On 2 November 2018, a new special voluntary disclosure programme (SVDP) was announced by the Minister of Finance during the 2019 budget, to encourage taxpayers to voluntarily disclose their previous undeclared income accurately and to settle tax arrears.
The programme was announced in view of Malaysia’s participation in the automatic exchange of information with foreign tax authorities, where the Inland Revenue Board (IRB) should have already received the first batch of information on the bank accounts in foreign countries held by Malaysian tax residents. As such, the SVDP provides taxpayers with an opportunity to report and pay Malaysian tax on undeclared income.
Under the SVDP, any taxpayer who makes a voluntary disclosure during the period from 3 November 2018 to 30 June 2019 will be offered reduced penalty rates. The IRB is expected to accept the voluntary disclosures in good faith, where a further review will not be made on the information disclosed by the taxpayer, unless additional information is received from third parties indicating otherwise.
Malaysia has in the past implemented several tax amnesty programmes, the last of which expired on 15 December 2016.
Concessionary rates under the SVDP
The reduced penalty rates under the SVDP are as follows:
Under the SVDP, underpaid tax and reduced penalties must be paid by the following deadlines:
Failing to pay according to the deadlines will result in an increase in tax imposed based on the prevailing provisions of the law and legal action may be taken.
What this means for you
The SVDP offered this time around encourages taxpayers to approach the IRB in good faith given the willingness of the IRB to accept the information disclosed at face value. Individuals and businesses considering taking advantage of the SVDP should undertake a comprehensive review of their tax compliance affairs to date, and seek further advice where necessary to ensure that the benefits of the SVDP are applicable to them.
Business Law Digest is compiled with the assistance of Baker McKenzie. Readers should not act on this information without seeking professional legal advice. You can contact Baker McKenzie by emailing Danian Zhang at firstname.lastname@example.org.