Consequences of Incorrect Tax Returns and Late Payments in Malaysia

Filing an income tax return and paying taxes on time are the obligations for every taxpayer.

Failure to comply with these requirements can lead to various penalties and fines.

1. What are the consequences if I file an incorrect tax return to Inland Revenue Board Malaysia (IRBM)?
   

   According to Section 113(1) of the Income Tax Act,  penalty shall be imposed on any person who:

   – Makes an incorrect return by omitting or understating any income of which he is required by the 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.

   Unless he satisfied the Court that the incorrect return or information was made or given in good faith, be guilty of an offence and shall, on conviction, be liable to a fine ranging from:-

   1. RM1,000 to RM10,000; and
   2. A special penalty of double the amount of tax which has been undercharged / consequence of incorrect return/ information.

   Under Section 113(2), if a taxpayer is not prosecuted, the Director General of the Inland Revenue Board may require the taxpayer to pay a penalty equal to the amount of tax that was undercharged due to the incorrect return or information.

   The Director General has discretion in deciding whether to prosecute under Section 113(1) to recover a higher quantum of penalty and fine, or to take a lenient approach under Section 113(2).

2. What are the consequences for making late tax payments?
   Section 103 of the Income Tax Act imposes a 10% late payment penalty on taxpayers who fail to make their tax payments on time. This penalty applies to taxpayers who have filed a correct return but have defaulted in paying the tax due within the stipulated period.The Inland Revenue Board of Malaysia (IRBM) also imposes late filing penalties, as follows:

   Submission of Tax Return	Rate on tax payable
   Within 12 months from the due date	15%
   Within 24 months from the due date	30%
   After 24 months from the due date	45%

Tax consulting is the core service of ANC Group. Our tax professionals provide clients with comprehensive tax support and guidance. We offer tax consulting and compliance services for expatriates, entrepreneurs, and listed and non-listed companies.

Our tax consulting services include business tax, transaction tax, personal tax, and corporate income tax. We don’t just guide you in interpreting and applying complicated taxation rules, but to explore new opportunities and business trends.

We keep you abreast with Malaysia tax updates and any changes in the local regulations.

We work closely with industry specialists, authorities, and associated professionals within ANC Group to provide the best-in-class integrated tax planning solutions. ANC specialists coordinate the accounting and taxation services to bring your business to success.

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