FEBRUARY 19 — As the closing date for Malaysia’s Special Voluntary Disclosure Program 2.0 (SVDP 2.0) draws near on May 31, 2024, taxpayers are urged to take this opportunity seriously to avoid potential audits from the Inland Revenue Board Malaysia (IRBM).

The IRBM has a powerful data system that taps into various sources, including the Companies Commission of Malaysia (SSM), the Royal Malaysian Customs Department (RMCD), immigration records, and even social media platforms. With the implementation of the Automatic Exchange of Financial Account (AEOI), foreign assets and bank account information can now be accessed by the IRBM, leaving no room to hide for those who think their money abroad is beyond reach.

In a bid to fortify tax compliance, the IRBM is intensifying efforts by monitoring offshore accounts. Leveraging information received from tax authorities worldwide, the IRBM aims to verify whether individuals with offshore accounts are fulfilling their tax obligations, particularly when the funds originate from activities within Malaysia. Rigorous checks will be conducted, and cases hinting at potential tax non-compliance will be promptly handed over to the audit and investigation team.

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Failure to match reported income with taxes paid can trigger audits or investigations. A regular tax audit process, taking a minimum of six months, allows IRBM full access to documents and records under Section 80 of the Income Tax Act 1967 and this will cost both time and money for businesses.

Understanding SVDP 2.0:

The program encourages the voluntary disclosure of undisclosed income and tax-related discrepancies under specific sections of the Income Tax Act 1967, Real Property Gains Tax Act 1976, and Stamp Act 1949.

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a. Categories of taxpayers:

Open to all, SVDP 2.0 covers both new and existing taxpayers, including those with unreported income, asset disposal, and duty payers who failed to stamp documents before May 1, 2023.

b. Review process:

A review will be carried out to ensure the accuracy of the tax computations (mathematical/ calculation error) based on the voluntary disclosure submitted.

c. Period of Completion:

Non-Transfer Pricing Issues – SVDP 2.0 applications will be processed within a period of 14 working days from the date of receipt of the completed applications.

Transfer Pricing Issues - SVDP 2.0 applications will be processed within a period of 30 working days from the date of receipt of the completed applications.

d. Payment options and conditions:

Taxpayers can opt for full settlement within 30 days or choose instalment payments until May 31, 2024, with specific conditions.

e. Inclusions of SVDP 2.0: Tax scenarios covered:

Covers various voluntary disclosures, including under-declared income, over claimed expenses, transfer pricing issues, correction of over claimed relief, deductions or rebates, and adjustments for capital allowances or incentives.

f. Exclusions of SVDP 2.0: Tax scenarios not covered:

Excludes cases where tax audits have commenced, involve non-taxable reduced assessments, tax repayment (except TP cases), or if investigation or prosecution proceedings have started. Also excludes taxpayers with recorded tax transactions and tax rate amendments not part of reportable claims.

g. Outcome of voluntary disclosures:

Audit/investigation action will not be carried out in the future for the year of assessment in which the voluntary disclosure is made. However, audit/investigation can be taken for the year of assessment involved for the following circumstances:

· If a voluntary disclosure is made on non-transfer pricing issues only and there is a risk on transfer pricing issues.

· If a voluntary disclosure is made on the transfer pricing issues only, audit and

· investigation can be taken on other issues other than transfer pricing.

Tax payment on the voluntary disclosure has failed to be made within the stipulated time period.

Why participate in SVDP 2.0?

SVDP 2.0 is a proactive approach for taxpayers to identify and address tax and transfer pricing risks. By participating, taxpayers can avoid penalties and surcharges that may arise during a standard audit. SVDP 2.0 operates on good faith submissions and conducts mathematical or calculation error checks, to eliminate the initiation of a traditional tax audit.

Approaching deadline — take action now:

In conclusion, SVDP 2.0 presents a mutually beneficial scenario. Taxpayers can regularise financial affairs, reduce penalties, and avoid legal consequences, while the IRBM benefits from improved tax compliance and increased revenue.Notably, IRBM has received 64,748 SVDP 2.0 cases with dues totalling RM573 million as of January 31.

As the May 31, 2024 deadline approaches, individuals and businesses are strongly encouraged to participate in SVDP 2.0, ensuring a smoother process and contributing to the betterment of the overall tax landscape in Malaysia.

*This is the personal opinion of the writer or publication and does not necessarily represent the views of Malay Mail.