Tax Update: Public Ruling No. 4/2022 (Recovery from persons leaving Malaysia)

The Inland Revenue Board of Malaysia (IRBM) recently issued Public Ruling No. 4/2022 (dated 20 October 2022) to replace Public Ruling No. 12/2015 (dated 17 December 2015).

Under section 104 of the ITA, if the Director General (DG) is of the opinion that a taxpayer is about to leave Malaysia without paying:

1. All sums payable by DG in relation to:

a. Increase in tax charged for overdue payment of tax [subsection 103(3), (5) or (7) if the ITA] or

b. Increase in tax charge for late payment of tax by instalments [subsection 107(3) or subsection 107C(9) of the ITA]

c. When the amount of the difference between the tax payable under an assessment for that assessment year and the total of the installments payable exceeds 30% [subsection 107B(4) of the ITA], the tax is increased.

d. If the amount of the difference between the tax payable under an assessment for the year of assessment and the revised estimate or deemed revised estimate, whichever occurs later, or if neither a revised estimate nor a deemed revised estimate is provided, an increase in tax will be assessed [section 107C(10) of the ITA].

e. An increase in tax imposed on tax payable if:

i. The DGIR does not provide an estimate nor does it provide a Notice of Installment Payments (CP 205) to make payments in instalments pursuant to Section 107C(8) of the ITA.

ii. No legal action has been taken under ITA’s 120(1)(f) against anyone for failing to provide such an estimate.

iii. The corporation, LLP, trust body, or cooperative organization is required to pay tax in accordance with an assessment for the assessment year.

2. All debts payable by him on withholding tax from:

a. Contract payment [subsection 107A (2) of the ITA]

b. Interest and royalties [subsection 109(2) of the ITA]

c. Special classes of income [subsection 109B (2) of the ITA]

d. Miscellaneous income [subsection 109F (2) of the ITA]

Derived from Malaysia and payable to a non-resident person.

The Director General (DG) may issue a certificate to a Commissioner of Police or a Director of Immigration requesting that the taxpayer not be allowed to leave Malaysia until all taxes, sums, and debts due have been paid in full or until he has provided security that satisfies the DG for the payment.

3. Details on the tax, amounts, and debts that are due are included in the certificate that triggers the halts order. Upon receiving such a certificate, a commissioner of Police or a Director of Immigration is required to take action to stop the taxpayer from leaving Malaysia, including the use of reasonable force and the seizure, removal, or retention of any identity certificates, passports, exit permits, or travel documents pertaining to the taxpayer in order to carry out the DG’s request.

4. For the purposes of section 103 of the ITA, the DG does not have to prove that a taxpayer intends to leave the country permanently.

5. From 1 January 2021, the DG can submit a taxpayer travel restriction certificate to the Malaysian Immigration Department by using electronic medium under the provisions of subsections 104 (1A) of the ITA.

2. Allowing taxpayer to Leave the Country

If all taxes or obligations shown on the certificate have been fully paid, the taxpayer will be permitted to leave the country. To demonstrate that the payment has been made, you must present supporting documentation or a receipt. The payment receipt must be given to the IRBM branch office that manages his income tax file in order to request an instant cancellation. After the check has been approved by the bank for paying by cheques, the taxpayer is free to leave the country. The taxpayer will subsequently receive a letter of revocation.

A taxpayer who cannot settle fully his tax liability and debts will be allowed to leave the country with certain conditions.

The conditions are as follows:

a. Paying at least 50% (or a rate decided by the DG) of the claim’s total value as stated in the certificate issued in accordance with section 104 of the ITA.

b. To enable the issuance of a letter for temporary release to the taxpayer, payment must be provided in cash or by bank draught. To demonstrate that payment has been made, you must present supporting documentation or a receipt.

c. Payment by installments for the balance of tax and debts must be arranged for resolving the outstanding amount.

d. Taxpayer application for future temporary releases from Malaysia will not be approved of they do not adhere to the payment schedule.

3. What happens if the person tries to leave or intending to leave Malaysia without payment of tax and debts?

The tax payer who intends to leave Malaysia voluntary or attempts to leave Malaysia without making payments for all tax, sums and debts so payable mentioned in the certificate, if convicted, they will be liable to:

i. A fine of not less than two hundred ringgit (RM 200) and not more than twenty thousand ringgit (RM 20,000) or

ii. Imprisonment for a period not exceeding six (6) months or;

iii. Both

4. Responsibility of Taxpayer

i. A taxpayer is responsible for updating their information to the IRBM branch office that handles their income tax file. Issuance of the certificate by the DG is deemed to have been served on the taxpayer according to the latest address known to the DG.

ii. Taxpayers are advised to check and settle their arrears of tax and debts before planning to go aboard.

iii. Taxpayers can check on the status of the imposition of stoppage order on their official website of IDM at www.imi.gov.my. Foreign nationals are advised to contact the IRBM branch office regarding their status.

5. Payment Method

The following methods can be used to settle unpaid taxes and debts:

i. MyTaxPortal at https://mytax.hasil.gov.my via ‘ezHasil Services’> ‘ByrHASiL.’

ii. A commercial bank’s online banking platform designated as the HASiL collecting agent;

iii. Commercial banks that were appointed as HASiL POS Malaysia counters agents for collections

iv. A bank cash deposit device designated as a HASiL collection agent.

v. The ATM in the bank, which was designated as the HASiL agent for collection.

The new PR details the circumstances and steps for collecting tax and debts owed from taxpayers who will be departing Malaysia, much like the prior PR did. According to Section 104 of the ITA, the Director General (DG) may issue a certificate to the Commissioner of Police or Director of Immigration asking that a person be barred from leaving Malaysia until he or she has paid all outstanding taxes for which he or she is responsible (including taxes owed by companies, for which the person is jointly and severally liable as the Director of the company – note that this applies only in specific situation).