SMEs are urged to take the opportunity to correct any past indirect tax non-compliance under the Special Voluntary Disclosure & Amnesty Programme (VA Programme) implemented by the Royal Malaysian Customs Department (RMCD) to benefit from the full or partial remissions of tax/ duty/ levy/ penalty/ surcharge offered by the department.
Further to the announcement made by the Minister of Finance (MOF) in Budget 2022, RMCD has released the guidelines on the implementation of the VA Programme for indirect taxes effective 1 January 2022.
PKF Malaysia director Fan Kah Seong said the programme is an unprecedented initiative by the MOF and RMCD as this is the first time the RMCD has introduced an amnesty and voluntary disclosure at the same time for eligible taxpayers.
“We have experienced the Special Voluntary Disclosure Programme (SVDP) that was announced in 2019 for direct tax and it was a success for the IRB as it has collected additional tax revenue of more than RM7.9 billion for the SVDP in 2019. This has helped to push the government’s total tax collection in 2019 to RM145.11 billion which is 5.89 percent higher than the total tax collection in 2018,” Fan said in a PKF bulletin entitled ‘Special Voluntary Disclosure and Amnesty (VA) Programme for Indirect Taxes: What can businesses do and how do we go about preparing for it?’
RMCD introduced the VA Programme to encourage taxpayers to voluntarily declare any indirect taxes, duties, or levies that have been underpaid or erroneously reported, as well as to voluntarily settle any outstanding debts without dispute with the RMCD. It is available for a period of nine months, from 1 January to 30 September 2022. It covers the following indirect taxes relating to any duty/ tax/ levy/ penalty/ surcharge liabilities outstanding on or before 31 October 2021:
Sales Tax and Service Tax (SST); Goods and Services Tax (GST); Import and Export Duties; Excise Duty; Tourism Tax; and Departure Levy.
The VA Programme is divided into two categories:
- Voluntary Disclosure – for errors that are unknown by the RMCD; and
- Amnesty – for offences that have been identified by the RMCD and a Bill of Demand (BOD) is issued.
Taxpayers now can make things right on their indirect taxes compliance without incurring any penalties. As such, Fan said they should now undertake a general review of their indirect taxes or do a more targeted assessment on specific areas of concern such as customs duty, sales tax, and/or service tax where these mistakes are likely:
- Incorrect use of tax exemption
- Under declaration of sales tax
- Late registration of sales tax
- Incorrect valuation for the sales value of goods
- Non-charging of service tax for the provision of taxable services
- Under declaration of service tax
- Failure to account for imported service tax
- Incorrect application of group relief – not fulfilling the conditions
- Treated a taxable service as a non-taxable service
- Under declaration of output tax
- Discrepancies in input tax apportionment
- Incorrect returns submitted
- Input tax wrongly claimed on invalid tax invoices
Benefits and phases of implementation
The VA Programme will be implemented in two phases, where both phases offer different tiers of benefits as below:
|Phase One||Phase 2|
|Period||1 January – 30 June 2022||1 July – 31 Sept 2022|
|Remission of penalty||100% or 90%||50% or 80%|
|Remission of tax||10%, 20% or 30%||5%, 10% or 15%|
|Payment of tax||Full payment of tax must be made within the above stipulated periods of the respective phases in order to enjoy the above tiered benefits|
With respect to audit matters, Fan explained that the RMCD has indicated that an application made under the VA Programme will be accepted in good faith whereby no audit will be conducted for the activities and periods involved in the application, provided that an applicant submitted a complete disclosure of the amount of duty/ tax/ levy that is liable.
However, should any elements of fraud be identified, the benefits offered under the VA Programme will be cancelled.
Eligible applicants to participate in the VA Programme are:
|Type of Applicant||Scenario||Phase 1||Phase 2|
|Registered person (Company/Individual)||Incorrectly submitted NIL return
Did not submit a return
Under declared & underpaid tax / levy
|Person liable to be registered||Late registration / non-registration|
|Person not liable to be registered||Erroneously imposed and charged tax but did not pay the tax collected to the RMCD|
|Person who imports services||Failure to account for and declare the GST and/or Service Tax on the imported taxable service acquired|
|Person who is an importer/exporter of good||– Under declaration and underpayment of tax/duty to the RMCD for importation/ exportation
– Incorrect declaration of HS tariff code on goods
|Person who has been granted an indirect tax exemption/facility||– Did not fulfill all the prescribed conditions which lead to the under-declaration and underpayment of tax/ duty to the RMCD
– Utilised the wrong exemption
|Person issued with BOD on or before 31 October 2021||– For matters relating to the period on or before 31 October 2021|
|Person with Approved Permit (AP) license||– Post importation voluntary disclosure for vehicles, which has been assessed|
|– Imported CBU vehicles which have been stored in the warehouse for more than 48 months||20%||10%|
|Vehicle manufacturers subject to Excise Duty||– Vehicles manufactured have exceeded 48 months and Excise Duty has not been paid|
|Person liable to be registered||– Failed to register and has not collected tax/ duty/ levy from customers||30%||15%|
Fan said: “Will the VA for indirect tax achieve similar success in 2022? Will taxpayers be willing to take part in this VA given the hue and cry and misgivings that some taxpayers have suffered after their SVDP declaration in “good faith” to the IRB? Will the businesses be facing a similar fate after the VA?
“There are no simple answers to the above questions but we feel that if businesses are doing the VA earnestly and truthfully and declare a complete and full disclosure of the affected transactions for the relevant periods that comprised some omission or under-declared indirect taxes that should be due to the RMCD, we should take this opportunity to come clean and be given the entitled remission on penalty and discount on the tax due to the RMCD accordingly.”
Further details on the VA Programme are available on the MySST portal website at www.mysst.customs.gov.my.