Malaysians have until 15 December to come forward to put their tax affairs in order under an amnesty programme.

A tax amnesty programme of the Malaysian government, designed to crack down on irregularities and bring in revenues, kicked in at the start of this month. It follows a similar scheme last year, while other Asian nations such as Indonesia also operate such projects.

Under the process, which runs until 15 December (source: Baker & McKenzie), taxpayers are asked to approach the country’s Inland Revenue board to put right prior non-compliance with Malaysian tax laws.

To encourage compliance, the IRB is willing to cut tax penalties for voluntary disclosure at specific rates and waive the tax increment over settlement of tax arrears.

The programme was launched after a budget speech on 28 January.

The latest programme’s guidelines are similar to the process of a year ago, but there are a number of changes, such as widening the scope of offers to include taxpayers who failed to submit their petroleum income tax returns and taxpayers who have failed to present chargeable instruments for stamping.

If returns are not reported in the prescribed timeline, this carries a penalty of up to 300 per cent of the amount of tax underpaid, and filing of incorrect returns carries a penalty of up to all of the amount of tax undercharged. With concessionary rates under the amnesty, voluntary disclosure – if made before an audit is carried out by the authorities - carries penalties of 15 per cent or 20 per cent, depending on timing of payment. With audit cases settled between 1 January 2016 and 15 December 2016, charges are 25 per cent or 35 per cent, depending on timing of payment.

Governments in a number of nations are carrying out amnesties and disclosure programmes, such as Indonesia and Brazil. A concern at times has been that if persons come clean about undisclosed money, their financial privacy is at risk – a key concern in nations where standards of governance and respect for confidential data are often poor. To see an item about the Indonesia programme, see here. Brazil's own amnesty has raised concerns about privacy, (see here).

The tax amnesty programme is relatively new in Malaysia; the first programme was only introduced for a short term in 2015.

WealthBriefingAsia understands that there has been some success, and sufficient support and response from taxpayers which prompted the extension of the programme in 2016. Based on feedback received by the Inland Revenue Board (“IRB”), there are taxpayers who have been successful in reaching a settlement with the IRB. Having said that, the IRB re-iterated that each case will be reviewed based on its own merits and the officer cannot comment on the frequency of the settlements.