Only income derived from M'sia is taxable - Johari

The tax collection system in Malaysia is based on the simple premise that if an individual or company derives income from Malaysia, that income received will be subjected to Malaysian income tax, Second Finance Minister Johari Abdul Ghani said.

Meanwhile, income derived from outside Malaysia and remitted to Malaysia would be exempted from tax, he noted, adding that this applied to all individuals or companies without exception.

“It is important for the Inland Revenue Board (IRB) to determine whether the income is derived from Malaysia before income of an individual or a company is subject to Malaysian tax,” Johari said in a statement today.

The statement was to further clarify his reply to Segambut MP Lim Lip Eng and Batu MP Tian Chua, who recently asked about the tax files of Reza Aziz and Jho Low and why they were not paying tax in Malaysia.

“The initial finding of the IRB has shown that the two individuals, who were the subject of enquiries by the opposition MPs in Parliament, do not have income derived from Malaysia in the past recent years and there are no records that they have brought in taxable income derived from overseas into Malaysia.

“Even if they had brought their income which is derived from overseas into Malaysia, this will be exempt from income tax,” he explained

However, he added, if it was later discovered that any of their income was indeed subject to Malaysian tax, the IRB had the power to raise the assessment against those individuals within five years or at any time if fraud, willful default or negligence was proven.

Malaysia has adopted a self-assessment system, whereby an individual or a company is required to determine and compute their chargeable income and tax liability.

The rate of tax applicable is provided under the Income Tax Act 1967 and changes to the rate may be made and announced during the annual national budget. Under the self-assessment system, a taxpayer will be audited on any declaration of income made.

In the case where a person failed to make any declaration, the IRB had a dedicated team to continuously analyse and identify this, Johari said, adding that the IRB would impose severe penalties after finding out that tax was payable.

“It is not the practice of the IRB to tax any individuals or companies based on perceived wealth or rumours of income. Please be assured that the IRB is ever vigilant in carrying out its duties under the law without fear or favour,” he said.

- Bernama