Tax Offences And Penalties In Malaysia
Have you ever considered not paying your taxes? Perhaps you’ve entertained the thought of conveniently ‘forgetting’ to file your taxes, or reporting a lower income than you actually earn, or overstating the amount of tax relief you’re eligible for.
If any of these has crossed your mind…please don’t act on it. You could get punished with a fine, imprisoned, or both.
Common tax offences that could get you into trouble
1. Not filing your taxes
If you earn enough to be taxed (as of 2015, this means earning an annual income of RM34,000 after EPF deduction), you need to file your taxes. If you don’t, you could be fined between RM200 to RM20,000, imprisoned or both.
You’ll also have to make sure file your taxes before the deadline, otherwise you’ll have to deal with the penalty:
|Source of income||Offence||Penalties|
|Non-Business||Paying taxes after 30th April||a. 10% increment from the tax payable, and
b. Additional 5% increment on the balance of (a) if payment is not made after 60 days from the final date
|Business||Paying taxes after 30th June|
2. Misreporting how much you earn
Claiming that you earn a lower income that you actually do could mean (unlawfully) paying less tax, but you’ll risk being fined RM1,000 to RM10,000. Plus, you’ll also have to pay 200% of the tax amount that was undercharged.
Underreporting your income is also an easy mistake to make if you aren’t aware of what types of income are taxable. Besides employment income, taxable income also includes rental income, dividends and royalties.
3. Overstating your tax reliefs
Filing your tax reliefs could save you a significant amount of taxes, but you’ll have to be very careful when you declare them. You should also never overstate your tax reliefs just to get reduced tax charges – if you don’t have the relevant documents to support your claims, you could get fined RM300 to RM10,000, imprisoned or both.
When you declare a tax relief, make sure to have vouchers, receipts or any other documents that can be used as proof, and keep them for at least seven years.
Tax offences, fines and penalties in Malaysia
Aside from the list above, you can also get fined or imprisoned for various other tax offences. Here’s a summary of tax offences stated in the Income Tax Act:
|Failure to furnish an Income Tax Return Form||RM200 to RM20,000 or imprisonment (not exceeding six months) or both|
|Failure to give notice of changeability to tax||RM200 to RM20,000 or imprisonment (not exceeding six months) or both|
|Make an incorrect tax return by omitting or understating any income||RM1,000 to RM10,000 and 200% of tax undercharged|
|Give any incorrect information in matters affecting the tax liability of a taxpayer or any other person||RM1,000 to RM10,000 and 200% of tax undercharged|
|Willfully and intentionally evade or assist any other person to evade tax||RM1,000 to RM20,000 or imprisonment (not exceeding three years) or both and 300% of tax undercharged|
|Assist or advise others to under declare their income||RM2,000 to RM20,000 or imprisonment (not exceeding three years) or both|
|Attempting to leave the country without payment of tax||RM200 to RM20,000 or imprisonment (not exceeding six months) or both|
|Obstructing any authorised officer of IRBM in carrying out his duties||RM1,000 to RM10,000 or imprisonment (not exceeding one year) or both|
|Failure to comply with an order to keep proper records and documentation||RM300 to RM10,000 or imprisonment (not exceeding one year) or both|
|Failure to comply with a notice asking for certain information as required by IRBM||RM200 to RM20,000 or imprisonment or (not exceeding six months) both|
|Failure to give notice on changes of address within three months||RM200 to RM20,000 or imprisonment (not exceeding six months) or both|
What happens if you’ve accidentally committed an offence?
Made a mistake on your tax return form, but have already submitted it? According to Lembaga Hasil Dalam Negeri Malaysia (LHDN), here’s how to make an amendment:
- If you submit the amendment before the tax deadline: Write a letter detailing the mistake made and enclosing documents (purchase receipts, invoices, etc.) to support your application. The letter and supporting documents must be submitted to the branch that handles your tax file.
- If you submit the amendment within six months from the due date of tax deadline: Make a self-amendment by submitting an Amended Return Form (ARF) to the branch that handles your tax file. Only taxpayers who have submitted their tax return on time can make a self-amendment.