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What are the penalties for sales tax evasion? How long should I keep records? What are the legislation and regulations governing sales tax in Malaysia?

Duty to Keep Accounts and Records


Every licensed manufacturer who sells any taxable goods must issue an invoice in Malay or English language to the purchaser. The amount of sales tax payable is to be shown separately to the prices and quantities of goods sold.

A licensed manufacturer must keep full and true records written up to date of all transactions which affect or may affect his liability to sales tax.

A licensed manufacturer is allowed to keep records in other language provided a translation is furnished at the request of a sales tax senior officer. Such translation must be made by an interpreter nominated by the sales tax officer and will be done at the expense of the licensed manufacturer.

The records which are required to be kept must be preserved for a period of six (6) years from the latest date to which such records relate.

Drawback of Sales Tax


Under Section 29 of the Sales Tax Act 1972, all duty-paid goods used as materials for the manufacture of other goods which are subsequently exported, are eligible for drawback of the sales tax in full.

Similarly, goods from the Principal Customs Area (PCA) which are used in the manufacture of other products by a factory in a free trade zone or on the islands of Langkawi, Tioman or Labuan are considered as exports of goods from Malaysia.

Evasion of Sales Tax


Any person who wilfully with intent to evade or to assist any other person to evade sales tax:
  • omits from a return made any information in relation to any matter affecting the amount of his or the other person's chargeability of sales tax;

  • makes any false statement or entry in any return, claim or application;

  • gives any false answer, whether verbally or in writing, to any question or request for information asked or made;

  • prepares, maintains or authorises the preparation or maintenance of any false book of accounts, false invoices or other false records, or falsifies or authorises the falsification of any book of accounts, invoices or records; or

  • makes use or authorises the use of any fraud, art or contrivance,


shall be guilty of an offence against the Sales Tax Act 1972 and such person shall be liable to a fine not exceeding RM50,000 or to imprisonment for a term not exceeding three (3) years or to both.

Where an offence has been committed by a company, a firm, a society, an association or other body of persons, any person who at the time of the commission of the was a director, manager, secretary or other similar officer or a partner shall be deemed to be guilty of that offence, unless he proves that the offence was committed without his consent or connivance and that he exercised all such diligence to prevent the commission of the offence.

Trials and Proceedings


If in any prosecution in respect of any goods seized for non-payment of sales tax or for any cause of forfeiture or for the recovery of any penalty or penalties under Sales Tax Act 1972, any dispute arises whether sales tax has been paid in respect of such goods or whether anything is exempt from sales tax, then and in every such case the burden of proof thereof shall lie on the defendant in such prosecution.

No costs or damages arising from seizure to be recoverable unless seizure without reasonable or probable cause.

Legislation


The current legislation governing the administration and operation of sales tax in Malaysia are as follows:
    Principal Legislation
  • Sales Tax Act 1972 [Act 64]
    (Malay: Akta Cukai Jualan 1972 [Akta 64])

  • Subsidiary Legislation
  • Sales Tax Regulations 1972
    (Malay: Peraturan-Peraturan Cukai Jualan 1972)

  • Sales Tax (Rules of Valuation) Regulations 2002
    (Malay: Peraturan-Peraturan Cukai Jualan (Kaedah-Kaedah Penilaian) 2002)

  • Sales Tax (Exemption from Licensing) Order 1997
    (Malay: Perintah Cukai Jualan (Pengecualian Dari Pelesenan) 1997)

  • Sales Tax (Rates of Tax) Order 1972
    (Malay: Perintah Cukai Jualan (Kadar-Kadar Cukai) 1972)

  • Sales Tax (Rates of Tax) Order 1997
    (Malay: Perintah Cukai Jualan (Kadar-Kadar Cukai) 1997)

  • Sales Tax (Exemption) Order 2013
    (Malay: Perintah Cukai Jualan (Pengecualian) 2013)

  • Sales Tax (Petroleum) (Payment) Order 1999
    (Malay: Perintah Cukai Jualan (Petroleum) (Bayaran) 1999)

  • Sales Tax (Customs Ruling) Regulations 2007
    (Malay: Peraturan-peraturan Kastam (Ketetapan Kastam) 2007)

  • Sales Tax (Exemption) (Pangkalan Kubor Duty Free Area) Order 1989
    (Malay: Perintah Cukai Jualan (Pengecualian) (Kawasan Bebas Cukai) (Pengkalan Kubor) 1989)


Sales Tax Act 1972 will be repealed by the Goods and Services Tax Act 2014 which will come into operation on April 1, 2015.

In spite of the repeal, any liability incurred, sales tax due, overpaid or erroneously paid may be collected, refunded, remitted or enforced as if the Salex Tax Act 1972 had not been repealed.


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Knowledge Base ID :   1543
Last Reviewed :   June 11, 2014
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