1. Self-Assessment for Companies
In view of the impending change to the self-assessment
system with companies taking the lead in year 2001, the Income Tax (Amendment)(No.2)
Bill 1999 was tabled in Parliament in October, 1999. This Bill contains proposed
amendments specific to self-assessment by companies.
2. Payment of Tax by Instalment for Companies [New Section 107C]
Furnish Estimate of Tax Payable
Currently, a Notice of Instalment Payment (CP 38 SA) requiring compulsory payment
of tax by instalments is issued by the DG to companies based on their tax payable
for the previous year.
With the change from preceding year to current year basis of assessment in year 2000,
it is proposed that every company shall for each year of assessment furnish to the
DG an estimate of its tax payable. The estimate of tax payable shall be made in the
relevant prescribed form and furnished to the DG not later than 30 days before the
beginning of the basis period for a year of assessment.
Example:
| Company's financial year |
1st January, 2001 to 31st December, 2001 |
| Furnish to DG estimate of its tax payable
by |
1st December, 2000 |
However, in the case of a company that first commences operations
in a particular year of assessment, the estimate of tax payable shall be furnished
within 3 months from the date of commencement of operations and the provisions regarding
furnishing an estimate of tax payable meeting the requirement below at least 30 days
before the beginning of its basis period shall apply from its second year of assessment.
Quantum of Estimated Tax Payable
Currently, the estimate of income tax payable is based on the tax payable for
the preceding year i.e. estimate for year of assessment 1999 is based on the tax
payable for year of assessment 1998. It is proposed that with effect from year of
assessment 2002, the tax payable for a year of assessment shall not be less than
the revised estimate or where no revision is made, the estimate of tax payable for
the preceding year of assessment.
There is also a provision unique to year of assessment 2001, that the estimate of
tax payable shall not be less than the amount of tax payable for year of assessment
1999.
Payment by Instalment
It is proposed that the estimated tax payable for a year of assessment be paid
in equal monthly instalments depending on the number of months in the basis period,
by the tenth day of a calendar month beginning from the second month of the basis
period.
Example:
| A company's financial year end |
31st December, 2001 |
| Payment of its first instalment is by |
10th February, 2001 |
In the case of a "new" company which commences operations
in the particular year of assessment, payment shall be made in equal monthly instalments
(determined by reference to the number of months in the basis period) and each instalment
shall be paid by the 10th day of a calendar month beginning from the sixth month
of the basis period.
Revised Estimate of Tax Payable
A revised estimate of tax payable may be made in the sixth month of the basis
period for a year of assessment using a prescribed form.
In the case where the revised estimate exceeds the amount of instalments that have
been paid for that year, the excess is to be settled in the remaining instalments
in equal proportion. No further instalments need to be made in the case where the
revised estimate is less than the amount of instalments that have been paid.
DG's Power to Direct
Notwithstanding the above provisions, except in the case of a "new"
company's estimate of tax payable, the DG may direct any company to make payment
by instalments on account of tax which is or may be payable by that company at such
times and in such amounts as he may direct.
Penalties
Where an instalment due and payable has not been paid by the due date or the date
specified by the DG, a 10% penalty will automatically apply without any need of service
of a notice.
Presently, where a variation of the amount payable under a notice (CP 38 SA) has
been made and the tax assessed exceeds the total instalments payable, the difference
which exceeds 30% of the tax payable under the assessment attracts a penalty of 10%.
No penalty is imposed on the difference between the tax payable under the notice
of assessment and the notice (CP 38 SA) in the absence of any variation thereto.
It is proposed that the above 30% tolerance margin be maintained. Where the tax payable
under an assessment exceeds the estimate or revised estimate of tax payable as the
case may be, by an amount greater than 30% of the tax payable under the assessment,
then without any further notice being served, the excess over the tolerance level
will be liable to the 10% penalty. An illustration of the penalty payable on under-estimation
of tax payable is shown below:-
| |
RM |
| Tax payable under an assessment |
600,000 |
| Estimate or revised estimate of tax |
|
| payable furnished to the Inland Revenue |
400,000 |
| |
---------------- |
| Difference |
200,000 |
| 30% of RM600,000 |
180,000 |
| |
---------------- |
| Excess |
20,000 |
| |
========== |
| Penalty of 10% on excess |
2,000 |
The DG may in his discretion for any good cause shown, remit
wholly or partially the above penalties.
Unless otherwise indicated, the above proposals are to have effect from year of assessment
2001. |
