Chong Hui Lin (EW 4119)

Margaret Chai Chan Wei (EW 4136) TAX 317: Taxation System

Part B: Write an essay that explains the self-assessment system (SAS) related to a
companys income tax return and tax estimate.

In year of assessment (YA) 2001, companies are placed on self-assessment system (SAS). Under
this system, companies are required to furnish tax estimate, make payment of tax and file the
return Form C to Director General Inland Revenue Board (DGIRB).

A new company with authorized share capital less than or equal to RM2.5million is not required
to furnish the estimate tax payable for the first two year. On the other hand, new company with
authorized share more than RM2.5million has to furnish tax estimate for the first YA based on
estimated company profit. The estimated tax payable for the first YA will be the basis for the tax
estimate for the following YA.

Example 1, XYZ Ltd had just commenced business in year 2014. XYZ Ltd with authorized share
capital RM2.4million is not required to furnish tax estimate for the first two year as it meet the
requirement authorized share not more than RM2.5million. Therefore, XYZ Ltd only pays its tax
estimate start from YA 2016.

Example 2, the commencement date of ABC Ltd is 1 st March 2014. ABC Ltd with authorized
share capital RM2.7million had furnished and summited the tax estimate form (CP204) before
31st May 2014. The first instalment of tax estimate payable is on 10 th August 2014 and last
instalment is on 10th May 2015.

An existing company should furnish estimation of tax payable (CP204) for a YA which is not
less than 85% of the tax estimate or revised tax estimate of immediate preceding YA not later 30
days before the beginning of the basis period. A company also can apply to revise its tax estimate
payable in the sixth month and ninth month of the basis period of a YA by using form CP204A.

Example 3, the basis period of SONY Ltd is from 1 st January to 31th December. The revised tax
estimate of SONY Ltd for YA 2013 is RM 160,000. So, the estimate of tax for YA 2014 must not
be less than 85% of RM160,000 ( RM136,000). Assumed that the tax estimate for YA 2014 is
RM144,000. The amount of each instalment is RM12,000 (based on number of month in basis
year) and the first instalment date is due on the 10 th February 2014 (2nd month of basis period). In

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Chong Hui Lin (EW 4119)
Margaret Chai Chan Wei (EW 4136) TAX 317: Taxation System

May 2014, SONY Ltd paid its tax instalment on 11 th May 2014 and was imposed a penalty of
10% of RM12,000. Therefore, SONY Ltd had paid a total of RM13,200 to IRB in May 2014.

Example 4, In the sixth month of YA 2014, SONY Ltd revised its tax estimate to RM158,000 by
using Form CP204A. The difference of RM14,000 shall be payable in the remaining 6 instalment
in equal proportion. Therefore, the revised monthly instalment from July 2014 to January 2015
(7 months) is RM14,000.

If the difference between the actual tax and the revised tax estimate or the original tax estimate
exceeds 30% of tax payable, the difference between that amount and 30% of the actual tax
payable an increase of 10% of the amount of difference will be imposed.

Example 5, the actual tax and revised tax estimate of SONY Ltd for YA 2014 were RM240,000
and RM158,000. The table below shown calculation for the penalty for underestimate tax.

Actual tax payable RM 240,000

Less: Revised tax estimate payable (RM 158,000)
Difference RM 82,000
Less: 30% of actual tax payable (RM 72,000)
Excess RM 10,000
Penalty (10% of the excess) RM 1,000
Therefore, the balance tax amount of SONY Ltd has to paid is RM83,000.

Companies are required to furnish return Form C for each YA and summit to the DGIRB within 7
months from companys accounting year end. In addition, company is allowed to amend their tax
returns once only within 6 months from the due date of submission of tax return to DGIRB.

Example 6, SONY Ltd has furnished their tax return in Form C for YA 2014 and summited to
DGIRB on the last day of submission that is 31th July 2015. On October 2015, SONY Ltd
decides to amend their tax return and the due date to amend their tax return for YA 2014 is 31 th
January 2015.

The final payment of income tax is the difference after deducting total instalment of tax estimate
from actual tax amount. This is payable on the last day of the seventh month from the companys
accounting year end. If there is any late payment, a penalty of 10% will be imposed and after 60
days from the due date, 5% of penalty of total will be imposed too.

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Chong Hui Lin (EW 4119)
Margaret Chai Chan Wei (EW 4136) TAX 317: Taxation System

Example 7, SONY Ltd should actually pay its final balance tax amount for YA 2014 on 31 th July
2015 but SONY Ltd only pay it on the 1 st November 2015. The table below show the calculation
of penalty due to late payment.

Payment date Amount

31th July 2015 Final Tax payment RM 85,000
Add: 10% of penalty
RM 93,500
1st November 2015 (RM85,000 X 10%) = RM8,500
(more than 60 days) Add: 5% of penalty from total
RM 98,175
(RM93,500 X 5%) = RM4,675
Therefore, the total tax amount paid by SONY Ltd on 1st November 2015 is RM98,175.

(786 words)