What Are Some Of The Common Tax Offences That A Company Could Potentially Face In Malaysia

It comes as no surprise (or maybe it does), but a company will have to file tax returns and pay taxes too- failing to do so will land the company in very, very hot soup! 

Now that the warning is out of the way, let us briefly look at some of the common tax offences that a company can potentially land itself into if the company fails to file its tax return and pay its taxes.

1) Tax evasion 

Question: What does tax evasion mean?

Answer: It means the company:

1. Fails to pay its taxes, such as corporate tax;
2. Makes false statements i.e. giving false information while filling your tax/ when tax officers request you to furnish them with additional information in regards to your tax;
3. Falsify books of account/ record ;
4. Prepare and maintains or authorize the preparation and maintenance of false books of account; and
5. Make use of devices to make false statements.

Question: What does the law say?

Answer:

The law specifically states that if you are found guilty, you will be liable to a fine of not less than one thousand ringgit and not more than twenty thousand ringgit or to imprisonment for a term not exceeding three years or to both, and shall pay a special penalty of treble the amount of tax which has been undercharged in consequence of the offence or which would have been undercharged if the offence had not been detected. 

2) Filling incorrect statements

Question: When does this usually occur?

Answer: It usually occurs when the company:

1. Understate/ omit the income that needs to be declared while filing taxes; or
2. Gives incorrect information that might affect the amount of taxes the company have to pay.

Question: What does the law say?

Answer:

The law specifically states unless the company can prove that the incorrect statements were genuine mistakes, the company will be liable to a fine of not less than one thousand ringgit and not more than ten thousand ringgit and shall pay a special penalty of double the amount of tax which has been undercharged in consequence of the incorrect return or incorrect information or which would have been undercharged if the return or information had been accepted as correct.

3) Failing to keep records

Question: What needs to be kept and how long?

Answer: The law makes it clear that a company has to keep sufficient records for a period of seven years from the end of the year to which any income from that business relates to enable that income from that business for each year of assessment or the adjusted loss from that business for the basis period for any year of assessment to be readily ascertained by an officer from Inland Revenue Board of Malaysia (IRBM) that the taxes the company filled/ declared is accurate.  These records can include:

1. Books of account recording receipts and payments or income and expenditure;
2. Invoices, vouchers, receipts and such other documents as in the opinion of the Director-General are necessary to verify the entries in any books of account; and
3. Any other records as may be specified by the Director-General.

Question: What does the law say?

Answer:

If a company fails to observe the practice above, the company can be liable to a fine of not less than three hundred ringgit and not more than ten thousand ringgit or to imprisonment for a term not exceeding one year or to both.

4) Obstructing IRBM officers from performing their duties

Question: What are the common offences in this category?

Answer: This includes offences such as when a company:

1. Obstructs or refuses to permit the entry of the IRBM officers into any land, building or place as ordered for them to access to any relevant documents to ascertain the accuracy of the tax filled;
2. Obstructs or refuses to permit the entry of the IRBM officers from performing their duties;
3. Refuses to produce any book or other document in the company’s custody or control on being required to do so by IRBM officers;
4. Fails to provide reasonable facilities or assistance while the IRBM officers are performing their duty; or
5. Refuses to answer any question relating to any of those purposes lawfully asked by the IRBM officers.

Question: What does the law say?

Answer:

If a company is found guilty for obstruction, the company can be liable to a fine of not less than one thousand ringgit and not more than ten thousand ringgit or to imprisonment for a term not exceeding one year or to both.

And there you go. Hopefully, this will prevent you and your company from landing itself in hot soup!

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