Volume 4 Issue 2 1 March Tax amnesty Reduction and waiver of tax penalties

Transcription

1 Volume 4 Issue 2 1 March 2016 Tax amnesty 2016 Reduction and waiver of tax penalties

2 Reduction and waiver of tax penalties The 2016 Budget recalibration measures* include a proposal for the relaxation of penalties for voluntary disclosure and settlement of tax arrears. ow can this bene t you Waiver of tax increase (late payment penalty) for tax arrears: income tax, petroleum income tax, withholding tax and RPGT** Reduction of penalty for voluntary disclosure of non submission or late ling of income tax and petroleum income tax forms, and RPGT forms Reduction of penalty for voluntary disclosure of incorrect returns led Reduction of penalty for audit and investigation cases Reduction of penalty for voluntary disclosure and settlement of late stamping Notes: * These measures were announced by Malaysia s Prime Minister and Finance Minister, YAB Dato Sri Mohd Najib bin Tun Abdul Razak, on 28 January ** RPGT denotes Real Property Gains Tax Source: Inland Revenue Board s media release on Reduction of Penalty For Voluntary Disclosure And Waiver of Tax Increase For The Settlement Of Tax Arrears dated 10 February

3 The Malaysian Inland Revenue Board ( IRB ) has followed through to announce that there will be a reduction of penalties and waiver of tax increases to encourage voluntary disclosures and early settlement of tax arrears (the Amnesty )*. Multinational, foreign and local companies** Foreign and local individuals** (including high net worth individuals) Who can apply? Taxpayers with unresolved tax issues with the IRB Taxpayers currently under civil suit, tax audit or investigation by the IRB Others** (including body of persons, limited liability partnerships, corporation sole, trust bodies) Key areas to note Merit based Tax audit Open years Documentation Limited time frame Depends on the IRB s discretion based on the merits of the case Possibility of triggering a tax audit by the IRB Not clear on the years of assessment to be audited by the IRB The IRB may call for historical documents 1 March 2016 to 15 December 2016 Notes: * The tax amnesty for indirect taxes will be covered in the next issue of EY s Take 5 ** Taxpayers deriving income from Malaysia who are looking for opportunities to regularize their tax positions 3

4 Current tax penalty and the Amnesty regime Set out below are the current penalty regime under the tax law, the concessionary rates applied by the IRB in practice and the reduced penalty rates under the Amnesty regime. 1) Penalty rates Penalty regime Income Tax Act 1967 Petroleum (Income Tax) Act 1967 Penalty rates based on the tax law Penalty rates (Concessionary rate) Reduced penalty rates (Amnesty regime*) Failure to furnish tax returns by the statutory due date (income tax) Up to 300% x period from the statutory due date for furnishing the tax return**: Within 12 months: 20% After 12 months to 24 months: 25% After 24 months to 36 months: 30% Beyond 36 months: 35% Full payment: 15% Payment in 6 instalments: 20% Failure to furnish tax returns by the statutory due date (petroleum income tax) Up to 300% No concessionary rate speci ed in any guidelines issued by the IRB Full payment: 15% Payment in 6 instalments: 20% Incorrect returns: Voluntary disclosure (within a stipulated period) after taxpayer has been informed of the tax audit Incorrect returns: Voluntary disclosure by taxpayer during a tax investigation Up to 100% 35%*** Full payment: 25% Payment in 6 instalments: 35% Up to 100% From 45% to 100%*** Voluntary disclosure within 14 days from the date of the IRB inspection: Full payment: 20% Initial payment of 50% and remaining in 6 instalments: 25% Incorrect returns: Voluntary disclosure Within x period from the statutory due date for furnishing the tax return***: Within 60 days: 10% After 60 days to 6 months: 15.5% Full payment: 15% Payment in 6 instalments: 20% Up to 100% x period from the statutory due date for furnishing the tax return: After 6 months to 1 year: 20% After 1 year to 3 years: 25% Beyond 3 years: 30% Incorrect returns: Discovery by the IRB during a tax audit Incorrect returns: Discovery by the IRB during a tax investigation Up to 100% 45% or 100%**** Full payment: 25% Payment in 6 instalments: 35% Up to 100% From 45% to 100%*** Full payment: 25% Initial payment of 50% and remaining in 6 instalments: 35% Applicable to: Unresolved cases as of 31 December 2015: Settlement by 31 July 2016 Taxpayers who were subject to tax investigation from 1 January 2016: Settlement by 15 December 2016 * Based on the Garis Panduan Operasi Bil 1 Tahun 2016 Tawaran Pengurangan Penalti Dan Penghapusan Kenaikan Cukai issued by the IRB on 10 February 2016 ** Based on the Garis Panduan Operasi Bil 1 Tahun 2015 Pengenaan Penalti Di Bawah Subseksyen 112(3) Akta Cukai Pendapatan 1967 issued by the IRB on 5 March 2015 *** Based on the Petroleum Tax Audit Framework, the Tax Investigation Framework and the Tax Audit Framework issued by the IRB on 1 April 2013, 1 October 2013 and 1 February 2015 respectively **** The penalty rate for taxpayers who are listed in the Monitoring Deliberate Tax Defaulter Programme is 100% 4

5 1) Penalty rates (cont d) Penalty regime Real Property Gains Tax Act 1976 Stamp Act 1949 Penalty rates based on the tax law Reduced penalty rates (Amnesty regime*) Failure to furnish RPGT form by the stipulated due date Up to 300% Full payment: 5% Payment in 6 instalments: 8% Failure to present an instrument for stamping within the stipulated period x period from the stipulated due date for presenting an instrument for stamping (whichever is greater): Within 3 months: RM25 or 5% After 3 months to 6 months: RM50 or 10% Beyond 6 months: RM100 or 20% Stamping of the instrument and payment of stamp duty made: From 1 March 2016 to 30 June 2016: 5% From 1 July 2016 to 15 December 2016: 10% 2) Rate of tax increase Rate of tax increase (based on the Income Tax Act 1967, unless otherwise indicated below) Waiver of tax increase (Amnesty regime*) Income tax payable After the due date: 10% Beyond 60 days after the due date: Additional 5% Estimated tax payable by instalments (by a company, limited liability partnership, trust body or co-operative society) After the due date: 10% Under-estimation of tax payable by a company, limited liability partnership, trust body or cooperative society (where the tax payable exceeds the original, revised or deemed revised estimate of tax payable, whichever is later, by an amount more than 30% of the tax payable) 10% Amount to be waived is not indicated Payment by instalments (other than a company, limited liability partnership, trust body or co-operative society) After the due date: 10% Shortfall of instalments payable by persons other than a company, limited liability partnership, trust body or co-operative society (where the tax payable exceeds the total instalments payable by an amount more than 30% of the tax payable) 10% Amount to be waived is not indicated Withholding tax payable After the due date: 10% Late payment of withholding tax: 50% penalty waiver Discovery during tax audit: Fully waived Voluntary payment of unpaid withholding tax: Petroleum income tax payable After the due date: 10% (Petroleum (Income Tax) Act 1967) Real Property Gains Tax Disposer Acquirer (remittance of retention sum to the IRB) After the due date: 10% (Real Property Gains Tax Act 1976) * Based on the Garis Panduan Operasi Bil 1 Tahun 2016 Tawaran Pengurangan Penalti Dan Penghapusan Kenaikan Cukai issued by the IRB on 10 February

6 Considerations Before approaching IRB: Ascertain any unpaid taxes Undertake a tax health check Undertake a withholding tax review on amounts paid or credited to non-residents Review your personal net worth against income reported Formulate a submission strategy 6

7 Sharing EY knowledge and insights The outlook for global tax policy in 2015 Indirect tax in 2015 Global Tax Policy and ontroversy Brie ng 2015 You and the Taxman 10th anniversary commemorative edition Tax Insights Issue 13 Take 5 - Malaysia principal hub incentive Take 5 - Tax amnesty Take 5 - Budget 2016 Malaysia Take 5 - Recalibration of Budget

8 EY Assurance Tax Transactions Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and uality services we deliver help build trust and con dence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more, of the member rms of Ernst Young Global imited, each of which is a separate legal entity. Ernst Young Global imited, a U company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com Ernst Young Tax onsultants Sdn. Bhd. All Rights Reserved. APAC no ED None This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for speci c advice. ey.com/my Contacts Yeo Eng Ping Tax Leader, Asean Tax Leader, EY eng-ping.yeo@my.ey.com Lim Kah Fan Partner, Business Tax Services kah-fan.lim@my.ey.com Amarjeet Singh Partner, Business Tax Services amarjeet.singh@my.ey.com Chow Seong Chen Executive Director, Business Tax Services seong-chen.chow@my.ey.com Farah Rosley Partner, Business Tax Services farah.rosley@my.ey.com Chan Vai Fong Director, Business Tax Services vai-fong.chan@my.ey.com For further information about EY or our thought leadership, please visit: Website: Mobile app: EY Insights (available on ios and Android devices)