• Malaysian companies should pay more attention to taxation issues as it could significantly affect a company’s bottom-line;

• Companies might end up paying significantly more for their ignorance on tax risks as the Inland Revenue Board (IRB) is getting more aggressive in tax collection;

• Companies that were ignorant of taxation issues could incur a 60% penalty on top of their corporate income taxes if they failed to make the accurate disclosure;

• Furthermore, IRB has a whole supply chain of whistle-blowers who could be competitors or disgruntled ex-employees;

• More than 90% of the companies audited by the IRB were found to be “tax-delinquent” in one way or another;

• To avoid incurring a penalty on tax error, companies and the public needs to be educated on tax rules and keep records of their business transactions for tax purposes;

• Many companies, especially small and medium-scaled enterprises did not have proper documentation hence will faced problems when dealing with tax officers who would be prejudiced when there’s no prompt response to their request for companies’ records.

IRB chief executive Tan Sri Zainol Abidin Rashid was reported as saying that its tax collections for 2006 to go up to as high as RM65 billion from RM58.8 billion last year.

The government has also announced the introduction of a tax audit and investigation framework, which outlines the rights and obligations of both IRB and taxpayers and bring about uniformity of tax treatment.

(Source: The Edge, Malaysia)

Related posts:

1. TRANSFER PRICING IS AN IMPENDING MAJOR TAX CHALLENGE FOR COMPANIES ESPECIALLY MULTINATIONALS
2. Tax Updates- Advance Tax Ruling
3. Budget 2008- One Tier System And Tax Incentive For SMEs
4. MALAYSIA TAX BUDGET 2010: PERSONAL TAX INCENTIVE FOR BROADBAND EXPENSES
5. Extending Tax Incentive For Promotion Of Malaysian Brand Name To A Company Within The Same Group
6. Malaysian Corporate Tax Versus Others In Asia Pacific
7. SINGAPORE WANTING TO GO BY YEAR END INTO OECD’s WHITE LIST ON TAX COMPLIANT ON INTERNATIONAL TAX EVASION

Recently reported in Reuters that:
“ The U.S. Internal Revenue Service (IRS) claimed back tax from Glaxo (Europe’s biggest drug-maker) after alleging it engaged in so-called “transfer pricing”, a practice designed to minimise U.S. taxable profits by overpaying foreign subsidiaries for product supplies. The IRS argued that Glaxo’s U.S. unit had overpaid its British parent for various drugs, including its once best-selling ulcer pill Zantac, which is now off patent.
The dispute with the IRS goes back to an audit by the tax authority in 1992 of Glaxo Wellcome, which later merged with SmithKline Beecham to form GlaxoSmithKline.
The settlement covers an original dispute for the period 1989-2000, which was due to go to trial in February 2007, as well as the subsequent years 2001-2005. GlaxoSmithKline Plc will pay a net $3.1 billion to settle an ongoing tax dispute with the U.S. government, which was to go to trial next year.”

Glaxo can afford such challenges as it has deep pockets, but imagine that if this happens to your company. So do be careful when reviewing the transfer pricing of your goods and service especially to overseas counterparts like subsidiaries, associates, holding company.

(refer my earlier transfer pricing articles for India)

Related posts:

1. TRANSFER PRICING IS AN IMPENDING MAJOR TAX CHALLENGE FOR COMPANIES ESPECIALLY MULTINATIONALS
2. Government To Consider Incentives, Tax review To Encourage REITs
3. SIA Cut Pays After $307 million Quarterly loss( April to June’09)
4. What Is An Effective Transfer Pricing System In A Divisional Organization
5. Malaysian Companies Should Pay More Attention On Tax Risks
6. Singapore Cuts Corporate Tax And Increase GST to 7%
7. MALAYSIA TAX BUDGET 2010: PERSONAL TAX INCENTIVE FOR BROADBAND EXPENSES