TAX ADMINISTRATION

Return & Assessment

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 ASSESSMENT
• Current year assessment w.e.f 1/1/2000
– ‘Pay as you earn’ scheme.
• Income tax payable in 2018 is for the income derived in the
year 2018
• The correct amount of tax payable for YA 2018 would only be
known when taxpayer file in the return form in year 2019
• The submission of return is a year later.
• Tax benefits are based on what is proposed in the budget.

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 TYPES OF RETURNS
– B: resident individual with a business source
– BE: resident individual without a business source
– M: non-resident individuals
– C: Companies
– C1: Co-operative societies
– P: Partnership
– T: Trust body, deceased person estates, club, association
– E: Annual return by employer.
– EA: a return to employee by employer stating the
employee’s remuneration in details.
– EC: like EA form for government employee

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 SUBMISSION OF RETURNS
• Sec 77(1A):
– Companies, trust and co-operative society: 7 months after
the closed of their accounting period
• Individual with business income: not later than 30 June in the
year following a YA.
• Individual with employment and investment income: latest by
30 April on the following year.

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 Responsibility of tax payer
• Sec 77(1):
– Every chargeable person is required to furnish its tax return to IRB
– Where return form is issued, a person must complete it even though he
has no income or will have no chargeable income.
• Sec 77(2):
– When any chargeable person has not received a return form for the
relevant year, he must inform the IRB of his chargeability to tax
– Within 14 days after 31 March of the year of assessment
• Sec 77(3): New arrival:
– An individual who arrived in Malaysia- inform DG of IRB within 2
months after arrival

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 Responsibility to file a return.
• Husband and wife : the husband
– The wife income is reported in the husband return (B form)
– Irrespectively of whether the wife elects for joint assessment
or not.
– Joint assessment: chargeable person is the husband
• However, wife still liable to tax when her husband is not in
position to pay the tax.
• Notice of assessment on the husband is considered served on the
wife
• However the wife is not given the right to appeal against the
assessment

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 Responsibility to file a return.
• Companies (s75)
– The manager, directors, co. secretary
• bodies of person (s75)(society, club, co-operative societies)
– The manager
– The treasures
– The secretary
– Members of its controlling authority
• Non- Residents (s70)
– Him/herself or his agent, attorney or his managers

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 Responsibility to file a return.
• Company in liquidation (s75(2))
– Liquidator must settle first the tax that should be payable
before making any distribution to shareholders
– Fail to do so, the liquidator is liable to pay a penalty the
tax equivalent to the amount of the tax.
• Executors s.74
• Trustee (s73)

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 Responsibility of the employer
1. Distribute EA/EC form to employee and IRB
2. Give notice of employee commencing employment to IRB not later
than one month from the commencement of employment (CP22
Form : to register new employee)
3. Give notice of cessation of employment to IRB (CP22A form)
4. Employee leaving Malaysia (CP 21) for a period exceeding 3
months: one month before the departure date.
5. Retention of money due to employee until 90 days after IRB
received the notification of cessation of employment
6. Schedular tax deduction: (PCB)
– Withhold tax under PCB system
– Monthly deduction from employee salary and remit it to IRB not
later than 15th day of each month
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 Responsibility of the employee

1. Notify IRB about his chargeability

2. Request for a return form
3. Submit the B/BE form to IR not later than 30
April
4. Inform if there was a change in address
within 3 months of the change.

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 Notice of assessment

• Sent by post shall be deemed to have been

served on the taxpayer, notwithstanding he
received it or not.
• Responsibility lies on taxpayer to inform IRB
if he has not received one
• Penalty will be imposed on taxpayer for late
payment
• E-Filling-once clicking button submit
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 TYPES OF ASSESSMENT

1. Original assessment
2. Reduced assessment
3. Additional assessment
4. Composite assessment
5. Increased assessment
6. Advance assessment
7. Protective assessment

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 Original Assessment
• Assessment made by taxpayer or his agent under self
assessment system
• Power of DG of IRB (non submission case)
– Where no return is submitted, the DG may determine the
amount of chargeable income according to his best judgement
(s90(2))
– Determine the chargeable income when taxpayer fail to
submit a return.
– Taxpayer would be liable to a penalty for non-submission
of return
– Taxpayer can appeal on original assessment made by DG
IRB

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 Reduced assessment

• When appeal made by taxpayer against an

assessment or additional assessment
• Can be reach through:
– Discussion with the DG of IRB
– Win the case through appeals to Special
Commission or court decision

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 Additional assessment
• When:
– Taxpayer had omitted certain income while making the return
and discovered by DG after making original assessment
– Tax had been refunded to taxpayer by an error of fact or law
• Time bar for issuance additional assessment
– w,e.f. YA 2014 – 5 years after the end of the relevant YA
• Exception: in situation of fraud, willful default or
negligence is ascertained
• This assessment can appeal.

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 Composite assessment
• When taxpayer:
– Makes default in furnishing a return in accordance with Sec.
77(1)
– Fail to give notice of chargeability in accordance with Sec, 77(3)
– Makes an incorrect return by omitting or understating any income
– Give incorrect info. affecting his own chargeability
• Usually is made after a tax investigation is conducted
and comprises a few YAs
• Tax payable under this assessment include the tax
undercharge and the penalties.
• Can appeal.

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 Increased assessment

• Only issued when:

– The tax payer reach an agreement with DG during
the review of assessment; or
– The SP. Comm or the court had decided the issue
in dispute and resulted in an increase in the tax
payable
• No right to appeal for increased assessment

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 Advance assessment
• DG has a power to assess the taxpayer in advance – prevent loss of
revenue
• Only include the tax charged
• Situations applies:
– Taxpayer ceases to carry on a business
– Taxpayer commences to receive employment income, pension,
annuity or periodical payment
– Taxpayer is about to leave M’sia hand his income is likely to
cease upon leaving
– Taxpayer is carrying on the business of transporting passenger or
cargo by sea or air
– Basis period of a business or investment sources for a YA does
not coincide with calendar year
– Taxpayer received income subsequent to cessation of business
source

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 Protective assessment
• To avoid assessment become time barred
• DGIR can issue protective assessment up to a 5 years time
limit
• Usually happen when there was tax investigation by IRB
officer.
• Example: if the investigation for income for YA 2010 is on the
process and it is likely that tax liability will incur, the DGIR
can issue protective assessment before 31 December 2015.

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 Final and conclusive assessment
• Where no valid notice of appeal has been made
against the assessment
• Agreement has been reached between the taxpayer
and the DG and taxpayer has no right to ask Sp.
Comm. to review the agreement
• Where an assessment has been determined on appeal
and there is no right for further appeal

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 TAX ADMINISTRATION

Collection and Recovery

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 COLLECTION

• Responsibility for collection under the

Collection Branch of the IRB
• Starting from YA 2004, IRB has change from
Formal/Official Assessment System (OAS) to
Self Assessment System (SAS) for individual
• For company, it is starts on YA 2001

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 Self Assessment System (SAS)

• Taxpayer is required to:

– estimate his income tax payable
– Pay the income tax
– Revised his estimates
– Submit his return form within the time specified
• The return form submitted is deemed a notice of
assessment
• Return form should be submitted together with the
amount of final tax that should be paid to IRB.

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 Method of collecting tax

a) By direct assessment (either on the person or

an agent);
b) Through deduction of tax at source
(withholding tax scheme)
• Penalty will be imposed if the tax payable is
not settled within stipulated period
• Tax is payable although taxpayer made an
appeal against the assessment
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 PAYMENT OF TAX BY INSTALMENTS
(sec 107B)
• compulsory installment scheme was introduced w.e.f.
1/1/1989 to all tax payer exclude individual taxpayers
whom are under the deduction scheme for employees
• Amount of tax payable is estimated based on previous
year assessment
• Amount, timing and number of payment – directed by
DG. (notice of instalment scheme)
• 6 Bi-monthly instalment (March to January)

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 Variation of instalment

• Allowed by DG upon application not later than

30 June of each YA
• The variation should be spread over the
remaining 4 bi-monthly instalments
• If DG reject the application for variation,
rejection letter will be issued

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 Penalty: imposed automatically

• for variation of instalment

– When the tax liability exceeds the total instalments
payments by more than 30%
– Penalty: 10% on the difference
• Late payment of instalment
– Instalment should be made within 30 days from the
due date stated in the notice
– Failure: 10% of the amount of that particular
instalment

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SCHEDULAR TAX DEDUCTION SYSTEM
(STD/PCB)
• Mechanism to collect tax from employees on the
monthly basis
• Responsibility lies on employer
• Table for deduction is provided by IRB
• Due date for payment: not later than 10th of every
calendar year
• Total amount of STD will be stated in employee
EA/EC form
• Refund: within 14 days (e-filing system)

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 Determination of deduction (who is qualify
for STD)
• Employee’s monthly income (min. RM3,800/month)
• Contribution to EPF (max RM6000/year)
• Marital status
• Number of children
• Working status of the wife
Payment must be made by employer using Form CP39
no later than the 15th day of every calendar month

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 PENALTY TO EMPLOYER
– Fails to remit the STD amount
– Fails to remit the deduction by 15th day of the
following month
– Not deducting and remitting the following amount
– Fail to inform DG within 10 days after
remuneration ceased to be paid
• If convicted:
– Fine not exceeding RM1,000; or
– Imprisonment not exceeding 6 months or both

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 Expatriates issues
• Employed less than 60 days- not subject to STD
• Foreign worker exercised employment in Malaysia-
remuneration paid at his home country and local
company pays technical fees – local company should
make the necessary deduction or arrange for advance
assessment to IRB
• STD also apply to non-resident

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 Penalty to taxpayer

• Fail to pay the tax payable – within 30 days

after receiving notice of assessment
– 10% penalty on the amount to be paid will be
added to tax payable
• Further penalty; fail to made a payment within
60 days after the imposition of the first penalty
– 5% penalty will be imposed and added to the total
amount due

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 Application of penalty

• Sec 103- late payment of tax:

– 30 days : 10%
– 60 days: 5%
• Sec 107(B)
– Late payment of installment : 10%
– Variation of installment : 10%

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 RECOVERY OF TAX

• Recovery from wife

– In the case of joint assessment If the chargeable person (the
husband) has no capacity to pay tax
– Total tax payable x wife total income
total income of husband and wife
• Recovery from person leaving M’sia
– Prevent him from leaving unless he has settle all his tax
liability
• Recovery by suit
– Civil proceeding as a debt due to government

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TAX ADMINISTRATION 3

APPEALS, OFFENCES AND

PENALTIES
 INTRODUCTION :
Right to appeal. Sec 99(1)
• Dissatisfied taxpayer can write an appeal letter stating
his reasons of objection;
• submit it together with his return form OR
• APPEAL within 30 days of the dates of notice of
assessment
• Procedure to appeal:
– Discussed with IRB; no agreement has been reached…
– Appeal to Sp. Commissioner;.. Not satisfied…
– High court and Court of Appeal
 Assessments that are allowed for an appeal;

• Original assessment which is not yet valid and

conclusive
– 30 days from the date of notice of assessment
• Advance assessment
– Within first 3 months of the assessment year following the
YA
• Additional assessment
• Amount refunded to tax payer
– Appeal to Sp. Comm. 30 days from the notified date of the
amount refunded
 Extension of time for appeal. Sec 100

• If an appeal is not made within 30 days , tax

payer may apply for extension.
– Reasonable cause: illness, not in Malaysia
• If DG reject the application, forward to Sp.
Comm. with his reason for the objection and
inform taxpayer (appellant)
• Sp. Comm. Will decided and their decision is
final.
 OFFENCES AND PENALTIES

• Types of offences;
– Failure to furnish a return. [s. 77(1), 77A(1)]
– Failure to give notice of chargeability [ S. 77(3)]
– Incorrect return
– Wilful evasion
– Understatement of tax
– Leaving M’sia without payment of tax
– Others (table on page 597)
• Example 30.3 [page 600]
 PENALTY TO EMPLOYER
– Fails to remit the STD amount
– Fails to remit the deduction by 10th day of the
following month
– Not deducting and remitting the following amount
– Fail to inform DG within 10 days after
remuneration ceased to be paid
• If convicted:
– Fine not exceeding RM1,000; or
– Imprisonment not exceeding 6 months or both
 Penalty to taxpayer

• Fail to pay the tax payable – within 30 days

after receiving notice of assessment
– 10% penalty on the amount to be paid will be
added to tax payable
• Further penalty; fail to made a payment within
60 days after the imposition of the first penalty
– 5% penalty will be imposed and added to the total
amount due
 OFFENCES: Sec. 112
Failure to submit return.
• In accordance with Section 112, anyone who fails to
submit a return form within the time period or fails
to give notice that his income is subject to tax will be
liable to:
– a fine of not less than RM200 and not more than
RM2,000 ,or
– imprisonment not exceeding 6 months or both.
• If you are abroad for certain period of time, you must
declare and fill up the tax return.
 OFFENCES: Sec 113
False, Understating or Incorrect Returns
• With reference to Section 113, anyone who makes an
false declaration or preparing incorrect return by
omitting or understating any income which affects the
chargeability to tax shall be liable to:
• a penalty of not less than RM1,000 and not more than
RM10,000.
• In addition, a penalty of double the amount of tax
undercharged due to incorrect return may be imposed
too.
 OFFENCES:
Willful Evasion (Section 114)
• Section 114 stating that whoever:
– willfully omits from a return, or
– making false statements or
– entries in returns, or
– gives a false answer to a question asked, or
– prepares and maintains false books of account or
– makes use of any fraud,
• shall be liable to:
• a fine of not less than RM1,000 and not more than RM20,000
or
• imprisonment of not exceeding 3 years or both and a special
penalty of treble the amount of tax undercharged.
 Barred from Leaving Malaysia

• With reference to Section 115, taxpayers who

has been issued a certificate in respect of
Section 104 recovery of tax and is leaving or
attempts to leave Malaysia without paying the
tax shall be liable to:
– a fine of not less than RM200 and not more than
RM2,000 or
– imprisonment not exceeding 6 months or both.
 Other offences (Section 120)
• According to section 120, a person who fails to fulfill
the Director General's requests, or fails to keep proper
record or fails to submit information regarding their
employees shall be liable to:
• a fine of not less than RM200 and not more than
RM2,000 or
• imprisonment not exceeding 6 months or both.