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Masters of Financial PlanningTaxation Planning
Tax Administration of Self Assessment System
By: Associate Professor Dr. GholamReza Zandi
zandi@segi.edu.my
Self Assessment System
2
Self assessment system was implemented on companies from
2001 and individuals and other taxpayers from 2004.
Under the SAS, taxpayers estimate the tax payable for the
following year of assessment and pay the tax in installments.
At the end of the basis period, they determine their taxable
income, compute the tax liability and submit the appropriate tax
returns.
3
Companies under SAS:
Provide estimate of the tax payable one month prior to the
commencement of the business
Estimates shall not be less than 85% of its previous year’s
estimate
May revise estimates in the sixth and ninth month of the basis
period
File tax return within seven months of the financial year end
Self Assessment System
Self Assessment for Individuals
4
Taxpayers estimates income tax payable for current Year of
Assessment.
Taxpayer with business source pays tax to IRB (either in 6 bi-
monthly installments or through the Scheduler Tax Deduction
system (STD); and employees by monthly installments.
Taxpayer could revises the estimates of the tax payable two
times during the year.
Self Assessment for Individuals (Cont’d)
5
Corporate and other taxpayers submit the returns
within seven months from the end of the financial
period; employees submit the tax return (Form B)
to the IRB by 30 April of following year.
Amount of final tax (i.e. difference between the
actual and the estimated tax) should be paid within
30 days.
Duties of A Taxpayer
6
Every person carrying on a business is required to maintain
proper books of accounts & receipts for 7 years (sec 82 ITA).
Individuals with employment and other investment income
must maintain proper records for 7 years from the relevant
YA (sec 82A).
A taxpayer needs to notify in writing to the IRB of any change
of address within 3 months of the change (sec 89).
Duties of An Employer
7
An employer who knows that its employee is leaving Malaysia
for more than 3 months must notify the IRB [sec 83 (4)].
Under the Scheduler Tax Deduction system, employers must
deduct appropriate tax of its employees and remit it to IRB by
the 10th day of each calendar month in respect of tax for the
preceding month.
Duties of An Employer (Cont’d)
8
At the end of the year, the employer will indicate the total tax
deducted for each employee under the STD in their respective
Forms.
Employers must file a Return of Remuneration by 31 March of
the following year and furnish employees with a Statement of
their remuneration.
Powers of The Inland Revenue Board
9
The Inland Revenue Board (IRB) has the power to direct
taxpayers to furnish information relating to the tax return or
produce any books, accounts or information related to the
taxpayer’s assets and liabilities for examination purposes (see
sections 78, 79 and 87 ITA).
The IRB has power to full and free access to all buildings, places,
books, documents and other papers of the taxpayer for any and
all purpose under the ITA.
Any person failing to comply with the provisions of the tax law
without ‘reasonable excuse’ is guilty of an offence under sec 120.
Estimate of Tax Payable
10
Companies under self assessment
Company, trust and co-operative societies must
furnish IRB with an ‘estimate of income tax payable for
year of assessment (in Form CP204) not later than 30
days before the beginning of basis period.
The estimated amount must NOT be < 85% of the tax
payable for the previous YA.
Estimate of Tax Payable (Cont’d)
11
New SMEs are not required to provide estimates of
income tax payable for the first 2 years after
incorporation.
IRB will issue taxpayers a Notice of Payment
(Form CP205) and a 12 monthly payment slip
(CP207) before commencement of company’s
basis period.
Payment of Tax
12
Every person (other than company, trust, co-op
society) is required to pay his tax by installment as
directed by the DGIR.
The amount of tax payable is estimated based on
the previous year’s assessment. Payment is made
in 6 bi-monthly installments (except employees who
are under the Scheduler Tax System).
Payment of Tax (Cont’d)
13
A penalty of 10 % is imposed on amount unpaid (i.e. beyond
30 days from due date). When a taxpayer underestimates his
or her tax liability by more than 30% compared to the final
assessment, a 10% penalty is imposed on the difference.
Company Installment Schemes
14
A Company must pay tax in 12 equal monthly installments
accompanied by the payment slip, with payment due on the 10th of
every month starting from the 2nd month of the Company’s basis
period.
Example
If accounting year end is 31 December, then basis period for YA 2012
is 1/1/2012 – 31/12/2012. Thus, installment starts on 10/2/12 and ends
on 10/1/2013]
Failure to pay tax installments by the 10th day of the following month
will carry a 10% penalty on amount unpaid [sec 107C (9)].
Revision of Estimates
15
Company may revise the estimate of tax payable by submitting Form
CP204A to the IRB in the 6th month or 9th month or both months of the
Company’s basis period, resulting in tax payable for remaining
months of the basis period being revised upward/downward equally
[from the 6th or 9th month onwards].
Company must file tax return (Form C) within 7 months from the close
of the companies’ accounting year (end of basis period) (sec 77A).
In the above example, for YA 2012 tax return, the company has to
submit the tax return by 31 July 2013.
Penalty for Late Payment
16
The difference between tax payable as in the tax return and the
installments paid, is due and payable on the last day of the 7th
month after the end of the companies’ accounting period, in
order to avoid the 10% or 10% + 5% penalty on amount unpaid.
A 10% penalty will be imposed on the excess of 30% difference
between the original/revised estimate of tax and the actual tax
payable, upon submission of the tax return.
Deemed Assessment
17
Under the self assessment system, the tax return submitted or
electronically filed by a taxpayer is deemed to be a notice of
assessment on the day the return is submitted.
Where a person has furnished a return to the DGIR, the DGIR is
deemed to have made on that day an assessment on the
chargeable amount; and the tax payable by that person [sec
90(1)].
If the assessment is not contested by the taxpayer (sec 97) within
a prescribed time, it will become final & conclusive.
Public Rulings
A Public Ruling is a statement issued by the IRB to provide
guidance to the taxpaying public as well as to the officers of the
Inland Revenue Board. It sets out the interpretation of the DGIR
in matters of policy and procedures that are to be applied.
The IRB has issued 67 Public Rulings to-date.
In 2012, IRB issued 12 new Rulings.
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