Starting form 1st September 2018, the Goods and Service Tax system in Malaysia will be abolished and replaced by the Sales and Service tax.
A newly proposed SST framework (Sales Tax Bill and Service Tax Bill) has been tabled in parliament for the first reading on 31st July 2018. According to the proposed framework, the new SST will have tougher penalties for tax dodgers, including longer jail terms and heftier fines.
Below gives you a rough idea on how the newly proposed SST differ from the old framework.
Figure 1: Previous SST vs Newly proposed SST
Previous SST framework (1972 & 1975)
First-time offender
Under the previous SST framework, which was introduced in 1972 and 1975, first-time offender who was found guilty of willfully evading tax or assisting anyone to evade tax will face a fine not exceeding RM5,000, or up to 12 months jail term, or both.
Corporate body
If the offence is committed by a corporate body, the director, manger, secretary or partners will be deemed guilty of such offences as well.
Compounding of offences
The senior officer of SST have the option of offer a compound not more than RM5,000 to person who was found evading tax rather than charging the person in court.
The tabled SST (2018)
As the penalties outlined in the proposed Sales Tax Bill and Service Tax Bill are the same, they will be discussed as one (proposed SST).
First-time offender
According to the proposed SST framework, first-time offender who was found guilty of willfully evading tax or assisting anyone to evade tax will be fined between 10 times to 20 times the amount of tax, or imprisonment for up to 5 years, or both.
Second-time offender
If a person was found guilty of evading tax or assisting anyone to evade tax the second time, the individual will face a fine between 20 times to 40 times the amount of tax, or up to 7 years jail term. or both.
Coporate Bodies
Besides, people who are responsible in managing the company’s affairs (i.e. managers, directors, secretaries or partners), if found guilty of tax evasion offenses could also face up to RM30,000 fine, or up to 2 years jail term, or both.
Undefined tax amount
In the event when the amount of tax cannot be determined, the person will face a fine between RM50,000 and RM500,000, or a jail term up to 7 years, or both.
Indirect involvement in tax evasion
The proposed penalties on tax evaders go on to those who are indirectly involved.
If a person was found guilty in providing false information related to the SST will face up to RM50,000 fine, or up to 3 years jail term, or both.
The tabled SST framework also proposed a if a person was found guilty to advice or advice in the preparation of tax returns that result in another person evading sales tax, they will be fined between RM2,000 to RM20,000, or a jail term up to 3 years, or both.
Commencement of new SST
If the new legislation is passed, the ministry will be allowed to set when the new tax system will start through publication in the Gazette.
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