eKTP 95

Tax Offences, Fines & Penalties
Part 1 of 2 

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We as a taxpayer should aware of imposition of offences, fines and penalties by IRB in relation to income tax. Let look at some most common fines and penalties under Proviso of Income Tax Act (ITA), 1967 as below:

1. Income Tax Return Filing (ITRF)

Under the ITA 1967, the filing of the ITRF is within 7 months from the end of the company financial year (FY). For example, if the company financial year end (FYE) is 31 June 2018, then the deadline for filing of ITRF is not later than 31st January 2019.

The following are the types of offences if non-compliance:
a) Section 112(1), ITA 1967
- Failure to furnish an Income Tax Return Form (without reasonable excuse), is liable to a fine of not less than RM 200 and not more than RM 20,000 or imprisonment for 6 months or to both. 

b) Section 112(3), ITA 1967
- If no prosecution has been instituted in respect of the default in furnishing a return pursuant to Section 112(1) of the ITA, the Director General is empowered under Section 112(3) to impose a penalty of up to three (3) times the tax.

However, for those taxpayers who failed to submit the tax return on the due date, to encourage submission, the Government has announced a special programme called Special Voluntary Disclosure (“SVD”), this program is proposed to reduce penalty for voluntary disclosure of unreported income which launched with immediate effect. This program offers the reduced penalty rates for taxpayers whom voluntarily declare any “unreported income” for Malaysian tax purposes, including that which is in offshore accounts.  For more details, please refer to our e-article 88.

For taxpayers who failed to submit tax return on the due date and the tax payable is NIL, the IRB may require the tax payer to pay a compound up to RM 20,000.

Note: Grace period / extension of time will not be taken into consideration if the taxpayer fails to furnish a return within the grace period / extension of time granted by the IRB.

2. Incorrect Tax Return

a) Section 113(1)(a), ITA 1967 
- Make an incorrect tax return by omitting or understating any income is liable to a fine of not less than RM 1,000 and not more than RM 10,000 and shall pay a special penalty of double (200%) the amount of tax undercharged.

b) Section 113(1)(b), ITA 1967
- Give any incorrect tax return information in matters affecting the tax liability of a taxpayer or any other person, is liable to a fine of not less than RM 1,000 and not more than RM 10,000 and shall pay a special penalty of double (200%) the amount of tax undercharged.

3. Wilful Evasion

a) Section 114(1), ITA 1967
- Any person who wilfully and with intent to evade or assist any other person to evade tax is liable to a fine of not less than RM 1,000 and not more than RM 10,000 or imprisonment for a term not exceeding 3 years or to both, and shall pay a special penalty of treble (300%) the amount of tax undercharged.

b) Section 114(1A), ITA 1967
- Any person who assist in, or advise others to under declare their income is liable to a fine of not less than RM 2,000 and not more than RM 20,000 or imprisonment for a term not exceeding 3 years or to both.

4. Payment of Tax

a) Section 103(3) and 103(4), ITA 1967
- Any tax due and payable has not been paid by the due date, a penalty of 10% on the amount of tax unpaid upon the expiration of 30 days from the due date.
- Any balance remaining unpaid upon the expiration of 60 days from the due date, additional 5% increment on the balance unpaid.

b) Estimate of tax payable and Payment by instalments
Every person (other than company, trust body, co-operative society or limited liability partnership)
- Section 107B(3), ITA 1967 – Any instalment amount due and payable after 30 days of the date specified by the Director of General (DG), 10% penalty will imposed on the instalment amount due and unpaid.
- Section 107B(4), ITA 1967 – Actual tax payable 30% higher than the original / revised estimate of tax payable, 10% penalty will be imposed on the difference in actual tax payable and estimated tax payable made.

Every company, trust body, co-operative society or limited liability partnership.
- Section 107C(9), ITA 1967 - Any instalment amount due and has not been paid on the due date or on the date specified by the DG, 10% penalty will imposed on the instalment amount due and unpaid.
- Section 107C(10), ITA 1967 – Actual tax payable 30% higher than the original / revised estimate of tax payable, 10% penalty will be imposed on the difference in actual tax payable and estimated tax payable made.