Wilful Tax Evasion in Malaysia: Understanding the Consequences
According to Section 114(1A) of the Income Tax Act 1967, wilful evasion of tax means any action or deed deliberately performed or done with the purpose or intention of evading or assisting any other person to evade tax.
The term “evasion” is defined as the action of evading or escaping by artificial or contrivance, escape, dodging, prevarication, shuffling, excuse or subterfuge. Tax evasion is both immoral and illegal.
- What circumstances indicate that a person has the intention to evade tax?
Under the Income Tax Act (ITA) 1967, any person who wilfully and with intent to evade or assist any other person to evade tax may be found guilty of tax evasion. This includes:- Omitting from a return made under the ITA any income that should be included; or
- Making a false statement or entry in a return made under the ITA; or
- Giving a false answer to a question asked or request for information; or
- Preparing, maintaining, or authorizing the preparation or maintenance of false books of account or other false records; or
- Falsifying or authorizing the falsification of books of account or other records; or
- Making use or authorizing the use of any fraud, art, or contrivance; or
- If a person engages in wilful evasion and intends to evade or assist others in evading tax, what are the consequences?a) A fine ranging from RM1,000 to RM20,000; or
b) Imprisonment for a term not exceeding 3 years; or
c) Both; and
d) Special penalty of treble (3x) the amount of tax which has been undercharged in consequence of the offence or which would have been undercharged if the
offence had not been detected.
- What is the penalty for a person who assists in or advises with respect to the preparation of any tax return resulting in an understatement of liability for another person?
Any person who assists in, or advises with respect to, the preparation of any return where the return results in an understatement of the liability for tax of another person shall, unless he satisfies the court that the assistance or advice was given with reasonable care, be guilty of an offence and shall, on conviction, be liable to:-
a) A fine ranging from RM2,000 to RM20,000; or
b) Imprisonment for a term not exceeding 3 years; or
c) Both
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What is the provision for distinguishing between tax evasion and legal tax avoidance schemes under the ITA, and how does it apply to taxpayers?
In Accordance to Section 114(2) of Income tax Act, the provision only applies to situations where the taxpayer has carried out an evasion scheme which is prohibited by the ITA. It would not apply to legal tax avoidance scheme which has the tax implication of minimising the tax.
For further details, please refer to our previous article: Tax Avoidance and Tax Evasion.
ANC Group – Your Personal Tax Advisor
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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