Returns, Assessment

Chapter 28
- Introduction
Returns
Assessment
 Introduction
• According to the tax law, every chargeable
person is required to file in a return in the
prescribed form of his income earned
during the basis period for that year of
assessment.
• Filing is
- within 7 months from year end for
companies, LLP, trust body, coop society
- by 30th April of the following year for
individuals
 Chargeable person
• Any chargeable person derives income
from Malaysia is a chargeable person.
• Husband, wife, companies and bodies of
persons, company in liquidation,
incapacitated person, non residents,
executors, trustees, agents and
representatives.
 Persons jointly and severally
liable (S 75)
• Companies
i. Manager
ii.Directors
iii.Secretary
 Types of Returns
•B Resident individual with
other sources of income
• BE Resident individual with
employment source
•M Non resident individuals
•C Companies
•CI Co-operatives societies
•P Partnership
•T Trust, deceased person
estates, club, association, societies
•E Return by Employer
 Notice of chargeability s77(3)
• An individual who arrives in Malaysia must
inform the DG within 2 months after his
arrival that he is so chargeable
 Filing of return by non
companies
• Section 77(4) – Electronic Return must
specify:
• the chargeable income
• tax payable if any
• other particulars as may be required by DG
Not later than 30/6 in the year following
that YA (individuals with s4a income)
and 30/4 for others
 Filing of return by companies,
cooperative, trust -sec 77A
• Furnish return in the prescribed form within
7 month from the date following the close
of the accounting period which constitutes
the basis period for the year of assessment
• Return must state chargeable income, tax
payable and other particulars required
 Filing of return by companies,
cooperative, trust -sec 77A(4)
• Prior to YA2014, no legal requirements to
submit returns based on audited accounts.
Companies only filed returns based on
management accounts.
• Subsequently, subsection 4 was introduced
in the Finance Act 2014 ie returns must be
based on audited accounts.
• Some private companies are exempted by
SSM
Responsibilities of employer
• i. Form EA/EC
• It has all the details of employee’s income
including the amounts contributed to
EPF, SOCSO etc. EC for the government
employees.
• ii. The employer must give a
notice to the IRB not later than one month
from the commencement date of
employment – Form CP22
 Responsibilities of employer
• iii. Notice cessation – Form CP22A
• Notice must be given not later than one
month prior to the date of cessation
• iv. Employees leaving Malaysia – CP21
• One month before the expected date of
departure – if exceeding 3 months
Responsibilities of employer
• v. Retention of money
• Employer must retain whatever moneys
due to the employee at least 90 days after
the receipt by the IRB of the notification
of cessation of employment.
Responsibilities of employer
• vi. Scheduler Tax Deduction
• Employer is required to withhold tax
under the Scheduler Tax Deduction
System each month. The deducted money
must be remitted to the IRB by 10th of
each calendar day month in respect of tax
in the preceding month – Form CP 159
Responsibilities of employees
• i. Notice of chargeability
• Every person chargeable to tax for any
year of assessment shall notify the DG on
or before 14 April each year that he is
chargeable (section 77(2))
• ii. The return issued to him/her
must be completed and submitted within
the time allowed (s.77(1))
 Responsibilities of employees
• iii. The employee has to inform the IRB
in writing of any change of address
within 3 months of the change.
Assessment
 Introduction
• The DG is deemed to have made the
assessment on the day the returns are filed .
 Assessments and additional
assessments in certain cases 91(1)
• The Director General, where for any year of assessment it
appears to him that no or no sufficient assessment has been
made on a person chargeable to tax, may in that year or
within five years after its expiration make an assessment or
additional assessment, as the case may be, in respect of
that person in the amount or additional amount of
chargeable income and tax or in the additional amount of
tax in which, according to the best of the Director
General’s judgment, the assessment with respect to that
person ought to have been made for that year.
 s 91(3)
• The Director General where it appears to him that
— (a) any form of fraud or wilful default has been
committed by or on behalf of any person; or (b)
any person has been negligent, in connection with
or in relation to tax, may at any time make an
assessment in respect of that person for any year
of assessment for the purpose of making good any
loss of tax attributable to the fraud, wilful default
or negligence in question.
 Failure to furnish return or give
notice of chargeability
• 112 (1) Any person who makes default in
furnishing a return in accordance with subsection
77(1) or 77A(1) in respect of any one year of
assessment or in giving a notice in accordance
with subsection 77(3) shall, if he does so without
reasonable excuse, be guilty of an offence and
shall, on conviction, be liable to a fine of not less
than two hundred ringgit and not more than
twenty thousand ringgit or to imprisonment for a
term not exceeding six months or to both
 S112(3)
• Where in relation to a year of assessment a person
makes default in furnishing a return in accordance
with subsection 77(1) or 77A(1) or in giving a
notice in accordance with subsection 77(3) and no
prosecution under subsection (1) or (1A) has been
instituted in relation to that default— (a) the
Director General may require that person to pay a
penalty equal to treble the amount of that tax
which, before any set-off, repayment or relief
under this Act, is payable for that year; and
 S112(3)
• (b) if that person pays that penalty (or,
where the penalty is abated or remitted
under subsection 124(3), so much, if any, of
the penalty as has not been abated or
remitted), he shall not be liable to be
charged on the same facts with an offence
under subsection (1) or (1A).
 Types of assessment
• i. Original assessment
• Assessment made in accordance to the
particulars provided by taxpayer or his
agent in the relevant return. The DG can
exercise his discretion in accepting it.
 Types of assessment
• i. Reduced assessment
• For appeal against an assessment or
additional assessment, the tax payer may :
– a)reach an agreement with the DG
during the review of assessment or by
providing acceptable evidence for
claimed of expenses,
– b) with the case through appeals to SC or
court decision.
• Reduced assessment would be issued to reflect tax
reduction
 Additional Assessment
a)Taxpayer had omitted certain
income while making the return and
discovered by the DG after making
the original assessment,
b) When tax had been refunded to the
taxpayer by an error of fact of law
 Additional Assessment
• c)When there is additional income which
has not been taken into account when
making the return, or the original
assessment has not taken into account of
this income
• d) there has been excessive set off in the
earlier assessment
 Infra Quest v KPHDN
• Taxpayer, a wholly-owned subsidiary of
Permodalan Kelantan Berhad (which was
wholly owned by Perbadanan Kemajuan Iktisad
Negeri Kelantan).
• Taxpayer is in the business of providing
telecommunication towers licensed to
companies that provide telecommunication
services for the latter to affix antennas to the
towers.
 Taxpayer owned 193 towers in Kelantan
and its customers include
telecommunication service providers such
as Celcom, Maxis and Digi
 Towers were all manufactured by 3rd party
and installed for the purpose of Taxpayer’s
business.
 Taxpayer claimed capital allowance for
telecommunication towers in its tax return
but was disallowed by the DGIR upon audit.
 On 9.2.2011, DGIR issued notices of
assessment for YA 2003 - 2008. ▪ The
Taxpayer appealed to the SCI
 Issues

1. Whether the notices of assessment for YA

2003 and 2004 were time-barred? Yes as
DG sent notices on 9.2.2011
2. Whether the Taxpayer was entitled to claim
capital allowances on capital expenditure
incurred to build telecommunication towers?
 Decisions
The SCIT dismissed the Taxpayer’s appeal on these
grounds:
▪ DGIR had power to invoke section 91(3) of ITA:
• negligence of Taxpayer
• omitting to file correct returns by wrongfully
claiming capital allowances for the tower.
▪ Towers were premises where the Taxpayer
conducted its business activities.
▪ Towers were not apparatus by which the business
activities of the Taxpayer were carried on.
 High Court’s and COA ‘s
decisions
Taxpayer appealed to High Court and the appeal was
allowed on these grounds:
• DGIR did not satisfy section 91(3) of ITA
➢DGIR failed to prove the negligence of the
Taxpayer.
• Taxpayer satisfied the requirement that the
telecommunication towers were plants.
➢used for the purpose of its business of providing
telecommunication towers.
▪ DGIR then appealed against the High Court’s
decision to the Court of Appeal. The Court of Appeal
upheld the High Court’s decision.
1. Whether the notices of assessment for YA 2003
and 2004 were time-barred?

As DG sent notices on 9.2.2011, the additional

assessments for YA 2003 and 2004 were time
barred
s91(1)…within 5 years after YA 2003 (2008)
and YA 2004 (2009)
Composite Assessment s. 96A
Where a taxpayer
a)makes default in furnishing a return
in accordance with section 77(1),
b) fails to give notice of chargeability
in accordance with s.77(2) or (3),
c) makes incorrect return by omitting
or understating any income,
 Composite Assessment
• d) gives any incorrect information
affecting his own chargeability.
• This assessment normally comprises a
few years of assessment, after some
thorough investigation.
Increased Assessment (section
101(8),(9)
• The taxpayer reach an agreement with
the DG during the review of
assessment,
• The SC or the court had decided the
issue in dispute and result an increase
in the tax payable.
 Advance Assessment
• Generally, the issue of assessment is
based on income accrued/derived on
preceding year basis. It is issued to
prevent loss of revenue to the
government. It is issued where the
taxpayer:
– a. ceases to carry on
business source,
 Advance Assessment
• b) commences to receive employment
income, pension, annuity or periodical
payments (section 4(e))
• c) is about to leave Malaysia and his
source of income is likely to cease on his
leaving Malaysia,
• d) is carrying out the business of
transporting passenger or cargo by sea or air,
 Advance Assessment
• e) where the basis period of a business
for YA does not coincide with the calendar
year,
• f) taxpayer received income subsequent
to cessation of business.
 Protective Assessment
• The DG is authorized to issue additional
assessment subject to a 5 years time limit
unless there is element of negligence,
willful default or fraud. In order to avoid
time barred, a protective assessment will be
issued.