Forget social responsibility; let’s talk legal and financial consequences of committing tax offences in Malaysia.
Of course, we’re sure none of our readers would ever dream of breaking tax law.
Then again, we were sure that France would win the last World Cup and look how that turned out.
So, we figured it can’t hurt to raise awareness about what lies in store for those that incur the wrath of Malaysia’s Inland Revenue Board also known as LHDN.
Here’s how we’ll break it down:
- We’ll list the offences under two types: negligent and intentional
- We’ll provide avenues of recourse for those who live in fear of emails from LHDN
- Nagging time: we’ll provide some tips on how to avoid negligently committing tax offences
Let’s start.
Possibly negligent tax offences
It goes without saying any offence can be committed intentionally.
However, these could be committed accidentally, which is why we’ll give people the benefit of the doubt.
To be clear: LHDN does not classify their offences and penalties this way – it’s just us making it easier for readers to understand.
| Offence | Section Under Income Tax Act 1967 | Penalty (RM) |
|---|---|---|
| Incorrect tax return by omitting or understating any income | 113(1)(a) | 1,000 – 10,000 and double the undercharged tax amount |
| Incorrect information about the tax liability of a taxpayer | 113(1)(b) | 1,000 – 10,000 and double the undercharged tax amount |
| Not reporting a change of address within 3 months | 120(1) | 2,000 – 20,000, imprisonment up to 6 months, or both |
| Not obeying an order to keep proper documentation | 119A | 300 – 10,000, imprisonment up to 1 year, or both |
What to do if you’ve been negligent
Everyone makes mistakes, the important thing is to own up to it and make amends, which is precisely why LHDN has a guide on how to make an amendment to your tax returns.
in short, you must write a letter explaining the mistake and include relevant supporting documents such as receipts and invoices then submit it via the LHDN Customer Feedback Portal.
In the case of reporting a change of address, you can update your information online via LHDN’s e-Filing platform.
Definitely intentional tax offences
Okay, if you’ve committed any of the acts listed below, it’s kind of hard to plead ignorance.
It doesn’t mean you’re a bad person, it just means you probably knew you were doing something you shouldn’t, or NOT doing something you should.
Let’s see what naughty looks like.
| Offence | Section Under Income Tax Act 1967 | Penalty (RM) |
|---|---|---|
| Not submitting an Income Tax Return Form | 112(1) | 200 – 20,000, imprisonment up to 6 months, or both |
| Not notifying LHDN of your tax liability status | 112(1) | 200 – 20,000, imprisonment up to 6 months, or both |
| Trying to evade tax or assisting another person to evade tax | 114(1) | 1,000 – 20,000, imprisonment up to 3 years, or both, and triple the undercharged tax amount |
| Trying to leave the country to avoid paying tax | 115(1) | 200 – 20,000, imprisonment up to 6 months, or both |
| Obstructing an LHDN officer from performing their taxly duties | 116 | 1,000 – 10,000, imprisonment up to 1 year, or both |
| Not obeying an order to provide specific information by LHDN | 120(1) | 200 – 20,000, imprisonment up to 6 months, or both |
| Assisting others to under declare income | 114(1) | 2,000 – 20,000, imprisonment up to 3 years, or both |
What to do if you’re guilty
Well, it depends on which offence.
If you’ve gone and punched an LHDN officer, there’s not much you can do except tell your family you’re going on a one-year holiday in Sungai Buloh.
However, for certain offences, there is currently a Special Voluntary Disclosure Programme (SVDP) that allows taxpayers who want a clean slate with future tax payments to come forward and settle their taxes without fear of penalty.
The program is set to run until May 2024, so please take this chance to settle your tax affairs.
By the way: If you would like go study taxation beyond the scope of this article, our information was condensed from the Income Tax Act 1967 and LHDN’s official page on offences & punishments.
5 action items to keep you tax compliant
Say you’re the forgetful or clumsy type.
Here are five steps you can take to make sure you stay on top of tax requirements.
1. Take advantage of LHDN’s digital platforms
LHDN’s e-Filing platform makes submitting tax returns, carrying out payment, checking outstanding balance, and updating taxpayer information extremely easy.
If you don’t already have an account, we highly encourage you to register and make use of it.
2. Go digital with documentation
Physical receipts and invoices can be lost or damaged, while digital copies saved in a reliable cloud database like a Google Drive account will likely remain there until the end of time, which means they can be accessed whenever you need them.
3. File your returns on time
This is a big one, and is the downfall of so many people.
Stop procrastinating!
Get your tax obligations over with as soon as possible to avoid forgetting and ducking it to avoid penalties, only to have it snowball from a big problem into a huge problem.
4. Keep an eye out for LHDN emails in your inbox
In the event there are any changes or you are being notified of something important, LHDN will reach out to you via your email address. Be sure to open the email, as it’s considered read once sent.
5. Seek professional help If required
If you are unsure or would rather outsource this headache, it may be worthwhile to seek the assistance of a tax professional for compliance and tax advice, which brings us to the final section of the article.
Let MISHU ensure you meet your tax obligations
Consider engaging MISHU to handle your tax obligations. We partner with certified accountants to assist and can make your annual tax returns completely effortless. Get in touch!