2000 BUDGET ISSUE


 
OTHER TAX AND INVESTMENTS DEVELOPMENTS
 
INCOME TAX
 
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.




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