COVID-19 & MCO: 10 Key Tax Questions Answered
March 30, 2020
In light of the Movement Control Order (MCO), the Inland Revenue Board (IRB) and the Royal Malaysian Customs (RMC) have made various announcements in respect of managing our tax affairs.
This is timely as March is when individual taxpayers with business source income finalise their CP 500 instalment plan and make their first instalment payment. Meanwhile, individual taxpayers with non-business income ordinarily file their tax returns by end April or by mid-May for online submission.
This alert summarises the tax measures contained in the recent Economic Stimulus Packages and the administrative concessions announced by the IRB and RMC.
1. Are the IRB and RMC offices open during the MCO?
All IRB offices are closed during the MCO period. However, queries regarding taxation can be posted online to the IRB at the IRB’s Customer Feedback Website.
Taxpayers may use the online facility to apply for income tax reference number including e-Filing PIN number or if they forgot their e-Filing password. Additionally, taxpayers may also call the IRB’s Hasil Care Line which has been re-activated on 30.3.2020. The number is 03-8911 1000 for local calls and +603-8911 1100 for callers from abroad.
The RMC has been classified as providing essential services and as such, their operations at the ports, airports and borders operate as usual albeit with minimum personnel. Although the RMC offices are open for their operations, all scheduled meetings including round table discussions with taxpayers at the RMC offices are cancelled.
Taxpayers have been requested to use the RMC’s online facility for communication purposes including to arrange for online meetings. The contact details are available here.
2. What is the extended filing period for tax returns?
The filing of all income tax return forms that falls between March and June 2020 is extended by 2 months. Thus, an individual with employment income is given until 30.6.2020 to file his income tax return as opposed to filing the same on 30.4.2020. Meanwhile, an individual with business source income is given until 31.8.2020 to file his tax income return as opposed to 30.6.2020. The same 2-month extension is also given to companies whose income tax return filing is due between March and June 2020.
Additionally, the filing date of the following tax forms is extended to 30.4.2020:
Various employer notifications such as Form CP21, Form CP22 and Form CP22A
Form CP38 for monthly tax deduction for March 2020
Form CP58 for commission paid to agent, dealer and distributor
Form CP204A for revision of tax estimate for companies
Form LE 3 for irrevocable election to be taxed under the Income Tax Act 1967 for Labuan entities
The filing of all customs returns and forms including sales tax and service tax returns which are due on 31.3.2020 has been extended to 30.4.2020.
3. Is the timeline for tax payments extended as well?
As the filing of income tax returns are extended by 2 months, it follows that tax payments will also be extended as payment only needs to be made within 30 days upon filing of the returns.
Meanwhile, extension is given for the following payments until 30.4.2020:
Tax estimate instalment due from 18.3.2020 to 14.4.2020 pursuant to Form CP204 (for companies), Form CP204A (revised tax estimate for companies) and Form 500 (for individuals with business income)
Monthly tax deduction payment for March 2020
Payment of tax by Labuan entities
There will be no late tax payment increase for payments made within the extended time.
All payments due to the RMC on 30.3.2020 are extended to 30.4.2020 and penalty remission will be given for payments during this period.
Both the IRB and RMC are encouraging payments through online mode.
4. Regarding withholding tax payments, what is the arrangement?
Withholding tax payment due between 18.3.2020 and 31.3.2020 can be made from 15.4.2020 to 30.4.2020. There will be no penalty for the late payment if it is paid during the extended time.
The IRB has yet to announce if a similar extension will be given to withholding tax payments due between 1.4.2020 and 14.4.2020.
5. What would be the status of tax audits and investigations during the MCO?
The IRB has granted an extension until 30.4.2020 for taxpayers to submit documents and respond to IRB’s queries in relation to tax audits and investigations.
The RMC has yet to make any announcement on this but in light of the MCO and the cancellation of meetings at RMC’s offices, it is likely that taxpayers will be granted an extension to respond to Customs audits and investigations.
6. What are the tax relief provided in the stimulus packages?
• Tax Deduction
The Finance Minister has announced that all contributions of cash and items to the Covid-19 Funds set up by the Ministry of Health and the National Disaster Management will enjoy tax deduction. Additionally, the IRB has said contributions to any approved organisation or institutions under Section 44(6) of the Income Tax Act 1967 will also enjoy a deduction.
The IRB has further stated that taxpayers donating items including equipment must obtain a receipt with an official stamp from the recipient according to the format to be issued by the Ministry of Finance (MOF) or other documents such as original approval letter by the MOF, official receipt or letter of acceptance from the recipient and letter of acknowledgment of service value or project cost value from the relevant Government agencies.
Meanwhile, for cash donations, taxpayers should retain the official government receipts and various types of transfer slip such as cash transfer slip, cheque deposit machine slip and online payment slip. The IRB will also accept Real Time Electronic Transfer Funds and Securities System (RENTAS) receipt and telegraphic (TT) receipt advice. Cash donations to Section 44(6) approved organisations or institutions must be supported by official receipts.
The IRB has also reminded taxpayers to undertake the necessary checks before making any donation to avoid being scammed.
• Tourism Sector
Taxpayers in the tourism sector are allowed to revise and defer their monthly tax instalment due between 1.4.2020 and 30.9.2020. There will be no penalty for the tax estimate revision. The IRB has since clarified that tourism sector for this purpose refers to companies operating tour agencies, hotels and airlines.
Service tax exemption is granted for hotels from 1.3.2020 to 31.8.2020. However, the RMC has reminded hotels to continue issuing invoice stating that service tax as “0%” or “tax exempted”. The total value of exempted services must be stated in item 18 (c) of SST-02 form. Hotels must continue to account and make payment for imported taxable services using SST-02 form.
RMC has also clarified that tourism tax is not exempted and shall be charged as usual.
• Import Duty & Sales Tax
The Finance Minister has granted import duty and sales tax exemption on the following items effective from 23.3.2020 until a date to be announced later:
(a) Face mask (b) Medical equipment such as infrared thermometer and thermal scanner (c) Laboratory equipment such as Inverted Microscope Automated Extractor Machine (d) Personal Protective Equipment (PPE) such as face and eye protection, gloves and protective garments for surgical/medical use (e) Disposal items such as paper bed sheets, respiratory tubing and plastic test tube
7. How about the filing of appeals to the Special Commissioners of Income Tax (SCIT) and Customs Appeal Tribunal (CAT)?
The IRB has assured taxpayers that submission of notices of appeal to the SCIT (i.e. Form Q) due between 18.3.2020 and 31.3.2020 are automatically extended to 30.4.2020. Taxpayers are not required to submit the application for extension of time (i.e. Form N).
The CAT has informed that it is not able to accept and register new appeals during the MCO as it does not have online payment facility. However, the CAT has given assurance that appeals due for filing between 18.3.2020 and 31.3.2020 will be considered for an extension of time to lodge an appeal.
Both the IRB and CAT have yet to announce if similar extension will be considered for appeals which are due for filing between 1.4.2020 and 30.4.2020.
8. What happens to the tax appeals before the courts?
All tax matters including tax appeals fixed before the SCIT between 1 April and 15 April are adjourned. The SCIT will fix new dates and advise the parties concerned the soonest. Similarly, all customs appeals before the CAT are also adjourned.
Tax appeals before the courts including judicial review proceedings are also adjourned during the MCO. Case managements are still taking place online by way of e-review where parties including the court official need not be physically present in court.
9. What is the position in respect of stamping of documents and payment of stamp duty?
Stamping of documents is made via the Stamp Assessment And Payments Systems (STAMPS), a system which allows online application and payment for stamp duty. STAMPS can be used by legal firms, companies, partnerships and businesses registered with the Companies Commission of Malaysia.
For taxpayers who have used STAMPS, they may print the stamp certificate after the payment is successful and attach the certificate to the physical document. Businesses may verify the stamp certificate by downloading the “Semakan Ketulenan Sijil” smartphone application or online.
Individuals without a registered business will have to stamp their documents manually at the IRB’s Stamp Offices nationwide. Extension of time is given until 30.4.2020 for documents which should have been stamped between 18.3.2020 to 31.3.2020. No late penalty will be imposed if the payment is made within the prescribed time.
10. Are similar extensions granted to real property gains tax (RPGT) matters?
The filing of RPGT returns due between 18.3.2020 to 30.4.2020 is extended to 30.4.2020. Likewise, RPGT payments pursuant to a notice of assessment or RPGT retention sum by the acquirer due this period is also extended to 30.4.2020.