Malaysian Tax Offences Should be Avoided
Business owners and individuals usually have several ways to complete transactions that get taxed. By doing tax planning, they can evaluate different options they should conduct business and personal transactions. The purpose of this is to eliminate or lessen their tax liability. This is not the same as tax evasion because that is a tax offence in Malaysia. There are Malaysian tax offences that people try to avoid to stay away from illegal tax practices. Trying to interfere with the administration of tax laws might be considered corrupt and an act of fraud. If you want to know what these tax offence so you can avoid them, you can find out more now.
Tax Avoidance vs. Tax Evasion: Differences Between the Two
Even if they both sound similar, these two are very different. Tax avoidance lessens the tax bill structuring transactions so you can enjoy tax benefits. Tax avoidance is legal and wise.
Tax evasion is trying to reduce your taxes through deceit or concealment. It is a crime to do this. You should know when you have gone too far and should change your ways.
Here are some Malaysian tax offences:
1. You Give People Bad Tax Advice
If you have a friend or family asking you to give them tax advice, and are not sure what to answer, tell them to talk to a licensed professional. You should especially do this if they have complicated taxes. It is an offence to another person’s tax advice if it causes them to undeclare their taxes. Unless you are able to prove that you gave solid and accurate advice, you should just not say anything. You can be fined RM200 – RM20,000 and be jailed for a maximum of 3 years.
This law is more applicable to professionals who are dealing with tax, like accountants and tax lawyers. However, if you tell people not to include freelance income in their tax return, you could get in trouble.
2. Not Disclosing How Much You Earn
This is a one the worst Malaysian tax offences to commit, and it is under tax-evasion. The law in Malaysia is stringent when it comes to tax evasion. The penalty for omitting or understating your income can be 100% of the tax that was undercharged.
You must calculate all figures of your tax return properly. If you are unable to do it by yourself, using an auditing firm’s services is a good option. Business owners will benefit most from this type of service.
Another important thing to remember is that the tax law intricacies change every year, and that is why taxpayers should make sure that they evolve with trends. If you do not know enough about the current tax system, you might have tax officials coming after you.
3. Failing to Submit Your Tax Return Form
You might already be aware that you should submit a tax return form at the LHDN. However, if your income is enough, are you still obligated to submit tax returns?
The answer is that you should only file a tax return if your income is taxable. If you do not earn enough, there is no need to file a tax return. In case you have been filing your returns, you should not stop even if you are not paying taxes, or you had a pay cut and do not earn enough to be taxed.
This will keep you from falling out, which could put you at high risk for tax evasion. That can make you into a candidate for auditors to verify your taxes. Your audit can be up to 5 years of assessment. There is no limit on auditing if they see fraud or any form of tax evasion. That is why you want to be sure that your tax account is organized.
4. Failing to Keep Important Documents for Income Tax
The law makes it everyone’s duty to keep documents that affect their chargeable income. The tax law requires people to keep documents for seven years or more, and it applies to anyone, whether they are paying taxes or not. At least, you can prove that the chargeable income you have is not taxable.
These documents are under income statements and expenditure, and invoices, receipts, vouchers, and other documents that verify your tax return details. You must have your electronic records easily accessible.
If you do not keep this paper record for at least seven years, it is a criminal offence, and you can be fined RM300 – RM10,000 and/or a maximum of 1 year in jail. You just might want to keep your documents for more than seven years in case you encounter an error in the future.
There are many tax reliefs that Malaysian citizens can benefit from, reducing how much tax you need to pay.
5. You Overstate Your Tax Reliefs
Filing tax reliefs can give you significant savings on taxes, but you need to be careful when declaring them. Never overstate the tax reliefs you are entitled to just to lessen tax charges. If you do not have the documents needed to back up your claims, you can be fined RM300 – RM10,000
Once you declare them, you must have vouchers, documents, or any other receipts that you can use as proof. Make sure that you do not throw them away for at least seven years. This could help you a lot.
If you need a tax planner in Malaysia, you can get in touch with 3E Accounting because they are experts in this. Their experience has been proven and tested by many individuals and business owners for their taxes. You may contact us today!