Disclosure

Malaysia’s Inland Revenue Board Launches Special Program for Voluntary Disclosure

On 3 November 2018, the Inland Revenue Board of Malaysia (IRBM) issued its Operational Guidelines No. 1/2018. This guideline outlines the implementation procedures of the Special Program for Voluntary Disclosure (Special Program), which is eligible for taxpayers.

Malaysia’s Tax Reform Committee is part of the government’s efforts to help reform the tax system and address issues which are being faced. These issues include tax leakages and trying to reduce the existing gap. The committee is also tasked with finding new sources of revenue to increase tax collection. As part of those efforts, this Special Program was introduced to encourage taxpayers to make voluntary disclosures.

 

The Objective of Operational Guideline No. 1/2018

The main objective of introducing Operational Guidelines No. 1/2018 is to provide information which explains how the Special Program is going to be implemented. The guideline is also meant to provide information about the implementation period of this Special Program and the reduction in penalty. Aside from that, the guideline also outlines what payment procedures are involved in voluntary disclosure.

The implementation period will be from 3 November 2018 to 30 June 2019, and the applicable legislations include:

• The Income Tax Act 1967
• Petroleum (Income Tax) Act 1967 (PITA 1967)
• Real Property Gains Tax Act 1976 (RPGTA 1976)
• Stamp Act 1949 (SA 1949)

 

Special Program Voluntary Disclosure

Eligible taxpayers will be able to voluntarily disclose their income and pay taxes within the stipulated period. This program was made at an announcement during the 2019 Budget by the Honorable Minister of Finance. The Special Program oversees voluntary disclosure and payment that is made within a stipulated period. This period covers:

• Stamping of instruments which were not previously stamped
• Income which was not previously declared or under-declared
• Expenses which were over-claimed or not allowed
• Reliefs, rebates and deductions which were over-claimed
• The gains on disposal of assets on real properties, and shares in real property companies

Malaysia is not the only country which offers voluntary disclosure programs. Other countries where such a program exists include Australia, Indonesia, the United States of America, Singapore and the United Kingdom among others. Under this Special Program, taxpayers will also be given the opportunity to report the correct income in view of the implementation of the Common Reporting Standard (CRS) of 30 September 2018. The CRS allows Malaysia to receive financial information from taxpayers of other foreign tax administrations as well.

 

What Are the Penalty Rates Involved?

If a taxpayer fails to submit their documents on time, they may be liable for penalties after the Special Program period. The minimum penalty rate could start from 80% and range all the way up to 300% for taxpayers who fail to make their disclosure for the

ITRF / PRF / RPGTRF.

Taxpayers who fail to report the correct income may be liable to penalties under subsection 113(2) of the ITA 1967 / subsection 52(2) of the PITA 1967 / subsection 30(2) of the RPGTA 1976 at a minimum rate of 80% and up to 100%.

Any person who present instruments for stamping after the stamping period will be liable to penalty under subsection 47A(1) of the SA 1949 on amount of the deficient duty.

 

Payments Incurred for Voluntary Disclosure

Taxpayers who make voluntary disclosures during the Special Program period will be required to settle their taxes in the following manner:

• Payment must be made by 1 April 2019 (For voluntary disclosure periods from 3 November 2018 – 31 March 2019)
• Payments must be made by 1 July 2019 (For voluntary disclosure periods from 1 April 2019 to 30 June 2019).

If the taxpayer fails to settle the tax in full at the end of the stipulated period on 1 March 2019 – 1 July 2019, there will be an increase in the tax imposed. This will be based on the prevailing provisions of the law. If tax arrears are still unpaid, legal action will be taken accordingly. You may refer to the link from Malaysian Tax Authority website for further information – know more