Question

Based on the situations below, explain the type of offence, the provision of the
offence under Income Tax Act 1967, and penalty (fine/imprisonment) faced by the
taxpayers:(Malaysia tax)

Fatt, a graduate of Lim Kok Wing University, founded a startup business in
Selangor after he graduated. He has been earning a steady income from his
business venture in 2019. However, he did not declare any of his income to the
Inland Revenue Board of Malaysia by filing Income Tax Return Form, as he was
afraid of not getting any government assistance thereafter as his income exceeds
the limit stipulated.

Answer 1

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:

Offence	Fine
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 M20,000 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

Source: Hasil.gov.my

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.