Now You Know Taxpayer and Preparer Responsibilities

Welcome to series of Tax educational posts -->Now You Know Taxpayer and Preparer Responsibilities

As usual, this 5 minutes posts explain WHAT, WHY,  and HOW.

This posts focus on Income Tax Act (ITA) Subsection on Wilful Evasion

S 114 - Wilful Evasion

  • What constitutes Wilful Evasion or intend to evade
  • Assist any other person to evade S.114 (1)
  • Nature of assistant / advice given by any person or tax preparer --> offence under S.114 (1A)
  • Consequences of such Wilful Evasion action

Wilful Evasion = Any action performed to avoid tax laibility; or

                            = Assisting another person to avoid tax

Example of Wilful Evasion

  1. Deliberate omission of any income from a return S.114 (1a)
  2. Making a false statement or false entry in a Return S.114 (1b)
  3. Givings false answers S.114 (1c)
  4. Prepare, maintain, authorize preparation / maintenance of false records & accounting entry S.114 (1d)
  5. Falsify / Authorize falsification of book of accounts S.114 (1e)
  6. Final accounts prepared based on estimated or fictitious figures
  7. Use or authorize the use of fraud S.114 (1f)
  8. Assist in (or give advice ) in preparation of tax return that understated taxpayer tax liability S.114 (1A)


Example of assisting to avoid tax

  1. Preparer (or advisor) dishonest intention / action resulted understatement of taxpayer tax liability
  2. EXCEPTION -->Preparer (or advisor) justified its action is in good faith, honest with reasonable care.


PENALTIES under S. 114

Taxpayer = point 1 to 4; Preparer = point 1 to 3

  1. Fine up to RM20,000; or
  2. Imprisonment up to 6 months; or
  3. Fine + Imprisonment; AND
  4. Special penalty up to 300% of taxable amount

In addition, leave or attempt to leave Malaysia without settling all outstanding taxes and penalties, is an offence under S. 115 

Now You Know Taxpayer and Preparer Responsibilities -

What Next?

SETTLEMENTS process (wilful evasion):

  1. DG compute tax liabilty understated as
    1. Based on omitted income (* tax rate)  +
    2. interest on tax lost (i.e. fine) +
    3. Special penalty up to 300% of point 1.1
  2. DG will call taxpayer for interview, and present the findings as per point 1
  3. Taxpayer allowed to question the computation of omitted income
  4. Taxpayer could exercice acceptance of tax liability understated
  5. Settlement negotiation depending on
    1. gravity  of the offences
    2. Taxpayer cooperation during the tax audit period
    3. Taxpayer's capability to paid
    4. mutually win-win approach
  6. Worse case scenario, criminal proceeding

There were scenario, however, the DG exercise criminal proceeding without settlement path.

This direct criminal proceeding path aim as deterrent to other taxpayer.

Now You Know Taxpayer and Preparer Responsibilities -

Non Disclosure (ND) by Taxpayer

ND of any income (i.e. interest income, dividend, rent, etc) is an offence.

Possible ND Scenario

  • Deliberate ND of  income
  • false representation of income
  • Assumed income is not taxable
  • Negligence / unintentional omission due to poor memory
  • Wife / husband ND her income to spouse


Justification for Imposing Penalty

  1. False Claimed
  2. Failure to Keep Record
  3. Late Return
  4. Return not in accordance to Public Ruling
  5. Failure to Furnish Information
  6. Claimed personal expenses. Details please read Top 15 disallowed expenses
  7. Non disclosure of material information

Now You Know Taxpayer and Preparer Responsibilities
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