GROUP ASSINGMENT
COURSE : PERSONAL TAXATION
COURSE CODE : PTX1033
SUBMITTED DATE : 5th OCTOBER 2021
GROUP MEMBERS :
NAME OF STUDENTS NO. MATRICS
NUR ALEEYA MAISARAH BINTI MOHD NASIR ASJ200110124
NURUL SYAZWANA BINTI MOHD AKBAR ASJ200110482
NURNABILAH SYAFIQAH BINTI SUFAAT ASJ200110154
PROGRAMME : DIPLOMA IN ACCOUNTING
SECTION : AA 4.1
LECTURER’S NAME : MISS FATIMAHTUL ZAHARAH BT MOHD JOHAN
TABLE OF CONTENT
BIL TITTLE PAGES
1. QUESTION 1 – 11 3 - 14
2. REFERENCES 15
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[Link] discuss the Malaysian income tax system in relation to:
a. Scope of charge
The Malaysian income tax system relating to the scope of the first charge is the
reliability of income regulated by Section 3 of the Income Tax Act, 1967 (ITA) which states
that “income will be taxed for each year of assessment (“ YA ”) on the income of any person
who entered or originated in Malaysia or received in Malaysia from outside Malaysia. Besides,
the expression originating or originating from Malaysia means a source of income that must
exist in Malaysia. Income accumulated in or originating from Malaysia will be taxed at the time
of accrual or earned notwithstanding the fact that such income may not have been received
in Malaysia. In addition, in Part 3 the ITA expands its territorial scope to include foreign source
income received in Malaysia from outside Malaysia. Foreign source income refers to income
accrued in or originating from tax jurisdictions in outside Malaysia effective from 2004, foreign
source income originating from outside Malaysia and received in Malaysia by any person
(other than a resident company carrying on the business of banking, insurance or sea or air
transport) will not be subject to Malaysian income tax.
b. Six (6) Classes of income
Next, six classes of income are Section 4(a) business income, 4(b) employment
income, 4(c) dividend, interest or discount income, 4(d) rents, royalties or premium, 4(e)
pensions, annuities or other periodical payments and 4(f) others.
c. Types of taxes. Give TWO (2) examples of each
Besides, there are two types of taxes, namely direct taxes and indirect taxes. For direct
tax it is paid directly by those to whom it is levied and it cannot be distributed or transferred.
In addition, direct taxes must be paid directly to the government managed by the LHDN. For
examples, income tax and real property gain tax. Next for indirect taxes it is not paid directly
to the government. This taxes collected via third party and managed by Royal Custom
Department of Malaysia. For examples for this taxes are Goods & Service Tax (GST) and
sales tax.
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2. State THREE (3) objectives of Tax Administration.
Three objectives of Tax Administration are to regulate the private sectors of economy
to maintain the desired level of employment and increase economic development. Secondly,
to regulate the activities of specific areas of private sectors so as to encourage activities which
be beneficial to the country and to discourage those which are undesirable to the national
interest. Thirdly, to regulate the distribution of income and wealth as between different types
and classes of citizen.
3. State FOUR (4) functions of the Inland Revenue Board (IRB) as tax administrator in
Malaysia.
Four functions of the Inland Revenue Board (IRB) as tax administrator in Malaysia are
firstly to act as agent of the Government and to provide services in administering, assessing,
collecting and enforcing payment of income tax, petroleum income tax, real property gain
tax, estate duty, stamp duties and such other taxes as may be agreed between the
Government and the Board. Secondly, to advise the Government on matters relating to
taxation and to liaise with the appropriate Ministries and statutory bodies on such matters.
Thirdly, to participate in or outside Malaysia in respect of matters relating to taxation. Lastly,
to perform such other functions as are conferred on the Board by any other written law.
4. Income Tax Act 1967 imposes income tax on income receipts. However, capital
receipts are not chargeable to income tax. Explain and list any FOUR (4) examples
of capital receipts.
Capital receipts are business receipts which are not related to the day to day business
activities of a company. They occur occasionally and provide benefit for a long period of time.
Capital receipts are normally presented in the balance sheet of a company when realized and
generally occur as a result of the following events which is sale of fixed assets, issuance of
capital in the form of shares and issuance of debt instruments. Capital receipts also loans
taken by the government from the public, borrowings from foreign countries and institutes, and
borrowings from the RBI. Recovery of loans given by the Centre to states and others is also
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included in capital receipts. In the balance sheet, capital receipts are mentioned in the liabilities
section. The capital receipt has a nature of non-recurrence. All capital receipts are tax-free,
unless there is a proviso to tax it. Capital receipts can be both non-debt and debt receipts.
Non-debt receipts are those which do not incur any future repayment burden for the
government. Almost 75 per cent of the total budget receipts are non-debt receipts and debt
receipts have to be repaid by the government. Around 25 per cent of government expenditure
is financed through borrowing. A reduction in debt receipt (or borrowing) can be a big leap for
the economy's financial health. Most of the capital receipts of the government are debt
receipts. For examples of capital receipts are cash received from sale of fixed assets, amount
of loan received by the company from a bank, capital invested in the business by a new partner
and consideration received by a company through sale of its license to produce a well
marketed drug to another company.
5. The system of self-assessment (SAS) has already been adopted by many countries.
Malaysian has joined the wagon in 2004. The main objective of SAS is to increase
voluntary compliance, to minimize administration costs, to increase efficiency and
to lessen the IRB burden.
Discuss the responsibilities of taxpayer in related to SAS and discuss the effect of
this with regard to the taxpayer’s right of appeal (up to the level of the Special
Commissioners of Income Tax).
The responsibilities of taxpayer in related to Self Assessment System (SAS) is keep
accurate and complete business record. A person carrying on a business is obliged to keep
and retain sufficient business records in Malaysia for seven years after the end of the relevant
year. Where the person is late in furnishing the annual tax return, the records must be retained
for seven years after the end of year in which the return is furnished. Where the gross annual
business takings exceed RM150,000, the person must issue printed receipts serially
numbered for every sum received from his business activity. For persons who do not carry on
a business but who are required to furnish a tax return, records must be retained for seven
years from the end of the relevant year or seven years after the end of the year in which the
return is furnished.
Next is furnish tax returns for individual is for each year of assessment, every individual
who has chargeable income for that year and/or the year before, shall furnish a tax return in
the prescribed form (Form B, or BE) for that year of assessment by 30 June of the following
year if he carries on a business, or by 30 April of the following year if he derives income from
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other non-business sources of income. For Companies, LLP, and trusts these entities shall
furnish the annual tax return within seven months of the close of the accounting period which
constitutes the basis period for the year of assessment. A company is required by law to file
its annual return by electronic medium or by way of electronic transmission. The annual tax
return by a company must be based on accounts audited by a professional accountant. This
is significant as if the return is not based on audited accounts, but on, say, management
accounts, the said return is an incorrect return. It is therefore imperative that the annual
statutory accounts be ready in good time for the tax return to be submitted within seven months
of the close of accounts.
Third responsibilities as taxpayer is pay tax on time by instalments or monthly tax
deduction (MTD). Generally, tax is payable when an assessment is raised, but taxpayers are
given 30 days to settle the tax. If tax is paid beyond the 30 days, a late payment penalty of
10% is levied , and if payment is made beyond the next 60 days, there is an additional 5%
penalty levied. For an individual, employment income is subject to MTD from monthly
emoluments. For individuals who derive income other than employment income, the DG may
estimate their tax payable based on the preceding year’s tax payable and require them to pay
the estimated tax in instalments at prescribed due dates. If the estimated tax instalments are
not paid within 30 days of the due date, a penalty of 10% of the amount unpaid or paid late is
levied. Any balance of tax payable when the actual self-assessed tax is determined is payable
on the due date (ie by 30 April or 30 June of the following year), failing which a 10% penalty
of the amount unpaid or paid late is levied. For companies, LLPs and trusts, there is a
requirement to furnish a tax estimate to the DG not later than 30 days before the beginning of
the basis period for that year of assessment. The tax estimate may not be less than 85% of
the tax payable for the immediately preceding year of assessment. The tax estimated will be
payable in 12 equal instalments starting from the second month of the basis period. The
payment of the tax instalment must be made by the 15th day of the calendar month. The tax
estimate may be revised, upwards or downwards, in the sixth and ninth months of the basis
period. The taxpayer is not required to provide any grounds or reasons for the revision.
Thereafter, the amount of the remaining tax instalments will be adjusted accordingly.
It is important to note that if the tax liability for the relevant year of assessment exceeds
the tax estimate or revised tax estimate by more than 30%, there will be a 10% penalty levied
on the amount in excess of the 30% buffer. For a newly commenced company, LLP or trust,
if the first basis period is at least six months long, the first estimate of tax must be furnished
within three months from the date of commencement of operations. The tax thus estimated
will be payable in equal instalments over the number of months in the basis period, the first
instalment being in the 6th month.
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Section 99 of the Income Tax Act 1967 (ITA) provides that a person who is aggrieved
by an assessment which has been made on him for any year of assessment by the Director
General of Inland Revenue (DGIR) is entitled to appeal against that assessment. The right of
appeal under section 99 of the ITA shall not apply for the following cases which is deemed
assessment under subsection 90(1) of the ITA or deemed assessment for amended Income
Tax Return Form under section 91A of the ITA.
However, under subsection 99(4) of the ITA, if the taxpayer disagrees with the
treatment stated in Public Ruling or known stand, rules and practices of the DGIR prevailing
at the time when the assessment was made, the taxpayer is entitled to make an appeal.
Examples of known stand, rules and practices such as private rulings or advanced rulings,
guidelines of the Inland Revenue Board of Malaysia (IRBM) and decision of cases at the
Special Commissioners of Income Tax (SCIT)
6. Beng Lee, a Singapore citizen runs a trading business in Rantau Panjang, Kelantan.
He employs Ravi and Salim who are both Malaysian citizen to assist him in his
business. All of them are tax residents for the basis year 2019.
Required:
(a) Explain TWO (2) Beng Lee’s responsibilities as a business owner.
Beng Lee responsibilities as an owner of the business is he must deduct the MTD from
the remuneration of each of their employees in accordance with the schedule on account of
tax. There are several options to pay Monthly Tax Deductions (MTD) to the Inland Revenue
Board of Malaysia which is manual payments can be made by the employer though the
submission of Forms CP39 or CP39A at the payment counter of the Inland Revenue Board of
Malaysia. Original, photocopied or computer-generated forms are also acceptable. Second
option to pay MTD is Payments Online which is Monthly Tax Deductions (MTD) payments can
also be made online either via FPX for those who are members of the FPX, or by directly
logging into the respective internet banking accounts. Employers should note that Monthly Tax
Deductions (MTD) online payments for e-PCB and e-Data PCB can only be made through the
FPX medium by logging onto the e-PCB or e-Data PCB website.
Second, Beng Lee should notify the DG within one month before an employee leaving
Malaysia for more than three months, or retain any moneys due to a departing employee
(under specified circumstances) for 90 days and then pay this retained money over to the DG,
if so directed, towards payment of the employee's tax payable.
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(b) Explain TWO (2) Ravi and Salim’s responsibilities as individual taxpayer.
Ravi and Salim responsibilities as individual taxpayer is keeping records for audit
purposes. Most lawyers, accountants and bookkeeping services recommend keeping original
documents for at least seven years. As a rule of thumb, seven years is sufficient time for
defending tax audits, lawsuits and potential claims. Always keep donation receipts, Zakat
receipts, children’s birth certificates, marriage certificate and other supporting documents. This
is extremely important as LHDN has the right to request for any supporting documents for
taxes paid previously. So if you’re filing for reliefs, make sure you keep your documents.
Failure to produce the supporting documents during a tax audit can result in tax penalty of
RM300 to RM10,000, or imprisonment, or both.
Second, paying the income tax payable. Income tax payable is a liability that an entity
incurs that is based on its reported level of profitability. The tax can be payable to a variety of
governments, such as the federal and state governments within which the entity resides. Once
the organization pays the income tax, the liability is eliminated. As an alternative to payment,
the income tax liability can be reduced through the application of offsetting tax credits granted
by the applicable government entity. Since tax credits typically expire after a period of time,
one must pay close attention to which ones are available and can be applied to an income tax
payable. For example, governments typically allow the use of accelerated depreciation for the
purposes of calculating income taxes, which tends to delay the payment of taxes to a later
period. This varies from the more common straight-line depreciation used by businesses for
all other reporting purposes. The result is a timing difference between the recognition of
income for financial and tax reporting purposes. The income tax payable is usually classified
as a current liability in the balance sheet, since it is normally payable to the applicable
government(s) within one year. Any income tax payable within a longer period is instead
classified as a long-term liability.
7. State THREE (3) circumstances can the following be made to a person:
i) An additional assessment
Additional assessment is a redetermination of liability for a tax. It is a further
assessment for a tax of the same character previously paid in part. The following is an example
of a case law which defines an additional assessment: “The term additional assessment
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means a further assessment for a tax of the same character previously paid in part, and
includes the assessment of a deficiency.” [Riverside & Dan River Cotton Mills, Inc. v. United
States, 69 Ct. Cl. 70, 75 (Ct. Cl. 1930).
In your tax return, you must state all your income and your capital to us. Also state
your foreign income and capital. We subsequently impose an assessment. This will state how
much tax you still have to pay or will be refunded. If you do not send back your tax return, we
will impose an assessment on you. We will base this on an estimation of your income. If this
estimation turns out to be too low in retrospect, we may impose an additional assessment.
Have you filed a tax return, but have you not or not fully stated certain income or assets and
has the assessment already been imposed? In that case, we may also impose an additional
assessment for insufficient tax being levied. Did you deliberately not state certain income or
assets or did you state it incorrectly? In that case, we may also impose a penalty on you. This
is also possible in case of a serious imputable act (gross negligence). The IRB is allowed to
issue an additional assessment if it thinks that the original assessment is not sufficient. Such
assessment can only be issued within 5 years (or 7 years for transfer pricing issue) from the
end of that particular YA.
ii) A composite assessment
The composite assessment which has been made is final and conclusive and
therefore no further appeal shall me made against the composite assessment. This type of
assessment is usually used in investigation cases whereby more than one year of assessment
is involved and it is an agreement to compound an offence committed by the taxpayer.
However if it is necessary the additional assessment can still be issued.
Without prejudice to section 91, where a person makes default in furnishing a return in
accordance with subsection 77(1) or 77A(1) , fails to give notice of chargeability in accordance
with subsection 77(3) and makes an incorrect return by omitting or understating any income
of which he is required by this Act to make a return on behalf of himself or another person; or
gives any incorrect information in relation to any matter affecting his own chargeability to tax
or the chargeability to tax of any other person, for any year or years of assessment (that year
or those years being referred to in this section as the relevant year or relevant years), the
Director General and that person may come to an agreement in writing as to the payment by
that person of a sum of money (in this section referred to as the total amount) being the amount
of tax which has been undercharged or not charged for that relevant year or those relevant
years in consequence of such default in furnishing a return or failure to give notice of
chargeability or making an incorrect return or giving any incorrect information; and the amount
of any penalty or penalties which that person may be required to pay for that relevant year or
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those relevant years pursuant to subsection 112(3) or 113(2) or both (or where such penalty
is abated or remitted under subsection 124(3) so much, if any, of the penalty which has not
been abated or remitted).
iii) An advanced assessment
Advance assessment is whereby the Director General has a power to assess the
taxpayer in advance to prevent loss of revenue to the Government because under normal
situations the notice of assessment for any year cannot be issued before those particular years
of assessment. For example, the taxpayer is obliged to pay tax on October but the advance
payment can be issued by Director General on August. Based on section 92, the Director
General has the power to issue advance assessment regarding to some situations. Firstly,
whereby the taxpayer concludes to possess a business sources and therefore an advance
assessment will be issued in year of termination.[Law06] The taxpayer might do not have the
amount at that time to settle the liability or it might be difficult to trace the individual so this will
enable collection of tax rather than waiting to issue a normal assessment. Therefore, advance
assessment will overcome those kinds of problems. For example, an individual is running a
business and the accounts end on 31 October each year. The business is expected to cease
on 31 February 2006. In this situation, the 2005 assessment will be based upon income for
the year end 31 October 2005 and the assessment for the year 2006 would assess the income
for two months which ends on 31 February. Therefore according to section 92, the assessment
for both year 2005 and 2006 can be made in 2006.
It is also been issued when the taxpayer is about to leave Malaysia and his source of
income is possible to terminate if he leave Malaysia or it is considered as a need for some
other reasons that an assessment should be made on that individual. It is basically to avoid
loss of revenue especially when an individual will be in staying in Malaysia for unknown
period of time and the individual is being employed by a non-resident employer whom does
not have the stable settlement in Malaysia. Therefore the assessment can be made for the
year of departure and following years of assessment with respect of any source of income of
that individual. For example, an individual has income from employment and has left Malaysia
in middle of July 2008 after the employment ceases on 30 June 2008. The employment income
for the particular period in between January 2008 till June 2008 was RM 35,000. In this case,
it is possible to issue advance assessment in 2008 for the year of assessment 2008 to prevent
any loss of revenue to the Government.
8. Seri, a finance manager of AXY Sdn Bhd plan to dispose all the unnecessary
documents including the bills and receipts pertaining to her tax matters for year
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assessment 2018. The reason being, that she had already completed the e-Filling
process for that particular year.
Required:
Advice Seri on the above matters including offences that she violated and penalty (if any)
with regards to the Income Tax Act 1967 requirements.
Seri cannot disposed all the unnecessary documents including the bills and receipts
pertaining to her tax matters for year assessment 2018. All business records must be kept and
retained in safe custody for a period of 7 years starting from the year assessment. According
to Section 82 for responsibility to keep documents, the business must to keep the document
that consist of any other records as specified by the DGIR, books of account recording such
as receipts & payments and income & expenditure and Invoices, vouchers, receipts and such
other documents necessary to verify the entries in any books of account. Seri cannot disposed
this document event she already record it on e- filling because this is because, maybe the
data that is stored can be lost if there is a problem in the e filling system. So, the original
document that is still at Seri can be used as a back up if something happens. If Seri still
disposed the document , she can will imposed a penalty which is fail to comply with an order
to keep proper records and document and will be fine RM300 to RM10,000 or imprisonment
or both.
9. Hamid, a Malaysian citizen, married a Taiwanese, Gibrael on 14 February 2019. Hamid
is a Malaysian resident while Gibrael is a non-resident for the basis year 2019. In 2019,
both of them have worked as sales executives in RTF Sdn Bhd in Subang Jaya,
Selangor and have also formed a Partnership that exports local foods overseas.
a) Identify Hamid and Gibrael’s sources of income for the year of assessment 2019.
Both Hamid and Gibrael’s sources of income for the year of assessment 2019 are the
income their earned for working as Sales Executives in RTF Sdn Bhd in Subang Jaya,
Selangor and also the income from the Partnership formed that exports local foods overseas.
b) What is/are the basis period(s) for the above sources of income?
The basis period for Sales Executive in RTF Sdn Bhd in Subang Jaya, Selangor is
Year of Assessment 2019 which is from 1 st January 2019 until 31st December 2019 while the
basis period for the Partnership formed by Hamid and Gibrael which exports local foods
overseas is according to the calendar year or accounting year basis of their Partnership
business.
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c) What are the tax return forms that they will have to furnish to the Inland Revenue
Board for the year of assessment 2019?
Tax return forms that they will have to furnish to the Inland Revenue Board for the year
of assessment 2019 are Employment Income Tax Return Form and also Business Income
Tax Return Form.
10. Explain any FIVE (5) powers of the Director General of Inland Revenue under the
Act to obtain information for ascertaining the chargeable income of a person.
Firstly, powers of the Director General of Inland Revenue under the Act to obtain
information for ascertaining the chargeable income of a person is the power to call for specific
returns and production of books under Section 78. For the purpose of obtaining full information
for ascertaining whether or not a person is chargeable to tax or for determining his liability, the
Director General may by notice under his hand require that or any other person, (a) to
complete and deliver to the Director General within a time specified in the notice (not being
less than thirty days from the date of service of the notice) any return specified in the notice;
(b) to attend personally before the Director General and produce for examination all books,
accounts, returns and other documents which the Director General deems necessary; (c) to
make a return in accordance with paragraph, (a) and also to attend in accordance with
paragraph, (b); or (d) to provide in writing such information or particulars which the Director
General deems necessary.
Then, Director General has the power to call for statement of bank accounts and etc
under Section 79. The Director General may by notice under his hand require any person to
furnish within a time specified in the notice (not being less than thirty days from the date of
service of the notice) a statement containing particulars of all banking accounts, all savings
and loan accounts, deposits, building society accounts and co-operative society accounts in
regard to which he has or has had any interest or power to operate solely or jointly during that
period, all assets which he and any wife or dependent child of his possess or have possessed
during that period, all sources of his and the gross income from those sources, and all facts
bearing upon his present or past chargeability to tax.
Besides, Director General also has the power of access to buildings and documents
and etc under Section 80. Under subsection (1), for the purposes of this Act the Director
General shall at all times have full and free access to all lands, buildings and places and to all
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books, documents, objects, articles, materials and things and may search such lands,
buildings and places and may inspect, copy or make extracts from any books, documents,
objects, articles, materials and things without making any payment by way of fee or reward.
Under subsection (2), the Director General may take possession of any books, documents,
objects, articles, materials and things to which he has access under subsection (1) where in
his opinion- (a) the inspection of them, the copying of them or the making of extracts from
them cannot reasonably be undertaken without taking possession of them; (b) they may be
interfered with or destroyed unless he takes possession of them; or (c) they may be needed
as evidence in any legal proceedings instituted under or in connection with this Act. Under
subsection (3), where in the opinion of the Director General it is necessary for the purpose of
ascertaining income in respect of the gains or profits from a business for any period to examine
any books, accounts or records kept otherwise than in the national language, he may by notice
under his hand require any person carrying on the business during that period to furnish within
a time specified in the notice (not being less than thirty days from the date of service of the
notice) a translation in the national language of the books, accounts or records in question:
Provided that in East Malaysia this subsection shall have effect as if the words "or English"
were inserted after the words "national language" wherever they occur.
Next, the Director General has the power to call for information under Section 81. The
Director General may require any person to give orally or may by notice under his hand require
any person to give in writing within a time specified in the notice all such information or
particulars as may be demanded of him by the Director General for the purposes of this Act
and which may be in the possession or control of that person: Provided that, where that person
is a public officer or an officer in the employment of a local authority or statutory authority, he
shall not by virtue of this section be obliged to disclose any particulars as to which he is under
a statutory obligation to observe secrecy.
Lastly, Director General has the power to call for further return under Section 87. The
Director General may give notice in writing to any person whenever he thinks fit requiring that
person to furnish within a reasonable time (to be specified in the notice) fuller or further returns
respecting any matter as to which a return is required by or under this Act.
11. A tax audit was conducted to Megah Sdn Bhd. The following were highlighted by
the tax audit officers;-
a) The company unable to provide some invoices due to misplaced the documents.
b) The company did not notify the commencement of employment of three new
employees in 2019.
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c) The company did not provide reasonable facilities and assistance to the tax
officers during the tax audit.
Required:
Explain to the CEO of Megah Sdn Bhd, offences and penalties for each of the above
situation (if any).
First and foremost, the type of offences when the company unable to provide some
invoices due to misplaced the documents is categorized under fail to comply with an order to
keep proper records and documentation. For this type of offences, the penalty is Megah Sdn
Bhd may imposed to pay an amount of fine which is RM300 to RM10,000 or imprisonment
(not exceeding one year) or both.
Next, CEO or the representative from Megah Sdn Bhd should notify the
commencement of employment of three new employees in 2019 even though the company
will not be imposed for penalties as the act is not categorized as an offences.
Lastly, the type of offences when the company did not provide reasonable facilities and
assistance to the tax officers during the tax audit is categorized under obstruct any authorised
officer of Inland Revenue Board of Malaysia (IRBM/LHDN) in carrying out his duties. This is
because failure to provide reasonable facilities or assistance or both to the Director General
or an authorized officer, in the exercise of his powers, is an offence under the Act. For this
type of offences, the penalty is Megah Sdn Bhd may imposed to pay an amount of fine which
is RM1,000 to RM10,000 or imprisonment for a term of up to one year or both.
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