Special voluntary disclosure programme explained
THE Special Voluntary Disclosure Programme effective from Nov 3, 2018 to June 30, 2019 provides a chance to non-compliant taxpayers who have not filed tax returns, under declared income, hold overseas assets or income funded from Malaysian income sources, or hold local assets (i.e. property, jewellery, art) funded by undeclared income.
Why should I declare? To clean up your tax affairs and bring it up to date without questions asked by the Inland Revenue Board (IRB). The whole process is premised on good faith. If you do not declare, the IRB will catch up since they have invested significant resources in people and technology to mine and cross check their own data with external sources (i.e. internet, social media), information available from government sources (i.e. GST or SST information), from various sources whenever there are capital purchases (i.e. cars, jewellery, property, etc.). They can also buy external information (i.e. credit profile of taxpayers).
Is IRB receiving information from overseas authorities? Yes. From September 2018.
What income should be declared? All undeclared income or under declared income. Rental income, ad hoc or part time income (i.e. tuition fees, lecturing fees, commission), services provided for cash (i.e. plumbers, professionals), businesses dealing in cash (night stall markets operators, hawkers, etc), property gains not declared earlier or stamp duty not paid, undisclosed benefits-in-kind, etc.
How far back should do I go? All the way back. The 5-year time limitation only applies from the year you file your tax returns (assumed in 2017).
How do I determine the undeclared/ under declared income? You have to go back to your records to substantiate the amounts. If there are no records, estimate the amounts from the monies received into bank accounts. If there are absolutely no records, use a basis which is commercially explainable (e.g. rental based on the prevailing market rates).
Will I be audited?
No. The whole process is done on good faith. If the IRB receives information subsequently from third parties, the IRB retains the right to audit you.
Is the assessment final? Yes. Composite assessment will be issued.
Can I pay my taxes in instalments? If you opt into the programme before March 31, 2019, instalments will be allowed until April 1, 2019. Thereafter, additional late payment penalties will be applicable on outstanding amounts. The same principle applies for those who opt between April 1, 2019 to June 30, 2019, the last payment has to be made by July 1, 2019. What are the penalty rates? 10% of the additional tax payable from Nov 3, 2018 to March 31, 2019. Thereafter, 15% until June 30, 2019.
Can I do it myself? Do I need help? Where do I get it? The IRB offices across Malaysia are ready to guide you through this process free of charge. If you are uncomfortable with the process or in determining the correct amounts to be declared, you should approach a licenced tax agent.
If I declare, will there be repercussions on my family/relatives/partners/related parties? No. IRB accepts your declaration in good faith.
It is the interest of taxpayers to take advantage of this programme and come clean.
SM Thanneermalai is managing director of Thannees Tax Consulting Services Sdn Bhd and chairman of the Board of Trustees of the Malaysia Tax Research Foundation.