May 10, 2021

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Explanation of taxpayers’ rights

Do you As a taxpayer, you know your rights when you do business with the Internal Revenue Board (IRB)? As a taxpayer, your primary duty is to file your tax returns and pay your taxes.

In short, the income tax system relies on taxpayers’ self-evaluation of their tax obligations, and the Immigration and Refugee Board is supposed to educate taxpayers to properly declare their tax obligations and exercise vigilance towards taxpayers through tax audits and other means of taxpayer monitoring such as where it requires of the payers. Taxes provide various returns and internal analyzes of taxpayer activity.

In recent times, the level of scrutiny has gradually increased through audits and investigations with taxpayers. There are many different types of audits conducted by different departments of the IRB. The chances of taxpayers being called in for scrutiny have now increased dramatically. The pendulum appears to be moving towards enforcement rather than education.

In this climate, taxpayers need to know their rights.

> The right to appeal

The taxpayer has the right to file an appeal to the Special Income Tax Commissioners within 30 days of issuing the assessment by submitting a Q Form. Please note that despite the appeal, the tax must be paid.

> Time to answer inquiries

Under the concept of natural justice, the taxpayer must be given sufficient time to respond to inquiries raised by the Immigration and Refugee Board. Currently, the timeframe granted to taxpayers is usually from seven to 14 days and the Immigration and Refugee Board can at its discretion and at the request of the taxpayer give more time.

> The right to appoint tax agents

Taxpayers have the right to appoint licensed tax agents to file their tax returns and represent them when dealing with the IRB. Tax agents are permitted to attend and participate during any meetings between the Immigration and Refugee Board and taxpayers.

> The right to amend tax returns

Taxpayers are allowed to amend their tax returns within six months of the due date on which their tax returns are filed. However, any modifications will result in a penalty of 10%.

> Error or error

If the taxpayer commits an error or error in the declaration or statement, he shall be entitled to apply to the Director General (DG) for exemption within five years after the end of the assessment year in which this was made. If the Director General decides not to allow the exemption, the taxpayer has the right to appeal within six months of notifying the Special Commissioners for Income Tax.

> Advance judgment and price arrangements

Taxpayers can seek advance judgments on matters of income tax and advance pricing judgments on transfer pricing matters. There are complex requirements that must be adhered to before making such judgments. Please note that taxpayers will have to pay the Immigration and Refugee Board for such rulings.

In general, taxpayer rights are limited when compared to the powers available to the Immigration and Refugee Board. The Income Tax Act 1967 contains several provisions whereby taxpayers can apply to the Immigration and Refugee Board to exercise their discretion and nothing more.

For example, when taxpayers wish to offset a tax credit available from a previous year in exchange for tax payable in a later year, the estimation of whether or not offsetting will be allowed is entirely in the hands of the Immigration and Refugee Board.

Perhaps it is time for tax policymakers at the Finance Ministry to review taxpayer rights and balance the pendulum to make them equal.

This Article by SM Thanirmali SM Tanirmalai Thannees Tax Consulting Services Sdn Bhd.