Tis’ the season of giving

IRB's Special Voluntary Disclosure Programme

In a bid to improve its revenue collection and also bring non-compliant taxpayers into the system, it was announced that a Special Voluntary Disclosure Programme (SVDP) will run from 3 November 2018 to 30 June 2019.

Voluntary disclosure under this programme can be made at any Inland Revenue Board (IRB) office, from 3 November 2018 to 30 June 2019 in respect of the following categories of taxpayers:

• Unregistered taxpayers who have not submitted the Income Tax Return Forms (ITRF)/ Petroleum Tax Returns (PTR)/ Real Property Gains Tax Returns (RPGTR) for any YA
• Registered taxpayers who have not submitted ITRF/PTR/RPGTR for any YA
• Taxpayers who have submitted ITRF/PTR/RPGTR but with incorrect declarations
• Stamp duty payers who failed to present stamp-able instruments within a stipulated period of time.

Under this programme, taxpayers will be subjected to penalty rates of 10% to 15% of tax payable. Once the voluntary disclosure period expires, taxpayers could be subjected to penalty rates of 80% to 300%.

This is not IRB’s first rodeo. In 2016, the Budget 2016 Recalibration proposed for a special consideration on relaxation for penalty on taxpayers who come forward and declare their past years’ income and settled their arrears before 31 December 2016. Following this, the IRB announced the following offers to taxpayers in support of the proposal:

• Reduction of penalty to specified rates for taxpayers who opt for voluntary disclosure of non-compliance, subject to certain requirements.
• Waiver of tax increase for taxpayers who wish to settle in full their income tax, petroleum income tax, real property gains tax or withholding tax areas on or before 15 December 2016.

While the gist and the end goals of the two audit programmes remain somewhat similar, there are some differences.

Extraordinary wealth

Perhaps due to the circumstances that led to a new Malaysia, the spotlight has been shone on individuals with “extraordinary” wealth – those who hold foreign assets or derive income funded from Malaysian income source, or hold local assets funded by undeclared income.

Active promotion of SVDP

Since the announcement of the programme was made, it has been actively talked about – in national tax seminars, professional tax workshops and mainstream media. The IRB was quick to release guidelines and FAQs, which helped in reducing some uncertainty regarding SVDP. They also emailed taxpayers, reminding and urging them to take advantage of this programme.

"Good faith" approach

Finance Minister Lim Guan Eng has reassured that heavy-handed tactics (e.g. National Revenue Recovery Enforcement Team) will no longer be used and that the Government will pursue tax arrears through conventional methods, via lawyers and the courts.

The Government seems to be appealing to the taxpayer’s sense of morality and fairness by not only dropping the more unpleasant tax collection methods, but also by having the SVDP be based on good faith. Taxpayers are given the chance to straighten out their tax affairs (at a lesser cost) as IRB will not make further reviews on the reported information. 

International cooperation and big data analysis

Kind as the IRB may be, but they are not naïve.

The Standard for Automatic Exchange of Financial Account Information in Tax Matters allow participating jurisdictions to automatically exchange offshore financial, including their financial transactions, assets, and other tax-related information. This will result in taxpayers no longer being able to “hide” funds in offshore accounts. Malaysia has committed to exchange information under Common Reporting Standards (CRS) from September 2018.  Correspondingly, Malaysia will also receive financial information of taxpayers from other foreign tax administrations.

Apart from that, IRB chief executive officer Datuk Seri Sabin Samitah informed that the usage of big data technology would allow IRB to gather more data, computerise the information and identify irregularities more easily.

Should I or should I not?

Wolters Kluwer’s Special Voluntary Disclosure and Managing Income Tax Risks workshop aims to enable participants to prepare and submit their income tax disclosure accurately, and avoid any pitfalls and errors. Participants will also be guided through the measures taken by Inland Revenue when executing any tax audit and investigation exercise.  This would include computations and cases studies.