Penalty on Late Filing of Tax Returns

In the past, the IRB had imposed penalties ranging from RM200 to RM2,000 for late submission of tax returns, similar to the fines as stipulated in Section 112(1) of the Income Tax Act 1967 (ITA), based on the number of offences committed. The Institute would like to alert members that with effect from 1 June 2011, the IRB has deviated from the current practice and imposed penalties based on the length of delay that the return is submitted. From the information gathered through our members, the minimum penalty rate is 20% of the tax payable, before any set-off, repayment or relief. This power to impose the penalty is given under Section 112(3) of the ITA to the IRB who may impose a penalty “equal to treble the amount of the tax payable.”

The Institute has yet to receive any official notification on the new rates of penalties. However, members are warned to look into their backlog cases and advise their clients on the potential financial impact so that the clients are well-informed. The Institute is liaising with the authorities on the issue and will keep members informed of the developments.