Amarjeet Singh, who is a partner and the Malaysia tax leader of Ernst & Young Tax Consultants Sdn Bhd, said taxpayers should undertake a comprehensive tax “health check” and review issues raised in past Inland Revenue Board (IRB) audits to see if these warrant further attention and plan for voluntary disclosures to the IRB where relevant.
"Taxpayers must also ensure that they have the funds in place to make the relevant tax payments. Once their tax position has been regularised through a voluntary disclosure, taxpayers must then put in place a framework to ensure compliance going forward,” he said.
He said it was crucial for them to disclose their source of funds before the IRB receives such information through exchange of information measures.
The Standard for Automatic Exchange of Financial Account Information in Tax Matters will result in taxpayers no longer being able to “hide” funds in offshore accounts. The Standard enables more than 100 jurisdictions to automatically exchange offshore financial account information and is a powerful tool in the fight against illicit financial flows.
Malaysia has committed to exchange information under Common Reporting Standards (CRS) from September 2018. Correspondingly, Malaysia will also receive financial account information of Malaysian residents from tax authorities of other countries.
Amarjeet Singh hoped taxpayers would take this opportunity to regularise past non-compliance and start on a clean slate, as Malaysia joins the world in the new era of automatic exchange of financial information for tax.
“For the government, the voluntary disclosures will bring in much-needed funds during these challenging economic times, with the 'good faith' approach to the programme hopefully reducing the IRB resources needed to collect the additional taxes and penalties,” he said.
In the Budget 2019 speech on Nov 2, Finance Minister Lim Guan Eng announced the programme to allow taxpayers to voluntarily declare any unreported income, including funds maintained offshore, for Malaysian tax purposes.
Under this programme, income reported from Nov 3, 2018 to June 30, 2019 will “enjoy” reduced penalty rates - 10% of tax payable for disclosures made from Nov 3, 2018 until March 31, 2019, and 15% for disclosures made from April 1, 2019 until June 30, 2019.
The penalty rates will increase substantially after the programme ends, ranging from 80% to a maximum of 300% of the tax payable, from July 1, 2019.
Commenting on the programme, he said it would facilitate compliance in a timely and cost-effective manner, compared to costly and contentious audits, litigation and criminal proceedings.
Neighbouring countries which have introduced similar programmes include Indonesia and Singapore.
In Malaysia, the introduction of the programme will boost tax revenue collections, as the nation seeks to close the shortfall arising from the move from the Goods and Services Tax to the Sales and Services Tax.
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