The Covid-19 pandemic has turned the country on its head. Besides dealing with the reality of fighting with an invisible monster, many people have lost their jobs and are worried sick about how to make ends meet.
However, if your earnings are still above RM34,000 after Employees’ Provident Fund (EPF) deductions, you are required to file your taxes, regardless of whether or not your income has been affected.
The good thing is that you can receive aid from allowable deductions, rebates and exemptions to lower your taxes.
Sometimes, you may not even have to pay taxes at all. However, not filing your tax returns is an offense, making you subject to a number of penalties.
What happens if you don’t file your tax returns?
According to the Income Tax Act 1967, if you fail to pay your taxes, you can be penalised with imprisonment or a fine that ranges from RM200-RM2,000, sometimes both.
And if the tax authority finds that you have deliberately skipped filing your taxes, the penalty will increase within the range of RM1,000-RM20,000, imprisonment as well as a penalty of 300% of the amount undercharged for tax evasion.
If you try to leave the country without paying your taxes, you will again be subject to a penalty of RM200-RM2,000 or imprisonment, or both
What happens if you file your tax returns late?
While the authorities understand that you can be caught up with work and family demands, this is still no excuse to miss the deadline for tax submission.
If you do, you will be slapped with a penalty.
When this happens, you will have to pay a 10% increment of your tax payable as a fine and if you fail to make the payment within 60 days, then a 5% increment will be added to the balance.
Can skipping the payment of taxes hurt your credit score?
Yes. Not paying your taxes can become a red mark in your future financial dealings. Any legal action taken against you due to tax evasion will show up on your credit score or in your background check should you apply for a loan in the future.
Failure to pay your taxes indicates that you are not a good paymaster and tend to delay or forgo making obligatory payments.
Though income tax payments do not show up in your CTOS or CCRIS score, if you skip your Real Property Gains Tax (RPGT), it will be flagged in these reports.
Besides, financial institutions may demand to see your previous tax filing records before approving your property loan application. If your record shows inconsistent tax payments, your credibility with the bank will be hurt even after your best efforts.
To maintain your credit score and credibility, pay your taxes on time, every time. It is even better if you can make your tax payment with your credit card.
That way, it will show up in your credit card records, and when financial institutions see that you not only consistently settle your loan instalments but also pay your taxes on time, it will strengthen your credit score, and improve your chances of obtaining a housing loan in the future.
Is there any way to lessen the penalty of not filing taxes?
If you have a valid reason for not filing your tax form or for missing the deadline, you can write an appeal to the authorities within 30 days of the notice you receive from them regarding your tax payment violation.
While your appeal is in process, don’t wait around. Make your payment first and if your appeal is successful, you will get a refund later based on the assessment by the Internal Revenue Board of Malaysia (IRBM).
It is never a good option to skip filing or paying your taxes as it will negatively impact your credibility permanently. So, file your tax returns with the correct information to avoid any penalties or legal issues from cropping up later.
This article was written by Fahri Ahmed of PropertyAdvisor.my, Malaysia’s most comprehensive source of property data, property analytics and insights.