TAX ADMINISTRATION

Return & Assessment

2/4/20
yus/2006 1
 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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yus/2006 2
 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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yus/2006 4
 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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yus/2006 5
 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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yus/2006 8
 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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yus/2006 10
 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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yus/2006 20
 TAX ADMINISTRATION

Collection and Recovery

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• Resp
onsi COLLECTION
bilit
y for
colle
ction
unde
r the
Coll
ectio
n
Bran
ch of
2/4/20 yus/2006 22
the
• Taxp
ayer Self Assessment System (SAS)
is
requi
red
to:
– esti
mat
e
his
inc
om
e
tax
pay
abl
e
2/4/20 yus/2006 23

–
a) By
dir Method of collecting tax
ect
ass
ess
me
nt
(eit
her
on
the
per
son
2/4/20 yus/2006 24
or
• comp
ulsorPAYMENT OF TAX BY INSTALMENTS
y (sec 107B)
instal
lment
sche
me
was
intro
duce
d
w.e.f.
1/1/1
989
to all
tax
payer
2/4/20 yus/2006 25
• Allo
wed Variation of instalment
by
DG
upon
appli
catio
n not
later
than
30
June
of
2/4/20 yus/2006 26
each
• for
variaPenalty: imposed automatically
tion
of
insta
lmen
t
–W
he
n
the
tax
lia
bil
ity
ex
2/4/20 yus/2006 27
• Mech
SCHEDULAR TAX DEDUCTION SYSTEM
anis
m to (STD/PCB)
collec
t tax
from
empl
oyees
on
the
mont
hly
basis
• Resp
onsib
ility
lies
2/4/20 yus/2006 28
• Empl
oyee’Determination of deduction (who is qualify
s for STD)
mont
hly
inco
me
(min.
RM3,
800/
mont
h)
• Contr
ibutio
n2/4/20
to yus/2006 29
– Fa
ils PENALTY TO EMPLOYER
to
re
mi
t
the
ST
D
am
ou
nt
– Fa
ils
to
re
mi
2/4/20 yus/2006 30
 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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• Fail
to Penalty to taxpayer
pay
the
tax
paya
ble –
withi
n 30
days
after
recei
ving
2/4/20 yus/2006 32
notic
• Sec
103- Application of penalty
late
pay
ment
of
tax:
– 30
da
ys
:
10
%
– 60
2/4/20 yus/2006 33
• Reco
very RECOVERY OF TAX
from
wife
– In
the
cas
e of
joi
nt
ass
ess
me
nt
If
the
cha
2/4/20 yus/2006 34
rge
TAX ADMINISTRATION 3

APPEALS, OFFENCES AND

PENALTIES
• Dissa
tisfie INTRODUCTION :
d Right to appeal. Sec 99(1)
taxpa
yer
can
write
an
appea
l
letter
statin
g his
reaso
ns of
objec
• Origi
nalAssessments that are allowed for an appeal;
asses
smen
t
whic
h is
not
yet
valid
and
concl
usive
– 30
day
s
• If an
appeExtension of time for appeal. Sec 100
al is
not
mad
e
withi
n 30
days
, tax
paye
r
may
appl
• Type
s ofOFFENCES AND PENALTIES
offe
nces;
– Fa
ilu
re
to
fur
nis
ha
ret
ur
n.
[s.
77
(1)
– Fa
ils PENALTY TO EMPLOYER
to
re
mi
t
the
ST
D
am
ou
nt
– Fa
ils
to
re
mi
• Fail
to Penalty to taxpayer
pay
the
tax
paya
ble –
withi
n 30
days
after
recei
ving
notic
• In
accor OFFENCES: Sec. 112
dance Failure to submit return.
with
Secti
on
112,
anyo
ne
who
fails
to
subm
it a
retur
n
form
 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.
• Sectio
n 114
stating OFFENCES:
that
whoev
Willful Evasion (Section 114)
er:
– will
full
y
omi
ts
fro
ma
retu
rn,
or
– mak
ing
fals
e
stat
eme
nts
• With
Barred
refer from Leaving Malaysia
ence
to
Secti
on
115,
taxp
ayer
s
who
has
been
issue
• Acco
rding Other offences (Section 120)
to
sectio
n
120,
a
perso
n
who
fails
to
fulfill
the
Direc
tor
Gene