TAX AMNESTY 2016

Volume 4 – Issue 2 – 1 March 2016

Tax amnesty 2016 Reduction and waiver of tax penalties

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 beneÕt you7 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 Õling of income tax and petroleum income tax forms, and RPGT forms

Reduction of penalty for voluntary disclosure of incorrect returns Õled

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 2016. ** 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 2016 Take 5: Tax amnesty 2016

2

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)

Taxpayers with unresolved tax issues with the IRB

Who can apply?

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The IRB may call for historical documents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 Take 5: Tax amnesty 2016

3

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 speciÕed in any guidelines issued by the IRB


Incorrect returns: Voluntary disclosure (within a stipulated period) after taxpayer has been informed of the tax audit

Up to 100%

35%***


Incorrect returns: Voluntary disclosure by taxpayer during a tax investigation

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%


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

Up to 100%

45% or 100%****


Incorrect returns: Discovery by the IRB during a tax investigation

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

Fgl]k29ddl`]h]fYdla]kYZgn]j]Õ][ll`]hgkalagfo`]j]fghjgk][mlagfakafalaYl]\& *

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%

Take 5: Tax amnesty 2016

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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%


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%

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%

Fully waived

Estimated tax payable by instalments (by a company, limited liability partnership, trust body or co-operative society)

After the due date: 10%

Fully waived

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)


Fully waived

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


• Late payment of withholding tax: 50% penalty waiver • Discovery during tax audit: Fully waived • Voluntary payment of unpaid withholding tax: Fully waived

Petroleum income tax payable

After the due date: 10% (Petroleum (Income Tax) Act 1967)

Fully waived

Real Property Gains Tax • Disposer • Acquirer (remittance of retention sum to the IRB)

After the due date: 10% (Real Property Gains Tax Act 1976)

Fully waived

2) Rate of tax increase

Fgl]k29ddl`]h]fYdla]kYZgn]j]Õ][ll`]hgkalagfo`]j]fghjgk][mlagfakafalaYl]\& *

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


5

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

Sharing EY knowledge and insights

The outlook for global tax policy in 2015

Indirect tax in 2015

Global Tax Policy and ;ontroversy BrieÕng 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 2016


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EY | Assurance | Tax | Transactions | Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and iuality services we deliver help build trust and conÕdence 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 Õrms of Ernst Young Global Dimited, each of which is a separate legal entity. Ernst Young Global Dimited, a UC company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com. ¡ 2016 Ernst Young Tax ;onsultants Sdn. Bhd. All Rights Reserved. APAC no. 07000621 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 speciÕc advice.

ey.com/my

Contacts Yeo Eng Ping Tax Leader, Ernst & Young Tax Consultants Sdn. Bhd. Asean Tax Leader, EY

Lim Kah Fan Partner, Business Tax Services Ernst & Young Tax Consultants Sdn. Bhd.

Amarjeet Singh Partner, Business Tax Services Ernst & Young Tax Consultants Sdn. Bhd.

Farah Rosley Partner, Business Tax Services Ernst & Young Tax Consultants Sdn. Bhd.

+603 7495 8383 [email protected]


Chow Seong Chen Executive Director, Business Tax Services Ernst & Young Tax Consultants Sdn. Bhd.

Chan Vai Fong Director, Business Tax Services Ernst & Young Tax Consultants Sdn. Bhd.



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TAX AMNESTY 2016

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