Waiver and remission of tax penalty

The Malaysian Inland Revenue Board ("IRB") has recently announced that there will be a waiver and remission of tax penalty to encourage voluntary disclosures and early settlement of tax arrears.

How can this benefit you?

  • Opportunity to resolve tax disputes
  • Waiver of tax increase (late payment penalty) for tax arrears: Income tax, withholding tax and RPGT*
  • Remission of penalty for voluntary disclosure of non-submission or late filing of income tax return forms
  • Remission of penalty for voluntary disclosure of incorrect returns filed
  • Remission is for a limited time frame: 1 May 2015 to 30 November 2015

" IRB's media release on "Reduction of Penalty And Waiver of Tax Increase for Voluntary Disclosure And Early Settlement of Tax Arrears" dated 24 April 2015
*RPGT denotes Real Property Gains Tax

Taxpayers deriving income from Malaysia and looking for opportunities to regularise their tax positions may apply for the reduction of penalties and/or waiver of increase of tax.

Who can apply?

Multinational companies ("MNCs")* Local companies*
(including small and medium enterprises)
Individuals Others
(including body of persons, limited liability partnership, corporation sole, trust companies)

*Excludes companies whose tax files are handled by the Multinational Tax Branch or the Petroleum Branch of the IRB

Recommended for:

MNCs and local companies
  • With significant cross-border transactions, unresolved issues with the IRB and contentious issues
  • Including high net worth individuals, with annual gross income of more than RM1million

Current tax penalty regime

The tables below set out the current penalty regime under the tax law and the concessionary rates applied by the IRB in practice:

1) Concessionary rate of penalty

2) Rate of tax increase

*Rates of penalty for the late submission of tax returns are extracted from the "Garis Panduan Operasi Bil. 1 Tahun 2015" issued by the IRB on 5 March 2015.
**Based on the Tax Audit and Tax Investigation Frameworks
***Based on the Income Tax Act 1967

Amnesty regime

The recent IRB announcement aims to reduce the current concessionary penalty rates and waiver of tax increase. However, the amnesty* does not indicate the rate of reduced penalty.

Key areas to note:

  1. Merit based
    Depending on IRB's discretion based on the merits of the case
  2. Tax review
    Possibility of a tax audit by the IRB
  3. Open years
    Not clear on the years of assessment to be audited by the IRB
  4. State of documentation
    Ability to retrieve relevant documentation
  5. Short time frame: 30 November 2015
    Short period of time for applicants to perform a tax health check

*The IRB's conditions for amnesty are outlined as follows:
> The eligibility of the offer depends on the merits of the taxpayer's case
> It is subject to relevant regulations issued by the IRB
> It is not applicable to taxpayers whose tax files are handled by the Multinational Tax Branch or the Petroleum Branch of the IRB

You can consider...

Before approaching IRB:

  • Ascertain your tax status (payable / refund) for each year of assessment
  • Undertake a health check on the tax returns for the past 3 to 5 years of assessment
  • Undertake a withholding tax review on payments made to non-residents
  • Undertake a means test or capital statement review in the last 5 years of assessment (for individuals)
  • Formulate a submission strategy

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.