Indirect Taxes Voluntary Disclosure & Amnesty Programme

The Royal Malaysian Customs Department (“RMCD”) has introduced a Special Voluntary Disclosure & Amnesty Programme (“VA Programme”) to encourage taxpayers both to come forward and voluntarily declare any indirect taxes, duties or levies that have been underpaid or erroneously reported, as well as to voluntarily settle any outstanding debts without dispute with the RMCD.

What should you do?

Taxpayers now have a unique opportunity to get things right on their indirect taxes compliance without incurring any penalties. As such, you should now undertake a general review of your indirect taxes or do a more targeted assessment on specific areas of concern, e.g. customs duty, sales tax and/or service tax where mistakes are likely, such as:

Misclassifying services as non-taxable
Incorrectly using B2B exemption by failing the same service test or the personal consumption test
Not meeting conditions for service tax Policy exemptions
Wrongly applying the service tax intra-group relief by failing the 5% de minimis test
Late or non-registration for service tax
Not accounting for imported service tax
Misusing or erroneously using customs duty and sales tax exemptions
Failing to meet the conditions for sales tax drawback
Not adjusting for import duty and sales tax after making transfer pricing adjustments
Underpaying tax by incorrectly omitting royalties, assists, commission payments
Incorrect import pricing or incorrect tariff classification
Under declaring excise duty and sales tax by motor vehicle manufacturers

What are the benefits of undertaking a review and participating in VA?

Uncover any historical errors from misunderstanding or oversight
Eliminate (or reduce) the potential penalties
Mitigate any future risk exposures from such errors
Obtain further insight into any other areas of improvement on compliance
Gain confidence overall in your governance and risk management for indirect taxes

What are the key features of the VA Programme?

This programme will run from 1 January 2022 to 30 September 2022 (9 months).

The key incentives being offered are full penalty remission for disclosures and payments made in the first six months of the programme, or 50% penalty remission for those made in the last three months.

In addition, there may be a further remission of 10% to 30% of the primary tax in some cases.

The VA Programme will cover the following indirect taxes administered by RMCD: Sales Tax, Service Tax, GST, Tourism Tax, Departure Levy, Import Duty, Export Duty and Excise Duty.

RMCD will accept any voluntary disclosure made in good faith, and will not commence any audit of the periods and activities involved.

Persons eligible to participate in the VA Programme include:

Persons	Non-compliances (non-exhaustive)
Registered person	Incorrectly submitted NIL return Did not submit a return Under declared & underpaid tax / levy
Company / individual liable to be registered (but failed to register)	Has imposed tax / levy but has not paid to RMCD
Company / individual liable to be registered (but failed to register)	Did not collect tax / levy from customers
Company / individual not liable to be registered	Has imposed tax / levy but has not paid to RMCD
Company acquired imported taxable services	Has not accounted for GST / service tax
Company / individual who utilises duty / tax exemptions / facilities	Did not fulfill the prescribed conditions
Sales tax registrant (under Sales Tax Act 1972 or Sales Tax Act 2018)	Incorrect sales tax valuation / declaration for sales between related parties
Importer / exporter / manufacturer / Licensed Manufacturing Warehouse / Licensed Warehouse	Underpaid duty / tax during import & export declaration of goods Incorrect tariff code used during declaration Errors while utilising any exemption facilities Incorrect import valuation Not adjusting for duty / tax after making year end adjustment (for related party transactions)
Importer of used/new CBU cars	Under-declaration of vehicle value leading to under-payment of duty / tax
Importer of used CBU cars	Vehicles stored in Licensed Warehouse for >4 years
Importer of new CBU cars	Vehicles stored in Licensed Warehouse for >4 years
Local manufacturer of CKD cars	Excise duty not paid on vehicles not sold for >4 years

How can we help?

Our team has significant experience in performing reviews for indirect taxes and liaising with the authorities for voluntary disclosures. We can help you by:

Performing the health check assessment to uncover mistakes or errors
Quantifying any exposure and potential risks
Advising you through the VA Programme application to tax authorities
Providing guidance on potential changes to existing procedures and processes
Assisting with amending past returns
Liaising with tax authorities

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