Simplifying Tax Compliance

By Goh Shuan Thing

April 2024 FEATURE
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IT’S TAX SEASON. While many begrudgingly file their details obediently, paying taxes is more than a duty; it is a vital contribution to the nation’s development. Understanding and engaging with the tax system is crucial for every citizen; taxes ensure the smooth operation of public services and the realisation of broader societal goals.

The Tax Landscape

Malaysia’s tax system consists of direct and indirect taxes, with the Inland Revenue Board of Malaysia (IRBM), known to many as Lembaga Hasil Dalam Negeri Malaysia (LHDN), helming its administration. Citizens tout it as one of the most efficient departments in the country.

Taxpayers range from salaried individuals and freelancers to small-to-medium enterprises and large corporations, each with specific obligations and responsibilities. One of the most critical obligations is knowing when to pay taxes. Taxes for a given assessment year become due and payable on specified dates in the year following that assessment period. That means 30 April for individuals deriving non-business income and 30 June for those having a business income.

For many, tax compliance can seem daunting. As mentioned by many accounting firms, Malaysia’s tax is one of the most complex—not due to the system, but to the regular policy updates and the fine print that comes with each update.

However, with a basic understanding of documentation and filing requirements, it becomes significantly more manageable. Recent tax amendments have further refined the process, making it crucial for taxpayers to stay informed. These changes often aim to simplify filing, reduce liabilities and encourage compliance, benefiting the average taxpayer directly.

If you have never filed your taxes electronically, start doing so on the MyTax website by LHDN. Begin by clicking on the e-Daftar button to start registration. Fill out the necessary documents and head to your nearest LHDN office to get a onetime pin number. Once completed, log in to resume e-Filing.

Powerful Tools

Tax deductions and credits are powerful tools for reducing tax liability. From education and medical expenses to donations and investments, numerous opportunities exist for taxpayers to lessen their burden. Freelancers and individuals with multiple income sources should pay particular attention to these options, as they can significantly impact the final tax payable. Awareness and strategic planning can lead to substantial savings.

For business owners, the move towards e-Invoice marks a significant milestone in Malaysia’s digital transformation journey. This system streamlines tax filing, enhances accuracy and curbs fraud, benefiting both the government and taxpayers. The transition to e-Invoice will simplify record-keeping, reduce errors and promote a more transparent tax environment. Taxpayers can look forward to a more efficient filing process, with less paperwork and quicker processing times.

The SVDP 2.0 Initiative

The IRBM has also launched the Special Voluntary Disclosure Programme (SVDP) 2.0, as announced in the 2023 Budget, for taxpayers to rectify past oversights and enter the era of digital compliance with 0% penalties (ending 3 May 2024). Designed for taxpayers who wish to voluntarily disclose undeclared or under-declared income, asset disposal subject to Real Property Gains Tax and unreported additional income, it offers a reduced penalty rate for disclosures made within the programme period, extending from 6 June 2023 to 31 May 2024.

By participating in SVDP 2.0, taxpayers can correct past mistakes to ensure up-to-date tax reporting before the full implementation of e-Invoicing, thereby avoiding the heightened scrutiny and penalties associated with the digital tax system.

The shift towards digital tools, including e-Filing and e-Invoice, aligns Malaysia with global trends in tax administration. These changes herald a future where tax compliance is straightforward, less time-consuming and secure. As we move forward, the public needs to understand and engage with these digital tools in order to be well-prepared.

However, if you ever feel overwhelmed doing your taxes, do engage with online resources and workshops on tax compliance. Consider discussions with tax professionals to gain a deeper understanding of new systems like the e-Invoice.

Goh Shuan Thing

enjoys helping businesses be heard and stay relevant through creative content strategy. You will occasionally find her lost in alternate realities of her favourite books.