Zero Penalties for Those Who Have Been Evading Taxes in The Past

We get it, sometimes filing taxes can be mind-boggling and you may unintentionally file your tax returns incorrectly. We make sure to carry this out as it is our responsibility but we personally dread having to take the time out to do so every year. For those who fall under this category, and for those who have been evading taxes in the past, whether individuals or companies, the Inland Revenue Board (LHDN) is giving them the chance to start again with a clean slate.

According to The Star, LHDN Chief Executive Officer Datuk Dr Mohd Nizom Sairi said that they will begin their year-long Special Voluntary Disclosure Programme 2.0 (SVDP) on 1 June 2023.

“There will be zero penalties under SVDP 2.0. This is an opportunity for everyone to come forward openly and honestly, especially those who are aware that they have not been paying taxes and have not been declaring or over-claiming tax reliefs or rebates, Let us establish a reset and start from a clean slate so that we can move forward after this” he said.

Existing taxpayers who may have incorrectly filed their taxes are also encouraged to come forward on their own accord. This tax amnesty programme will overlook past discrepancies but those who have yet to settle their taxes will be required to do so.

Here are some of the categories covered by the programme in the previous SVDP:

• Undeclared or under-declared income

• Over-claimed expenses, rebates, and reliefs

• Unreported real property gains tax

There is a Catch

However, there is a caveat for SVDP 2.0 which is that the zero penalty will only apply to individuals and companies who are not currently under audit or investigation by LHDN. Mohd Nizom advised taxpayers to not wait until the last minute to participate as LHDN would continue doing its job of selecting high-risk cases for audit or investigation. This means that if your case is selected and discrepancies are found, penalties will apply. He explained that this is because the element of voluntariness will no longer be present.

According to Mohd Nizom, the main goal of the programme is to give individuals and companies a chance to fulfil their tax obligations, rather than to generate more revenue. He also said that LHDN will adopt a more facilitatory role to make it easier for everyone to fulfil their tax obligations. He elaborated that they would help to see how they can make it easier for those who find it difficult, and to explain it to those who find it confusing. In the case of a dispute, they will also be allowed to negotiate to see if they can come to a mutual agreement with LHDN. If a resolution cannot be found, both parties can agree to settle disputed matters in court.

What Happened During the Previous SVDP

A penalty between 10% to 15% was also imposed for the late submission of tax returns by individuals or businesses under the previous SVDP. It ran from 3 November 2018 to 30 September 2019 and generated approximately RM7.8 billion in additional taxes for the government. Around 286,000 taxpayers including 11,000 new taxpayers came forward.

“Many came forward to take part in the previous SVDP. However, when the previous programme ended, we found that many individuals and companies that came forward were those who were already under audit or investigation by LHDN. They insisted on being part of the SVDP knowing that they would be subjected to a lower penalty of between 10% and 15% instead of between 45% and 65% if audited by LHDN,” said Mohd Nizom.

On 24 February, Prime Minister Dato’ Seri Anwar Ibrahim announced that the SVDP would be revived under Budget 2023 in line with Malaysia Madani’s policy of strengthening the nation’s fiscal and economic position.

When It Will Take Place

SVDP 2.0 will begin on 1 June 2023 and end on 31 May 2024 for both individuals and companies. At least 50,000 new taxpayers are anticipated to participate. LDHN expects to see more than RM10 billion collected in addition to the current collection from existing taxpayers. Last week, Deputy Minister of Finance II Steven Sim said that LHDN is on track to set a new record by surpassing the RM176 billion target collection for 2023.

LHDN expects to see online entrepreneurs and individuals with small businesses that have since expanded but have yet to declare their incomes to come forward for SVDP 2.0. “These individuals may have been too focused on seeing their business grow over the past three years, including during the Covid-19 recovery phase. They were either ignorant of their tax obligation or didn’t have time for it. Now that a few years have passed, they are unsure of how to settle their taxes and are worried and afraid to come forward,” said Mohn Nizom.

Details on the guidelines and workings of the SVDP 2.0 will be announced before 1 June.

Image credit: facebook.com/LHDNMP, Glenn Carstens-Peters on Unsplash