Close this search box.

Tax Penalties In Malaysia You Need To Be Aware Of

Filing taxes is one of the most important things that every individual and business must take care of in different countries, including Malaysia. Companies that rely on professional accounting services have no issue in meeting the deadlines and properly file taxes on time.


However, it is possible that you might have thought about not paying taxes or delaying their payment. In such situations, you can face serious legal consequences and tax penalties in Malaysia. Whether you forget to file your taxes or decide to report a lower income than the actual one, you can be held accountable for tax fraud and evasion.


The purpose of this article is to let you know about the common tax offences in Malaysia, which can result in a tax penalty.

1. Avoid Tax Filing

If your company or you as an individual is eligible to pay taxes, you must file the taxes within the deadlines; otherwise, you can face fines and even jail time. The minimum criteria are that if you make an annual income of RM34,000 after EPF deduction, you must file your taxes.

If you choose to avoid filing your taxes, you will have to pay a fine of between RM200 to RM20,000 and possibly, face jail time. It is important to make sure that you are filing your taxes before the deadline to avoid these consequences. Generally, the tax on non-business income must be filed before 30th April, and tax on business activities must be filed before 30th June.
Tax day concept. The USA tax due date marked on the calendar.

2. Misreporting Your Income

It is illegal to misreport your income by pretending to be making a lower income than your actual income. Even if you are not misreporting your income deliberately, it is quite common that businesses end up making mistakes in their financial analysis and reporting.


You can avoid this issue by relying on an audit firm in Malaysia that is capable of fully auditing your company and generating thorough financial reports to avoid wrongful reporting.


If you try to misreport your income to pay lower taxes, you can be fined a significant amount of between RM1,000 to RM10,000. Moreover, you will likely have to pay 200% of the tax that was undercharged in the initial unlawful tax claim.


It is important to reiterate that underreporting your income is a common and easy mistake that many individuals and businesses commit because they are now familiar with the taxation laws and the types of income that are taxable.


Other than employment income, rental income, dividends, and royalties are also included in the taxable income. Therefore, you should consider hiring professional accounting services in Malaysia to avoid such issues.

3. Exaggerating Tax Relief

Getting tax incentives and relief is highly important to cut down your tax bill. It can help you in saving a significant amount of money that you can invest in other parts of your business. However, you must ensure that you are filing your tax relief for which you are qualified. If you end up overstating your tax relief, you can run into serious legal issues.

The law makes it clear that if anyone is found guilty of overstating their tax relief and cannot support their claims of getting tax relief, they can be fined RM300 to RM10,000, along with facing possible imprisonment.

Whenever you are declaring tax relief, you should maintain thorough records of the receipts or any other supporting document to avoid any issue in the future. An audit firm can also help you in filing your taxes and making sure that all of the taxes are filed within the deadline.
Businesswoman showing report with visitors activity statisctics at meeting with colleagues

In a Nutshell

Other than the tax penalties above, there are numerous other situations in which you can end up getting fined or even imprisoned for tax offences. The Income Tax Act of Malaysia deals with a variety of these tax offences.

To avoid this issue, it is highly recommended that companies rely on audit firms in Malaysia because these firms have professional and experienced auditors who know about the best practices of accounting and taxation. By relying on such professional services, you will not have to worry about getting penalized.

Moreover, individuals should also hire accounting services in Malaysia to get help in calculating the taxes and filing them on time. In short, these services will help you in avoiding tax penalties and help you in filing the taxes in an efficient, reliable, and timely manner.

For more information, feel free to get in touch with us.