Tax Administration

Presenters: Chng Tze Ling Chua Tzyy Shan Mabel Tan Chih Chean Stefan Ngan Phei Ern CEA110010 CEA110016 CEA110046 CEA110106

QUESTION 222
(Late Payment Penalty)
Loong submitted his return on 30 April 2012 and deemed a notice of assessment for YA 2011. It is a combined assessment showing tax payable of RM2,175. The aggregate of Loong and his wife, Total income = RM48,000 Irenes total income = RM28,000. Irene refused to pay her tax. She argued that her husband should pay the tax for both of their incomes as the assessment was made on him. Loong and Irene were proceeded a divorce. Late payment penalty of 10% and 5% had been imposed. The couple comes to IRB to have the matter resolved.

Required:
Assuming you are a tax officer in the Collections Branch of IRB explain to Irene the provisions in the law with regard to her position and the amount of tax/penalty she is required to pay, if any.

Solution
In the event of joint assessment, the wifes total income will be aggregated with the husbands. The husband is the person responsible to declare the wifes particulars in his return (Form B or BE) irrespective of whether the wife elects for combined or not. The wife shall be treated as having no chargeable income for that year under s 45(3). As such, the husband will be the chargeable person and be assessed to tax.

 Referred to the case of The King v Wilbert Gordon Roy Creamer [1919] 1 KB 564.
Notice of assessment served on the husband is considered served on the wife as well. The wife however, is not conferred the right to appeal against the assessment under proviso s 103(10). Section 103(11) allows the Director General (DG) to collect tax from the wife based on the computations even though as assessment has not been made upon her in respect of the total income.

Wifes Total Income Total Tax Payable x Total Income of Husband and Wife RM 2, 175 x RM 28, 000 RM 48, 000

= RM1, 268.75

Solution

QUESTION 223
(Penalties)
On 10-1-2011, Beng received the notice of installment payment for YA 2011 issued by the IRB under s107B of the Act. The total amount of tax payable = RM1,200,000. On 1-6-2011, Beng applied to IRB to vary the total amount of tax payable to RM600,000 and the application was approved by the IRB. The final tax liability of Beng was found to be RM910,000. Beng paid its installment of RM120,000, due in July 2011 on 25-8-2011.

Required:
Compute the penalties payable by Beng under s 107B of the Act.

Solution
Penalty for variation of installment: Actual tax payable for YA 2010 (-) Total installment payment (after variation) Excess (-) 30% of margin error (30% x RM910, 000) Excess Penalty(RM37, 000 x 10%)

RM 910,000 (600,000) 310,000 (273,000) 37,000

3700

Late payment for installment: Tax payable per installment 10% penalty imposed on 25.8.2012 (RM120, 000 x 10%) The penalties payable by Beng under s 107B of the Act: Variation of installment that exceeds the 30% threshold Late payment of installment not settled within 30 days Total penalties RM 120,000 12,000

3,700 12,000 15,700

QUESTION 224
(Residence Status and Consequent for Not Paying Tax Prior to Leaving Malaysia)
Robert, an employee of Cita Sdn Bhd, arrived in Malaysia for the first time on 16 April 2010 and left Malaysia permanently on 15 March 2011. During this period he was only absent from Malaysia once for the matters connected with his service. He left on 30 December 2010 and returned on 2 January 2011.

Required:
a) State, giving reasons, the residence status of Robert for each of two YAs 2010 and 2011.

Solution
YA PERIOD OF STAY NO. OF DAYS RESIDENCE STATUS REASON

2010

16/4-30/12

259

Resident

-Section 7(a) -Robert was present in Malaysia for more than 182 days
-Section 7(b) -The shorter period of 2/1 15/3 is linked to a period of more than 182 days in 2010. -The period he is not present in Malaysia (30/12 1/1) falls under temporary absence because he was absent for matters connected to his service.

2011

2/1-15/3

73

Resident

b) State the consequences if Robert failed to settle his tax upon leaving Malaysia.

If Robert failed to settle his tax upon leaving Malaysia, he will be penalized under Sec115 as he committed the offence of Leaving Malaysia without payment of tax. Robert will be fine not less than RM200 to RM2000 or imprisonment not exceeding 6 months or both.