Professional Documents
Culture Documents
tax administration is to achieve the maximum degree of compliance to the ITA (total
compliance).
OBJECTIVES OF STUDY:
To introduce income tax administration and identifying the level of compliance
degree.
To determine the division of income tax administration in respect of return form,
assessment, appeal and collection.
To understand of audit system on taxation.
Employers will be acquired to hold or deduct the tax from the employees income
and remit
to the IRB (the schedular tax deduction -PCB).
2. Assessments
3.Appeals
4. Collections and recovery
A return of income must be submitted to the assessment branch of the IRB within
30 days from the date of return.
The DG has the power to grant an extension of time to file a return if the person can
provide reasonable cause.
In practice, an informal extension of time is generally allowed up to 31 May each
year.
Notice of chargeability
Where a Return of Income Form has been issued by the Director General
A taxpayer must complete it and return to DG within 30 days.
Responsibilities of employee
1. Notice of chargeability- notify the DG before 15 April of the following YA that he is
chargeable [sec. 77(2)].
2. The return issued to him must be completed and submitted within the time
allowed [sec.77(1 )1.
3. Change of address - employee has to inform IRB in writing within 3 month of the
change.
Responsibilities of employer
El Employer is required to file in the following return:
1. Form EAIEC details of remuneration paid to employee including contribution to
EPF and
tax deducted under monthly deduction scheme (PCB). EC is for government
employees.
2. Notice of employee commencing employment [sec. 83(2)] - sent to IRB not later
than 1 month from commencement date of employment - form CP22.
5. Retention of money - employer required to retain amount of money due to
employee until at least 90 days after the receipt by IRB of the notification of
cessation of employment.
6. Schedular tax deduction (PCB) employer is required to withhold tax under the
PCB system. Each month, the employer is required to deduct appropriate tax of the
employees and remit to the IRB not later of 10 day of each calendar month in
respect of tax in the preceding month. At the end of the year, the employer is
required to make annual return (form CP159) together with form E.
3. Notice of cessation [sec. 83(3)] submit to IRB not later than 1 month prior to
the date of cessation of employment using form CP22A. With effect from 1/1/97,
employer is no longer required to give written notice of cessation if the employee is
subject to PCB, or where monthly income of employee < minimum amount subject
to PCB, provided that it is known that the employee is not retiring from any
employment permanently.
4. Employees leaving Malaysia form CP 21 must be submitted if employee is
about to leave or intends to leave Malaysia for a period exceeding 3 months.
Notification 1 month before departure and written notice. No written notice if an
individual is required to leave Malaysia at frequent intervals in the course of his
employment.
Types of Assessment
1. Original assessment made in accordance to the particulars provided by
taxpayer or his agent in the relevant return, but the DG can exercise his discretion
under these circumstances:
a) DGs judgement - DG refuse to accept return submitted and determine the
amount of chargeable income based on his best judgement [sec. 90(1)(b)].
b) Non-submission of return the DG can determine the chargeable income of the
person and make assessment accordingly [sec. 90(2)].
4. Protective assessment
- The DG issue this assessment to avoid assessment becoming time barred.
- Thus, an assessment for the year 1999 would become time barred if not issued
before 31 December 2004 because it would fall outside the six-year limit.
- Therefore, if a taxpayer is likely to incur a liability for 1999 but the DG has not fully
investigated the case or ascertained the liability he will issue a protective
assessment before the end of 2004 to protect the loss of revenue.
7. Reduced assessment
The DG may make a reduced assessment where:
a) the taxpayer's chargeable income is less than what has been assessed;
b) certain relief to which the taxpayer is entitled to had not been deducted in his
earlier assessment.
- The amount of tax reduced or discharged can either be refunded to the taxpayer
or carried forward to set off against the taxpayer's future tax payable.
APPEALS
A taxpayer has the right to appeal by objecting to the assessment made in writing
(objecting within 30
days after the date of the assessment notice).
The limit 30 days could be extended if the DG satisfied (reason of extension due to
absence from Malaysia, sickness or other reasonable cause).
lf the DG refused to extend the time, within 21 days of receipt of the notification,
could request from the Special Commissioners.
The decision by one of the Special Commissioners to refuse or grant the extension is
final.
Section 103 ITA 1967, a taxpayer is required to pay the tax as stated in the return
form.
The payment should be made regardless whether the taxpayer intends to appeal or
not.
This means that the taxpayer must pay the tax first and appeal later.
DA taxpayer must make payments within 30 days from the date of the service of
notice.
A 10% late payment penalty will be imposed if the taxpayer fails to pay within the
time limit.
b) Field audit
- carried out at the taxpayer's business premise.
- examine records other than business records ie. Sole-proprietorship and
partnership.
- notification of audit is 14 days.
Tax avoidance is the legitimate usage of tax commission he earns from selling
loopholes in order to reduce ones tax liability.
Achieved by means which are within the law and if caught may be subject to a
severe because steps are taken before tax liabilities penalty.
Tax avoidance is legal.
Example
If a salesman fails to declare to the IRB the commission he earns from selling
encyclopedias, then he is guilty of tax evasion and if caught may be subject to a
severe penalty.
On the contrary, if the saleman claims deductions for costs he has incurred in
selling the books, ie. taxi fare and telephone cost, then he is merely trying to reduce
his tax liability and regarded as tax avoidance.
Fraud
A declaration of an untruth with an intention to deceive.
Keeping 2 or more sets of accounts and concealing income by under-declaring in
come to the IRB with an intention to deceive the IRB is a fraud.
Indicators of fraud
Variation in size of items recorded in the balance sheet at the end of two or more
consecutive years of assessment;
sudden increase in sundry or other creditors;
insufficient drawings for private living expenses;
disproportionate deductions;
conspicuous operating expenditure;
ounreasonably low turnover or profits as compared to type of business, location and
number of customers.