The Star – Wednesday, 13 Feb 2019
PETALING JAYA: The government stands to collect an additional few billion ringgit from individuals and companies with overseas bank accounts under the Special Voluntary Disclosure Programme (VDP), according to Tax Advisory and Management Services Sdn Bhd chief executive officer Yong Poh Chye.
The majority of individuals and companies own overseas bank accounts because of property purchases and investments.
According to Yong, it is impossible for tax evasion as Malaysia is a participant of several international tax agreements to identify errant individuals and firms.
“You cannot run if you have been under declaring or evading taxes. Malaysia is part of the OECD multilateral convention (MLI), as well as the Common Reporting Standard (CRS), which makes it very difficult for people to hide with under declared income.
The Inland Revenue Board (IRB) introduced the VDP to enable taxpayers to make voluntary disclosures of income generated from sources within Malaysia and kept in overseas bank accounts which have yet to be declared for Malaysian tax purposes.
It has reduced the penalty for this to 10% if the income is reported by or before March 31, and 15% if done before or by June 30.
Come July 1, the penalty will be between 80% and 300%.
Malaysia has signed the MLI to implement tax treaty-related measures to prevent base erosion and profit shifting (BEPS) last January.
The MLI, covering 87 jurisdictions, came into force on July 1, 2018. Its aim is to implement a series of tax treaty measures to update international tax rules and reduce the opportunity for tax avoidance by multinational enterprises and Malaysian companies.
The IRB has issued a new version of its mutual agreement procedure guidelines on Dec 19, 2017, which aligns with the BEPS.
Malaysia has submitted a list of agreements with 73 countries that it designates as covered tax agreements to be amended through the MLI.
The other agreement which Malaysia has signed is the CRS, which has 122 countries participating.
The IRB will be informed if a Malaysian opens a bank account in any of the 122 countries.
The first reporting date of the CRS information to the IRB was on July 31, 2018.
The IRB has been receiving financial information, particularly regarding ownership of overseas bank accounts since September last year.
Yong pointed out that tax evaders could be using overseas bank accounts to avoid paying taxes.
“If Malaysian buyers pay a downpayment for a property purchased overseas from money that comes from dividends or capital gains that can be accounted for, then it is fine.
“However, if the money comes from a Malaysian company in relation to under declared or non-declaration of income and excessive expenditure, then it could be subject to taxation.
“The other issue is when a Malaysian rents out his or her overseas property and receives a rental income.
“If there is a shortfall between the rental income and the monthly bank instalment, the taxman would like to know if the additional money for the payment of the loan has been declared and accounted for,” he said.
Yong added that it is significant that the country has signed the MLI agreement as it is committed to tackling harmful tax practices and cross-border tax disputes.
Ultimately, this would make the Malaysian economy more transparent and attractive to investors, Yong said.