Below, comments by EY on the Special Voluntary Disclosure Program (SVDP) for indirect taxes as outlined in the Ministry of Finance 2022 Pre-Budget Statement.
On 31 August 2021, the Ministry of Finance (MoF) issued a pre-Budget Statement (Statement), ahead of Budget 2022. This is the first time such a Statement, which is consistent with international best practices, has been issued in Malaysia. The Statement was issued to provide a preliminary view on the direction of Budget 2022, enhance the transparency of the Budget formulation process, and increase public and investor confidence.
The Statement included various tax-related announcements, including potential avenues to enhance tax compliance and increase tax revenues. Businesses may be particularly interested in the proposal to implement a Special Voluntary Disclosure Program for indirect taxes (indirect tax SVDP). The indirect tax SVDP will be administered by the Royal Malaysian Customs Department (RMCD). This proposal follows an earlier SVDP administered by the Inland Revenue Board (IRB) in late 2018 to 2019 with respect to income tax, petroleum income tax, real property gains tax and stamp duty.
Under the indirect tax SVDP, taxpayers will be encouraged to voluntarily disclose any unpaid indirect taxes, underpaid indirect taxes or erroneous indirect tax filings or submissions, to the RMCD. Similar to the SVDP administered by the IRB previously, it is expected that reduced penalties will be imposed on taxpayers participating in the indirect tax SVDP. It is also possible that after the indirect tax SVDP period expires, the RMCD will enhance enforcement actions and increase penalties.
The period within which the voluntary disclosures can be made and the conditions to the indirect tax SVDP have yet to be announced. Taxpayers will eagerly await further information. The indirect tax SVDP will allow taxpayers to conduct a self-review, rectify errors and omissions, make good underpaid indirect taxes with reduced penalties, and move forward with a clean slate. The RMCD on the other hand would be able to increase its indirect tax revenue, reduce time spent on taxpayer audits and can look forward to enhanced compliance moving forward.
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