Updated guidelines for submission of estimated tax payable

Updated guidelines for submission of estimated tax payable

The Inland Revenue Board (IRB) has recently published on its website, Operational Guidelines No. 1/2021 (Guidelines) dated 22 December 2020. The Guidelines are in Bahasa Malaysia and are titled “Pengemukaan Anggaran Cukai Yang Kena Dibayar Di Bawah Seksyen 107C Akta Cukai Pendapatan 1967 (ACP)”. The new 45-page Guidelines replace the earlier Operational Guidelines No. 1/2017 dated 23 February 2017 (see Tax Alert No. 7/2017).

The new Guidelines are broadly similar to the earlier guidelines and provide clarification on the procedures for the submission of tax estimation forms. The key changes are outlined below.

1. The new Guidelines clarify that companies, co-operative societies, trust bodies and limited liability partnerships (LLP) (collectively referred to as “relevant entities”) that have ceased operations or are dormant are still required to submit an estimate of tax payable (Form CP204).

2. The earlier Guidelines stipulate that whilst non-resident companies which are subject to withholding tax (WHT) under Section 107A of the ITA are required to submit an estimate of tax payable, such companies would not need to remit any tax instalment payments to the IRB, as WHT had been suffered. In the new Guidelines, the statement that such companies do not need to remit tax instalment payments has been removed. 

3. The new Guidelines provide examples to demonstrate the following:

(a) Due date for the submission of Form CP204 for a company (non-SME), co-operative society, trust body or LLP that first commenced its operations in a YA, and the basis period for that YA is not less than six months

(b) Due date for the submission of Form CP204 for an SME (as defined) that first commenced its operations, pursuant to Section 107C(4A)

(c) The cessation of tax instalment payments in cases where the revised tax estimate (Form CP204A) is lower than the original tax estimate (Form CP204)

4. The new Guidelines re-iterate that the relevant entities will not be allowed to submit the Form CP204 later than the stipulated due date if the Notice of Instalment Payments (Form CP205) has been issued by the IRB. The amount of estimated tax payable issued via the Form CP205 is determined by the IRB. However, a revision of tax estimate can be submitted in the sixth and/or ninth month of the basis period for the YA.

The earlier Guidelines stipulated that the amount of estimated tax payable issued via the Form CP205 is based on the Form CP204 or Form CP204A (where applicable) for the immediate preceding YA. This statement has been removed from the new Guidelines.

5. The new Guidelines explain and provide examples to demonstrate the introduction of Section 21A(3A) of the ITA which requires the relevant entities to notify the Director General (DG) of any changes in the accounting period through the prescribed form, i.e. the Form CP204B.  The Form CP204B has to be submitted to the IRB no later than:

• 30 days before the end of the new accounting period if the new accounts are less than 12 months and are closed before the end of the original accounting period
• 30 days before the end of the original accounting period if the new accounts are more than 12 months and are closed after the end of the original accounting period

The new Guidelines also explain the penalties that would apply for non-compliance.

6. The new Guidelines stipulate that entities intending to change their accounting periods and revise their tax estimates at the same time will need to do so in the sixth or ninth month of the basis period for the YA. The Form CP204B will need to be submitted before the Form CP204A.

Based on the earlier Guidelines, the revision of the tax estimate due to the change in accounting period was possible outside of the stipulated time frames under certain circumstances and needed to be submitted together with the Form CP204B, an appeal letter and relevant supporting documents.

7.  Following on from Point 6 above, the new Guidelines also provide an updated methodology for ascertaining the tax instalment payments after a change in the relevant entities’ accounting period, which would appear to be in line with the updated Form CP204B, where the columns to complete a “revised tax estimate” have been removed. We believe the IRB will adopt this methodology in ascertaining the tax instalment payments for each YA by way of the Form CP205.

Note:

The IRB has also stipulated on its website that Paragraph 6 of Public Ruling (PR) No. 8/2019: Notification of change of accounting period by a company / LLP / trust body / co-operative society, with regard to the computation of revised tax instalment payments after a change in accounting period, will no longer apply with effect from 3 February 2021. The PR will be updated accordingly to be in line with the new Guidelines.

8.  The new Guidelines reiterate the requirement for a company under liquidation to furnish a Form CP204B upon the appointment of a liquidator

9.  The new Guidelines provide an updated example to demonstrate the tabulation of the underestimation penalty pursuant to Section 107C(10) of the ITA, taking into account the WHT that has been remitted to the IRB. The WHT is to be deducted from the “actual tax payable” amount, in computing the difference between the actual tax payable and estimate or revised estimate tax payable (where applicable).

We believe that this example is intended to reflect the calculation of the underestimation penalty for a permanent establishment in instances where tax has been withheld under Section 107A of the ITA. However, this will need to be confirmed with the IRB.

10. The earlier Guidelines outlined the following:

(a) Procedure to submit an appeal for an estimate of tax payable which is lower than 85% of the estimate or revised estimate tax payable for the immediate preceding YA

(b) Situations where a Form CP204 would be rejected

(c) Procedure for the relevant entities to submit an appeal against a Form CP205

These points have been removed from the new Guidelines.