Income Tax: Beware Of These Common Tax Offences!

As we all know, it's still tax season. There are still many people considering not to pay their taxes. In 2017, the Inland Revenue Board (LHDN) said many local celebrities had not been paying their income tax.

In any case, it would be wise to understand what would happen if the LHDN finds out that you have not been paying taxes. This article highlights the common tax offences in Malaysia:

1. Overstate tax reliefs

Some people try to overstate their tax reliefs so they can receive reduced tax charges. If you do this without attaching the relevant documents to support the claims, you could receive a fine of RM300 to RM10,000, a jail sentence, or both.

Therefore, be careful when filing the tax reliefs, even though it could save you a lot of money. 

2. Not keeping receipts and related documents 

It is crucial to save every voucher, receipts, or documents you can use as proof and keep them for seven years. Why seven years? According to Section 82A(1) and (2) of the Income Tax Act, you need to keep the documents for at least seven years.

The receipts and other documents are your income and expenditure statements that can verify your tax returns details. The LHDN sometimes conducts random audit checks to check on the claims' proof. It is better to play it safe and keep the receipts for as long as possible. 

Under Section 119A, it is a criminal offence not to keep a paper record for seven years. It can result in RM300 to RM10,000 fine, one year in prison, or both. 

In case you made a mistake, you should keep the documents for as long as possible. Section 122 provides that the authorities can pursue certain tax offences for up to 12 years. Some other offences do not have a time limit for how far the authorities can come after you in the future. 

3. Not stating the accurate amount of your income 

Section 113(1) provides that anyone who gives incorrect information about their income can cost them RM1000 to RM10,000 in fines and 200% of the undercharged tax. The authorities can ask the offender to pay the undercharged amount only if they do not want to take criminal proceedings against the offender.

Underreporting income is an easy mistake to make if one is not aware of what types of income are taxable. Taxable income covers employment income, rental income, dividends, and royalties. 

It is critical to double-check everything before submitting your tax form.

4. Providing tax advice resulting in under-declaring of taxes

Under Section 114(1A), it is an offence for someone to advise another person on tax if it results in the person to under-declare their taxes. So, if you have a family member or friend asking for tax advice, direct them to the LHDN instead.

If you cannot prove that you took reasonable care to ensure that your advice was accurate, you could receive RM200 to RM20,000 in fines, a 3-year jail sentence, or both.

This section applies more to professionals who deal with tax, such as accountants and tax lawyers. However, you could still be arrested if you tell your friend terrible tax advice. 

5. Not paying taxes

This one is a no-brainer. Section 114 of the Income Tax Act 1967 provides that you can receive a fine of RM1,000 to RM20,000 for evading taxes. You also need to pay an additional 300% of the tax amount you avoided paying. 

Under Section 104, LHDN's Director-General can issue a certificate to any Police Commissioner or Immigration Director to prevent you from leaving the country until you settle your tax debts. 

Section 115 says that it's a crime to try and leave Malaysia without paying your taxes. You could end up paying RM200 to RM20,000 in fines, spend six months in jail or both.

Remember to pay your taxes on time so you will not receive penalty charges. The final date to pay taxes is 30 April for non-business income and 30 June for business income. 

If you cannot pay tax on time, you can request to pay your taxes by instalment under Section 107B. Call your LHDN branch where your physical file is to file an appeal. It is best to do this as soon as possible because there will still be a late payment penalty if you do not make the payment on time. 

Other tax offences and penalties

1. Obstructing authorised LHDN officer in carrying out their duties: RM1,000-RM10,000 fine, imprisonment not more than one year, or both. 

2. Failure to comply with LHDN's notice asking for specific information: RM200-RM20,000 fine, imprisonment nor more than six months, or both

3. Failure to provide notice on address changes within three months: RM200-RM20,000 fine, imprisonment nor more than six months, or both.

4. Failure to submit an Income Tax Return Form: RM200-RM20,000 fine, imprisonment not more than six months, or both. 

If you have any problem with your tax return, the best thing to do is contact LHDN's call centre or visit your local branch for assistance.

Learn more about AJobThing!

Articles that might interest you 
DOSH Prosecutes 47 Cases of OSHA Violations in Q1 2021 
Human Resources Ministry Will Launch E-Wages System Soon 
Should Employees Receive Paid Leave for COVID-19 Vaccination?