What if I fail to pay Withholding Tax?

Consequences of Not Remitting Withholding Tax

When the withholding tax (WHT) is not appropriately deducted and remitted to the Malaysian Inland Revenue Board (HASiL), serious consequences will follow.

What Constitutes Non-Compliance?

The payer fails to pay WHT at the prescribed rate (whether deducted or not).
The payer pays WHT late (not within the period of one month after the date of payment/ crediting to the non-resident payee).
The payer fails to pay the increase in tax imposed on him for late payment of WHT or for failure to pay WHT.

The Consequences of Non-Compliance

A late payment penalty at the rate of 10% of the amount of unpaid tax may be imposed by the IRB.
The expense paid to the non-resident payee will no longer be qualified for a tax deduction or as a capital allowance made available on the qualifying capital expenditure.
The IRB can recover the withholding tax and penalties from the payer as a debt due to the Government.

In addition to the above, starting from the year of assessment 2011, the Director General may impose a penalty under section (s.) 113(2) of the Income Tax Act (ITA 1967):

(2) Where a person—

(a) makes an incorrect return by omitting or understating any income of which he is required by this Act to make a return on behalf of himself or another person; or

(b) gives any incorrect information in relation to any matter affecting his own chargeability to tax or the chargeability to tax of any other person,

… the Director General may require that person to pay a penalty equal to the amount of tax which has been undercharged in consequence of the incorrect return or incorrect information or which would have been undercharged if the return or information had been accepted as correct.

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