What Tax Arrears Mean for Businesses

It is imperative that we pay any tax arrears owed to the Inland Revenue Board of Malaysia (IRBM). What are tax arrears? The amount of tax the taxpayer has yet to pay as of the stipulated period is known as tax arrears.

The law mandates that individuals pay their annual taxes by 30th April every year if they earn an employment income instead of a business income. When it comes to those who own their businesses, they must disclose all of their annual tax payments by 30th June every year.

Companies must pay any tax amounts due within seven months of the end of the accounting period.

Why you should pay tax arrears on time

There are implications if individuals fail to pay their tax arrears within the allotted time frame or forget to make the payment intentionally or accidentally. Tax arrears will increase over time as unpaid tax increases, leading to higher taxes.

Travel restrictions abroad will also apply if their tax debt is not resolved. Therefore, the Malaysian Immigration Department may prevent anyone from leaving the country if they haven't paid their tax arrears.

In addition, taxpayers may face legal action if they don't pay past due tax debts. This might entail the seizure and auction of personal property; in some circumstances, bankruptcy or liquidation proceedings may be initiated. According to the court order, the taxpayers will also be held liable for the court fees and interest.

How to improve your knowledge and understanding of taxes

Understanding Malaysian income tax laws is the best method to protect your interests and position. Taxpayers should visit the official IRBM site at www.hasil.gov.my. Another helpful tool is EduZone, a tax education portal that provides users with tax-related materials, articles, and videos.

For more information, taxpayers can visit the IRBM's official social media sites and the websites of certified taxation companies that focus on taxation. Avoid obtaining information from unauthorised social media accounts and channels, as the information may have come from unreliable sources. Additionally, taxpayers need to be on the lookout for calls and scams that demand payment of taxes. Before conducting any transaction, always get in touch with IRBM to acquire confirmation.

Taxpayers can also track their current tax position with the IRBM MyTax App. The one-stop centre enables taxpayers to file taxes, access the most recent tax information from IRBM, and review their tax status and outstanding balances.

Through MyTax, the statement of tax position can also be retrieved through the e-Lejar application. As an alternative, taxpayers can contact the collection department of the branch managing their file or dial the Hasil Care Line to inquire about their payment history and tax status.

Offences and penalties

For non-businesses, if you pay your taxes after 30th April, the penalty is a 10% increment from the tax payable.

As for businesses, if you pay your taxes after 30th June, there will also be a penalty of 10% increment from the tax payable. 

Both of these penalties are based on the provisions under Income Tax Act 1967, specifically Section 103(3).

Under the payment of estimated income tax for business income, there are two types of offences:

• Paying instalments after 30 days of the date will result in 10% on the instalment due.

• If the actual tax is 30% higher than the revised tax estimate, the penalty will be 10% of the difference in actual tax balances and estimated tax made. 

Ask for support and guidance

The IRBM has established several avenues for the public to receive information and share feedback since it is aware of taxpayers' difficulties regarding tax-related issues. 

The Hasil Care Line, the customer feedback form, the Hasil Live Chat, the IRBM's official webpage at www.hasil.gov.my, and the IRBM's official Facebook, Twitter, and Instagram pages are all ways to get in touch with the IRBM.

Taxpayers can talk to the IRBM about making instalments if they cannot fully pay their overdue tax amount. Prior approval is required for the IRBM instalment payment method, and taxpayers must submit supporting paperwork, including: 

• Monthly cash flow records, 

• The most recent months' bank statements, 

• A list of monthly commitments, and 

• The number of proposed instalments. 

Taxpayers may also appeal the tax increase imposed, and IRBM will assess the appeal according to the merits of every case.

According to the information presented here, taxpayers can minimise their tax arrears by obtaining the relevant information and keeping in touch with the IRBM. Keep expense receipts for the year 2022 for tax relief, and make sure that any tax arrears are paid no later than 30th December 2022.

Check out the official IRBM website at www.hasil.gov.my to learn more.

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