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Malaysia | Employment Tax | Special Voluntary Disclosure Programme 2.0

June 21, 2023

13 June 2023                                                                                                                               

Employment Tax

Malaysia | Special Voluntary Disclosure Programme 2.0 

Impact: High

Summary

The MIRB has released its Operational Guidelines and FAQ in relation to the Special Voluntary Disclosure Programme 2.0 (“SVDP2.0”), which offers the opportunity for taxpayers to come forward and voluntarily submit (previously unsubmitted) tax returns or disclose prior years’ under-reported income with no penalty imposed. The SVDP2.0 will run from 6 June 2023 until 31 May 2024.

The Detail

Following the announcement of a 0% penalty tax amnesty programme during the Malaysia Budget 2023, the Malaysian Inland Revenue Board (MIRB) has released Operational Guidelines GPHDN 2/2023 on 2 June 2023 which sets out the eligibility criteria and implementation procedures, along with a Frequently Asked Questions (FAQ) document to supplement the Operational Guidelines.

Features of SVDP2.0

  • Implementation period is from 6 June 2023 to 31 May 2024
  • Offered to all categories of taxpayers except employer file category.
  • Taxpayers eligible for the SVDP2.0 are set out below:
Types of Taxpayers Relevant years of Assessment (Ys/A) Submission  method 
New taxpayers 

i.e., those who have never reported income to the MIRB but have started a business or have income/ disposed asset)

Y/A 2022 and preceding

Ys/A

Manual (using paper form) or e-filing via https://mytax.hasil.gov.my
Existing taxpayers, i.e., 1) those who have previously declared income to MIRB but have not submitted a tax

return form for any other Y/A,

or

2) those who have previously declared income to MIRB but still have unreported additional income

 

 

Y/A 2021 and preceding

Ys/A

 

 

Via the link on the SVDP2.0 website or via https://mytax.hasil.gov.my

  • All submissions under the SVDP2.0 are to be done through https://mytax.hasil.gov.my/
  • All submissions will be accepted in good faith; however, the IRBM will carry out a review of the tax computation to confirm that there is no mathematical / calculation error.
  • After the MIRB has concluded their review (i.e., to determine that the taxpayer is eligible to participate in the SVDP2.0), they will raise an Assessment, from which the taxpayer will settle the tax payment within the stipulated period in order for the SVDP2.0 process to be completed.
  • Under the SVDP2.0, the areas outlined below in relation to non-compliance would attract a 0% penalty rate. We have also set out what the penalty rates would be under the Income Tax Act 1967 (“ITA1967”) in ordinary circumstances:
Area of  non-compliance  Penalty rates under the ITA1967 Penalty rates under the SVDP2.0 
Failure to submit tax return – section 112(3) ITA 1967.300% of the tax liability (i.e., amount before any advance tax paid).0%
 

Incorrect return, either due to omission or understatement of income, or provided any incorrect information relating chargeability of tax – section 113(2) ITA1967.

 

 

 

100% tax under-charged.

However, under the Tax Audit Framework, the MIRB may impose penalty at the following rates:

1st offence – 15%

2nd offence – 30%

3rd and subsequent offences(s) – 45%

 

 

 

0%

 

 

 

 

  • The balance of tax payable arising from the Tax Notice issued by the MIRB under the SVDP2.0 is to be made either:
    •  In a lump sum payment (full settlement) within 30 days from the date of the Tax Notice, or
    • In instalments based on agreed instalment payment arrangements. Instalment is allowed to be made until 31 May 2024 without having to submit supporting documents.
  • If the taxpayer fails to settle the tax payment within the stipulated period, a penalty for late payment will be imposed.
  • If the balance remains unpaid after the end of the SVDP2.0 period, then the taxpayer is no longer eligible for the SVDP2.0 and they may be audited/ investigated in the future for that Y/A (even though they had made a submission during the SVDP2.0 period). The 0% penalty rate under the SVDP2.0 will no longer apply, and the relevant penalties (i.e., for under-reporting of income and/or late payment, whichever applicable) will be imposed accordingly.

Actions for employers/ taxpayers to consider

While the SVDP2.0 is not open to the employer file category (i.e., non-compliance relating to employer’s obligations do not come under this programme), the employer is responsible in ensuring that the correct amount of employment income has been provided to their employees to be declared in their Malaysian personal tax returns. Hence, this opportunity to come forward and make good of the gaps arising from non-compliance is timely, given the full waiver of penalty imposed for late tax return submission/ under-reporting of income.

In summary, non-compliance gaps may arise due to the following circumstances:

  • “Split payroll” arrangement to manage compensation and benefits for employees on a Malaysian assignment whereby income reporting may have been omitted.
  • Omission of equity income reporting and trailing reporting obligations by Malaysian employers, for employees who were granted equity awards/shares during their employment/assignment in Malaysia that vest after they have left Malaysia.
  • Employees with no clear delineation on their dual or regional roles and who do not report the income derived based on days spent outside Malaysia even though the roles and responsibilities discharged outside Malaysia are clearly incidental to a Malaysian employment.
  • Similarly, employees who are on assignment overseas whereby the assignments are incidental to Malaysian employment (and therefore, income earned during the assignment period continues to be taxable in Malaysia).
  • Malaysian companies or individuals who assume that tax treaty exemption is automatic without having to file a tax return in Malaysia together with the substantiating documentary evidences.

Thus, employers with globally mobile employees should take this opportunity to immediately review their assignment structures/employment models and perform a “health check” into their payroll and income reporting processes. This will help to evaluate if there have been any reporting gaps in the past which would require immediate rectification and disclosure to the IRBM to take advantage of the full penalty waiver offered under the Programme.

How we can help

Vialto Partners Malaysia can assist employers to review their assignment structure and policies, together with the effectiveness and accuracy of their payroll system in capturing compensation data for tax reporting. Thereafter, we can assist the impacted employees/ individuals with the preparation and submission of the tax return or additional income reporting form (whichever applicable) to the MIRB.

Contact us

For a deeper discussion on the above, please reach out to your Vialto Partners point of contact,
or alternatively:

Further information on Vialto Partners can be found here: www.vialtopartners.com

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