Theemployer smandate Areyoureadyto takecharge?€¦ · Corporate desk audit/ field audit/ PCB audit 2.1 Ensure employer compliance with MTD payments. ... Regulatory Compliance •Tax

Jointly brought to you by Deloitte and Talent Corporation Malaysia

The employer’smandateAre you ready to take charge?

4 August, 2015

9:00 a.m. - 1:00 p.m.

Deloitte (Kuala Lumpur office)

Meetpoint 1 & 2

Level 15 Menara LGB

1 Jalan Wan Kadir

Taman Tun Dr Ismail

60000 Kuala Lumpur

13 August, 2015

1:00 p.m. - 5:30 p.m.

Thistle Hotel

Jalan Sungai Chat

80100 Johor Bahru

14 September, 2015

9:00 a.m. - 1:00 p.m.

Deloitte (Penang office)

Level 12A Hunza Tower

163E Jalan Kelawei

10250 Penang

Agenda

2

1.00 pm – 1.30 pm Registration

1.30 pm – 1.40 pm Opening address Siva Kumeren A Narayanan

(TalentCorp)

1.40 pm – 2.40 pm Employer’s responsibilities arising

from Monthly Tax Deduction as final

tax & Employer’s tax audit

Ang Weina/ Chow Kuo Seng

(Deloitte)

2.40 pm to 3.00 pm The unknown corporate implication

arising from frequent business

travelers

Lee Lai Kuen/Chow Kuo Seng

(Deloitte)

3.00 pm – 3.30 pm Break

3.30 pm – 4.15 pm Optimizing incentives for employers Siva Kumeren A Narayanan

(TalentCorp)

4.15 pm – 5.00 pm Latest updates - immigration Siva Kumeren A Narayanan

(TalentCorp)

5.00 pm – 5.30 pm Q & A

© 2015 Deloitte Touche Tohmatsu Tax Services Sdn Bhd

No more income tax return filing

Heaven for employee

or hell for employer?

Ang Weina / Chow Kuo Seng

August 2015


Background

Monthly Tax Deduction (MTD) as Final Tax

• Tax payers who fulfil the criteria of MTD as Final Tax may elect not to furnish a

return to Inland Revenue Board of Malaysia (IRBM).

• Section 77C of the Income Tax Act

• MTD calculation updated per Income Tax (Deduction from Remuneration)

(Amendment) (No. 2) Rules 2014

4© 2015 Deloitte Touche Tohmatsu Tax Services Sdn Bhd

Employee’s income tax return filing obligations

5

The tax payer will still need to furnish the income tax return if

i. he has worked for more than one employer or has changed employers

during the year;

ii. his tax is borne by the employer;

iii. he opts for joint assessment;

iv. he has non-employment income such as business income, rental

income, etc during the year;

v. he wishes to claim refund or deduction/rebate and etc.


Employer’s obligations in MTD as final tax

If the employer uses the wrong method for MTD calculation,

will a compound be issued to the employer?

6

Rule 17, Income Tax (Deduction from Remuneration) Rules 1994 ["The

Rules"]

- any person, who, without any reasonable reason fails to comply with Subrule

10(1) or Rule 3 is liable to prosecution and upon conviction, can be fined up not

less than RM200 and not more than RM2,000 or to imprisonment for a term not

exceeding six months or to both.

#1



If the Form EA is prepared with an incorrect MTD, will a compound

be issued to the employer?

7

Section 120(1)(b) of the Income Tax Act

Preparation of erroneous Form EA

– Employer is liable to a fine of not less than RM200 and not more than

RM20,000 or to imprisonment for a term not exceeding six months or to both.

#2

Rule 17, Income Tax (Deduction from Remuneration) Rules 1994 ["The

Rules"]

- any person, who, without any reasonable reason fails to comply with Subrule

10(1) or Rule 3 is liable to prosecution and upon conviction, can be fined up not

less than RM200 and not more than RM2,000 or to imprisonment for a term not

exceeding six months or to both.



What is Form TP1

8

#3

What is the obligation of employer in relation to Form TP1

• Process the form and allow employees to claim reliefs and deductions not less

than 2 times in a year

• Keep all records (ie Form TP1) for 7 years from the year of the claim is made


Borang_TP1_2015.pdf


Other Forms TP ?

9

#4

Form TP3

• Collation of information on income, MTD and relief claims from previous

employment in the year concerned

• Mandatory completion by employees who had previous employment in the

year concerned.


Borang_TP3_2015.pdf

Employee’s dilemma

10

Form EA is prepared with an incorrect MTD.

Employee elects not to file a tax return (assumed MTD amount is correct).

Employee is subject to a tax audit.

Upon audit findings, actual tax liability is under-paid due to insufficient MTD.

Penalties for incorrect tax return

- Section 113 of the Income Tax Act

- No prosecution in court, fine is equal to the amount of tax arising from the

underreporting.

- If prosecuted, upon conviction, fine is between RM1,000 to RM10,000 +

special penalty of double the amount of tax arising from the underreporting.

What do you think are the consequences ?

Who will be responsible for this penalty ?


Next steps

11

Types of offences under "The Rules" are :

• Failure to remit monthly tax deduction of employees by the 15th. of the following

month.

• Failure to deduct and / or lesser deductions made on monthly tax deduction of

employees.

• Failure to remit or less remit MTD or CP38 deduction that has been made from

employees' remuneration.

• Failure to give complete and accurate information about employees.

Other obligations

• Form TP1


12

What is the LHDN’s approach?

What authorities seek to unravel in a statutory

employer’s audits?


1. Media Release

1.1 Monitoring Deliberate Tax Defaulters (“MDTD”)

1.2 Decentralisation of Income Tax Files

1.3 Reduction in Penalty and Waiver of Tax Increase

2. Corporate desk audit/ field audit/ PCB audit

2.1 Ensure employer compliance with MTD payments.

2.2 Correct PCB calculation.

2.3 To trace unreported income such as director fees, benefit-in-kind, perquisite

and allowance.

1.1 Monitoring deliberate tax defaulters


1.2 Decentralisation of Income Tax Files


1.3 Reduction in penalty and waiver of tax increase


Voluntary Disclosure

• Taxpayers may make errors in their tax matters due to ignorance or

negligence, without wilful intent to evade taxes.

• A taxpayer may qualify for the reduced penalty treatment if the voluntary

disclosure is timely, accurate, complete and self-initiated.

• The taxpayer must cooperate fully with the IRB to correct the error(s) made

and arrange with the IRB to pay the additional taxes and penalties imposed

(if any).

© 2015 Deloitte Touche Tohmatsu Tax Services Sdn Bhd 19

Voluntary Disclosure (“VD”) Checklist

1. Taxpayer name, identification number / registration number and address.

2. Detailed description of the VD, the tax omitted and the years involved.

3. Taxpayer is expected to explain whether in writing or verbal on the following:-

Circumstances under which error(s) that is / are being voluntarily disclosed

was / were uncovered;

Details of controls put in place/that will be put in place to prevent

recurrence of similar error(s), including date of implementation of controls;

Whether taxpayer has received any query or notification of the

commencement of an audit or investigation relating to the tax matter;

To the best of taxpayer’s knowledge, the VD is complete and accurate;

Taxpayer will cooperate fully with tax authorities to correct the

error(s)made;

Any additional taxes and penalties arising from the VD will be paid.

© 2015 Deloitte Touche Tohmatsu Tax Services Sdn Bhd 20

Short Term Business Travelers

The hidden risk

Lee Lai Kuen /

Chow Kuo Seng

August 2015

• There is an increasing need

for governments to find new

sources of revenue

International business travelersCountries continue to close the revenue gaps

22

Government spending exceeding revenues

United Kingdom Thailand

Very aggressive regarding wage withholding and tax

remittances if no business traveler exemption

Business Traveler Exemption Permanent Establishment

China Singapore

Treaty Claims Visa matters

Increasingly permanent establishment issues were

raised where the individual is not seconded to work for

the Thai entity.

China is seeking advanced approval and documentation

to allow treaty claims for business travelers

Linkage of system of Immigration to Tax Authority

Country Examples


Traditional challenges of Business TravelersBarriers to complete and accurate compliance

23

Business Demands

• Emerging Markets Requiring

Talent for Growth

• Changing Employee Attitudes

• Cost Pressures – Alternative to

Traditional Assignments

• Talent, Development & Learning

Regulatory Compliance

• Tax / Payroll

• Immigration

Global, Cross-border

• Different reporting laws and tax treaties

• Increased levels of employee tax

exposure

• Inefficient tracking of international travel

• Corporate obligations still exist even

where tax treaties may apply

• Increased visibility and coordination from

immigration

• Corporate exposure

• Scrutiny of local authorities

Malaysia

• Employer obligations include reporting of

income, withholding and tax remittance

• Employees must file tax return

• Administrative challenges in achieving full

compliance

• Risks arise because business travel is not

being tracked

• Increased scrutiny from tax authorities


A successful and consistent compliance framework can support your

company’s future global growth through mitigating exposure to

unnecessary tax costs and compliance failure risks, and improving

internal controls for global compliance reporting.

Understand your compliance environment?

Focus on four core elements

to determine if your

operations demonstrate the

behaviours which are most

likely to be found in a robust

tax compliance environmentTax positions

ProcessPeople

Documentation


How to tackle this issue?A holistic framework that defines roles, identifies travelers and

initiates subsequent compliance activities

25

1 Build the Case:

Quantify potential

exposure and garner

internal support to

address

2 Set the Foundation:

Develop guidelines and thresholds for

acceptable risk and identify available data

sources

3 Embed Processes:

Establish the systems and controls

and facilitating ensuring effective

communications

4 Review and Refine:Monitor results and revise

guidelines and processes


Deloitte’s business traveler process

HRIS FilesDeloitte Tax

Rules

Engine

Client

Business

Rules

Business travel

dashboards

Service

initiation

Portal and security

Client

database

Expense

reports

Mapping & data

transformation

Client

userPayroll

Deloitte Deloitte

AnalysisData

warehouseClient user

interface

Service

initiationData

Travel

records

Alternative

data

sources

Data flow and core processes

1 2 3 4 5


Business Traveler ProcessIdentification and Analysis

27

Please note: Images are illustrative of our standard offering. Visualizations and

data outputs are configurable and subject to the availability and usage of

corporate data sources.


Business travelers Considerations to note

28

Personal tax, immigration implications

• Correct visa

• Length and purpose of stay in Malaysia

• Costing

• Taxable or tax exempt in Malaysia?

• Compliance with employer’s obligations

• If taxes are due, who is responsible to pay?


29

Corporate tax implications

1. Withholding tax issue arising from services rendered by non-resident.

S.107A of income tax act

S.109B of income tax act

S.109F of income tax act

2. Permanent establishment refers to:

2.1 fixed place of business and duration of project

2.2 S.107A – contract payment

• Permanent establishment triggered by the employee of the non-

resident company performing services/projects in Malaysia.


Business travelers Considerations to note

Lessons learned & next stepsOur experience in managing business travelers has provided valuable

lessons learned & next steps going forward

Anticipate challenges with

data quality and

completeness

• The data will not be

perfect

• Improve data quality by

cross referencing different

data sources

• Engage stakeholders who

own the different data

sets early

• Consider data validation

based on quality of data

Payroll reporting =

compliance

• Engage the payroll team

early in the process

• Identification of taxable

employees is not the end

game

• Execution of payroll is

what makes you

compliant

Employee Experience

Matters

• Minimize employee

disruption

• Communicate

employee impact

clearly

• Educate and inform

throughout the process

Understand your risk

tolerance

• Establish consensus

on acceptable risk

• Consider all risk -

employees / corporate


Optimizing incentives for employers

Siva Kumeren A Narayanan

TalentCorp

August 2015


Latest updates - immigration

Siva Kumeren A Narayanan

TalentCorp

August 2015


33

Q&A


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each of its member firms are legally separate and independent entities. DTTL (also referred to as “Deloitte Global”) does not provide services to clients. Please see www.deloitte.com/about

for a more detailed description of DTTL and its member firms.

Deloitte provides audit, tax, consulting, and financial advisory services to public and private clients spanning multiple industries. With a globally connected network of member firms in more

than 150 countries and territories, Deloitte brings world-class capabilities and high-quality service to clients, delivering the insights they need to address their most complex business

challenges. Deloitte’s more than 210,000 professionals are committed to becoming the standard of excellence.

About Deloitte Southeast Asia

Deloitte Southeast Asia Ltd – a member firm of Deloitte Tohmatsu Limited comprising Deloitte practices operating in Brunei, Cambodia, Guam, Indonesia, Lao PDR, Malaysia, Myanmar,

Philippines, Singapore, Thailand and Vietnam – was established to deliver measurable value to the particular demands of increasingly intra-regional and fast growing companies and

enterprises.

Comprising over 270 partners and 6,600 professionals in 24 office locations, the subsidiaries and affiliates of Deloitte Southeast Asia Ltd combine their technical expertise and deep

industry knowledge to deliver consistent high quality services to companies in the region.

All services are provided through the individual country practices, their subsidiaries and affiliates which are separate and independent legal entities.

About Deloitte Malaysia

In Malaysia, services are provided by Deloitte Tax Services Sdn Bhd and its affiliates.

Disclaimer

This communication contains general information only, and none of Deloitte Touche Tohmatsu Limited, its member firms, or their related entities (collectively, the “Deloitte network”) is, by

means of this communication, rendering professional advice or services. No entity in the Deloitte network shall be responsible for any loss whatsoever sustained by any person who relies

on this communication.

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Documents

Theemployer smandate Areyoureadyto takecharge?€¦ · Corporate desk audit/ field audit/ PCB audit 2.1 Ensure employer compliance with MTD payments. ... Regulatory Compliance •Tax