Section 96A of the Income Tax Act 1967 establishes the concept of composite assessment, providing a mechanism for the Director General and a taxpayer to reach an agreement in writing regarding the payment of uncharged tax and penalties.
The key provisions of Section 96A are as follows:
Agreement for payment of uncharged tax and penalties:
- If a person fails to furnish a return, give notice of chargeability, makes an incorrect return, or provides incorrect information for any year or years of assessment, the Director General and that person may enter into a written agreement.
- The agreement involves the payment of a total amount, which includes the undercharged or uncharged tax and any penalties applicable under Section 112(3) or Section 113(2).
Composite assessment:
- Upon reaching an agreement, the Director General may make a composite assessment in respect of that person, encompassing the total amount agreed upon.
Notice of composite assessment:
- A notice of composite assessment is served on the person promptly after the composite assessment is made.
Content of the notice:
- The notice, in the prescribed form, includes details such as the relevant year or years, the amount of undercharged or uncharged tax, the amount of penalties, and the payment location for the total amount.
Collection of amount:
- The total amount agreed upon is collected as part of the tax payable by the person. However, it is not treated as tax payable for the purposes of the provisions of the Income Tax Act other than Sections 103 to 106.
Finality and conclusiveness:
- A composite assessment made under Section 96A is deemed final and conclusive for the purposes of the Income Tax Act.
- No appeal is permitted against a composite assessment.
References and applicability:
- References to sections in subsections (1), (4), and (5) include corresponding sections of repealed laws.
- References to the year of assessment in subsection (1) include a reference to the pre-year of assessment, with “repealed laws” and “pre-year of assessment” having the same meaning as in subparagraph 1(1) of Part I of Schedule 9.
Finance (No. 2) Bill 2023 proposed Paragraph 96A(1)(a) of the Income Tax Act 1967 is amended by substituting for the words “subsection 77(1) or 77A(1)” the words “subsection 77(1) or subsection 77A(1) or (1B)”.
The proposed amendment to Paragraph 96A(1)(a) of the Income Tax Act 1967 in the Finance (No. 2) Bill 2023 aims to modify the existing language.
The amendment substitutes the words “subsection 77(1) or 77A(1)” with “subsection 77(1) or subsection 77A(1) or (1B).”
The impact of this amendment is that it broadens the scope of the provision related to composite assessment. Specifically, it extends the situations where a person can be subject to a composite assessment for:
- Making default in furnishing a return under Section 77(1).
- Making default in furnishing a return under Section 77A(1).
- Making default in furnishing a return under the newly added Section 77A(1B).
In practical terms, this means that individuals or entities failing to comply with the requirements of these subsections may enter into agreements with the Director General for the payment of uncharged tax and penalties through a composite assessment.
The amendment provides tax authorities with a mechanism to address non-compliance and ensure the payment of outstanding tax amounts and associated penalties in a streamlined manner.
Related-Article:
Finance (No.2) Bill 2023 – https://www.ccs-co.com/post/finance-no-2-bill-2023
Finance (No. 2) Bill 2023: Amendment of section 2 – https://www.ccs-co.com/post/finance-no-2-bill-2023-amendment-of-section-2
Budget 2024: Further Tax Deduction For Voluntary Carbon Market (VCM) – https://www.ccs-co.com/post/budget-2024-further-tax-deduction-for-voluntary-carbon-market-vcm
Amendment to Section 4 of the ITA 1967 – Gains from the Disposal of Capital Asset – https://www.ccs-co.com/post/amendment-to-section-4-of-the-ita-1967-gains-from-the-disposal-of-capital-asset
Amendment to Section 4B of the ITA 1967 – Extension of the Scope of the Non-Business Income – https://www.ccs-co.com/post/____a
Amendment to Section 6: Income Tax Rates on Capital Asset Disposals – https://www.ccs-co.com/post/amendment-to-section-6-income-tax-rates-on-capital-asset-disposals
New Section 15C of ITA: Tax of Disposal Gains from Foreign Companies with Malaysian Real Property – https://www.ccs-co.com/post/new-section-15c-of-ita-tax-of-disposal-gains-from-foreign-companies-with-malaysian-real-property Amendment to Section 44(7A): Expanded Business Allocation for Charitable Entities – https://www.ccs-co.com/post/amendment-to-section-44-7a-expanded-business-allocation-for-charitable-entities
Evaluating the Impact: Section 61 Amendment on Trust Taxation – https://www.ccs-co.com/post/evaluating-the-impact-section-61-amendment-on-trust-taxation
Amendment to S 77A: New Reporting Rules on Capital Asset Disposal – The Impact of Section 77A(1B) – https://www.ccs-co.com/post/amendment-to-s-77a-new-reporting-rules-on-capital-asset-disposal-the-impact-of-section-77a-1b
Amendment to S 77B: Understanding Section 77B’s Latest Facets – Impact on Amendment of Tax Return – https://www.ccs-co.com/post/amendment-to-s-77b-understanding-section-77b-s-latest-facets-impact-on-amendment-of-tax-return
Evolution of Record-Keeping: Amendments to Section 82 – https://www.ccs-co.com/post/evolution-of-record-keeping-amendments-to-section-82
Transformative Tax Compliance in the Digital Era: Insights into Malaysia’s New Sections 82B and 82C – https://www.ccs-co.com/post/transformative-tax-compliance-in-the-digital-era-insights-into-malaysia-s-new-sections-82b-and-82c
