Episode 1 – Imposition of tax penalties in Malaysia

02 August 2022

Video Transcription

Good morning ladies and gentlemen. I’m Thanneermalai, the Managing Director of Thannees Tax Consulting.

We’re going to give you a short brief on whatever that’s happening at this point in time. This is absolutely current and what’s going on. This morning ladies and gentlemen, I want to bring your attention to the way the tax authorities are imposing penalties.

Whenever there are any tax audit adjustments whether it’s transfer pricing, income tax or any other tax audit, inevitably there will be a penalty and very rarely is the penalty waived. The normal penalty is 45%. What is happening now is there are many issues where the tax authorities take a different position when it comes to interpretation. The taxpayer has also taken a different position from an interpretation point to be fully supported by the law and by the facts. 

However, the inland revenue decides to take a different position. In that event, normally penalties should not be imposed. It’s unfair to impose a penalty in that situation. However, it is happening. Penalties are being imposed in such situations and the offer letter that comes to you from the inland revenue at the end of the investigation sadly is if you agree with them, it’s a 45% penalty, and if you do not agree with them, they’re using Section 93 and using the best judgment assessment in imposing 60% or even higher. But normally it is 60%. If you have a choice, it’s 45% if you accept, and it’s 60% if you don’t accept it. This is not a situation that we will welcome, but unfortunately, the inland revenue is doing it and that’s the reality.

Penalties are now becoming part and parcel of your tax system. At the moment we do not know how many penalties they are collecting, but penalties are now part of the tax system. 

Thank you, ladies and gentlemen. That’s what I want to bring your attention to – the way the revenue is imposing penalties. In most cases, penalties are being imposed. So, you can challenge the penalties. We have done that. You’ve got to bring good facts and it can be done. 

Thank you.

Share This