Finance Act 2019
As a result of the Finance Act 2019, the scope of the stoppage order was expanded to include the increase of taxes in situations in which the company has failed to submit an estimate of the amount of tax that is payable under Section 107C(10A) of the Income Tax Act 1967.
This expansion took effect on January 1, 2020.
Finance Act 2020
Following the provisions of the Finance Act 2020, starting on January 1, 2021, the stoppage order may be sent:
digitally; or
transmitted digitally
Public Rulings 4/2022
To reflect the legislative changes outlined above, Public Ruling No. 4/2022: Recovery from Persons Leaving Malaysia was issued by the Inland Revenue Board (IRB) on October 20, 2022.
This new Public Ruling, which is eight pages long, takes the place of Public Ruling No. 12/2015, published on December 17, 2015.
The following paragraphs make up the new Public Ruling, which also provides four examples:
Objective
Relevant provisions of the law
Interpretation
Introduction
Preventing a taxpayer from leaving the country
Allowing a taxpayer to leave the country
Payment method
Consequences of leaving or intending to leave the country without payment of tax and debts
Responsibility of a taxpayer
Updates and amendments
Disclaimer
The new Public Ruling, quite similar to the preceding Public Ruling, discusses the conditions and processes for recovering taxes and debts owed by taxpayers who will be departing Malaysia.
Stoppage Order
Under section 104 of the ITA, if the Director General (DG) believes [*] that a taxpayer is about to leave Malaysia without paying:
all tax payable by him (whether or not due or due and payable);
all sums payable by him
all debts payable by him on withholding tax
[*] For the purposes of section 104 of the ITA, the DG does not have to prove that a taxpayer intends to leave the country permanentlyThe DG may issue a certificate to a Commissioner of Police or a Director of Immigration requesting that that taxpayer be prevented from leaving Malaysia until he has paid all the tax, sums and debts so payable or furnishes security to the satisfaction of the DG for the payment.
The certificate that invokes the stoppage order contains details of the tax, sums and debts so payable.
A Commissioner of Police or a Director of Immigration upon receiving such a certificate, must take steps to prevent that taxpayer from leaving Malaysia, including the use of such reasonable force and the seizure, removal or retention of any certificate of identity and any passport, exit permit or other travel document relating to that taxpayer to enforce the request of DG.
Example 1
A certificate under section 104 of the ITA preventing taxpayers from leaving Malaysia was issued by the DG to Mr Kuma on 14.2.2022 for not settling his outstanding income tax of RM195,688.
The certificate was delivered to him by registered post.
On 18.07.2022, he went to the Immigration Department of Malaysia (IDM) to renew his passport, which would expire on 2.10.2022.
The IDM rejected his application for passport renewal because he was prevented from leaving Malaysia under the stoppage order.
Allowing Taxpayers to Leave the Country
A taxpayer will be allowed to leave the country if the amount of tax or debts due on the certificate has been settled in full.
Documentary evidence or receipt must be submitted to show that the payment has been made.
For immediate cancellation, the payment receipt will be submitted to the Inland Revenue Board of Malaysia (IRBM) branch office that handles his income tax file.
For payment by cheque, the taxpayer can leave the country after the bank has cleared the cheque. A revocation letter will then be issued to the taxpayer.
Temporary Release
A taxpayer (excluding foreign nationals) who cannot settle fully his tax liability and debts will be allowed to leave the country with certain conditions.
A letter for temporary release will be issued upon satisfying the conditions, and the period a taxpayer is allowed to travel out of the country will be stated in the letter.
Payment Method
The new PR also stipulates that payment for outstanding taxes and debts are now to be made through the following methods:
MyTax Portal at https://mytax.hasil.gov.my via ‘ezHasil Services’> ‘ByrHASiL’;
Commercial bank internet banking portal, which was appointed as HASiL collection agent;
Pos Malaysia counters and commercial banks which appointed as HASiL collection agents;
Bank cash deposit machine which is appointed as HASiL collection agent; or
The bank's automatic teller machine (ATM), which appointed as the HASiL collection agent
Consequences of Leaving or Intending to Leave the Country Without Payment of Tax and Debts
A taxpayer who leaves Malaysia voluntarily or attempts to leave Malaysia without making payment for all tax, sums and debts so payable mentioned in the certificate, if convicted, will be liable to:
a fine of not less than two hundred ringgit (RM 200) and not more than twenty thousand ringgit (RM20,000); or
imprisonment for a period not exceeding six (6) months; or
both.
A police officer or an immigration officer may arrest, without a warrant, any person whom he reasonably suspects of committing or is about to commit an offence by not complying with a certificate issued under section 104 of the ITA.
Frequently Asked Questions:
What is the stoppage order, and how did the Finance Act 2019 expand its scope?
The stoppage order is an order issued by the Director General of the Inland Revenue Board (IRB) that prevents a taxpayer from leaving Malaysia until they have paid all the tax, sums, and debts payable, or furnish security for payment to the satisfaction of the Director General. The Finance Act 2019 expanded the scope of the stoppage order to include the increase of taxes in situations where a company has failed to submit an estimate of the amount of tax payable under Section 107C(10A) of the Income Tax Act 1967.
What are the provisions of the Finance Act 2020 regarding the stoppage order? The Finance Act 2020 provides that the stoppage order may be sent digitally or transmitted digitally, starting from January 1, 2021.
What is Public Ruling No. 4/2022, and how does it relate to recovering taxes and debts owed by taxpayers leaving Malaysia?
Public Ruling No. 4/2022 is a new ruling issued by the IRB on October 20, 2022, to reflect the legislative changes made by the Finance Acts of 2019 and 2020. This ruling discusses the conditions and processes for recovering taxes and debts owed by taxpayers leaving Malaysia, including the stoppage order.
What are the consequences of leaving or attempting to leave Malaysia without paying all taxes, sums, and debts mentioned in the stoppage order?
If a taxpayer leaves or attempts to leave Malaysia without paying all the taxes, sums, and debts payable, they may be liable to a fine of not less than RM200 and not more than RM20,000, or imprisonment.
What are the payment methods for outstanding taxes and debts under the new Public Ruling?
Under the new Public Ruling, outstanding taxes and debts can be paid through the following methods: MyTax Portal, commercial bank internet banking portals appointed as HASiL collection agents, Pos Malaysia counters and commercial banks appointed as HASiL collection agents, bank cash deposit machines appointed as HASiL collection agents, or the bank's automatic teller machines (ATMs) appointed as HASiL collection agents.
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