Inland Revenue Board Malaysia (IRBM): Your Guide to Malaysia's Tax Administration

In Malaysia, the Inland Revenue Board Malaysia (IRBM), also known as Lembaga Hasil Dalam Negeri Malaysia (LHDN) in Malay, plays an important role in navigating the complex world of taxation. It is responsible for managing tax matters in Malaysia, including the collection and administration of taxes, such as income tax and corporate tax. Every business owner or individual taxpayer in Malaysia must understand the functions, duties and responsibilities of the IRBM for smooth financial functioning. Let’s explore the IRBM role in Malaysia's taxation landscape and address a few common questions about taxes.

What is the IRBM (LHDN)?

The Inland Revenue Board of Malaysia (IRBM), or Lembaga Hasil Dalam Negeri (LHDN), is the agency in charge of collecting money for the government. It operates under the Ministry of Finance (MOF), which handles government spending and revenue. LHDN was created in 1995 to manage taxes better and has more control over its finances and staff.

The organization oversees direct taxes regulations in Malaysia in accordance with the following Acts:

• Income Tax Act 1967
• Promotion of Investments Act 1986
• Real Property Gains Tax Act 1976
• Petroleum (Income Tax) Act 1967
• Labuan Business Activity Tax Act 1990
• Stamp Act 1949

Roles and Responsibilities of IRBM 

IRBM's roles and responsibilities are expansive. Let’s look into these in detail:

• Tax collection: The IRBM collects taxes from individuals, businesses, and corporations, thus ensuring that the government has the necessary funds to provide several public services. A few taxes that IRBM collects include:
  
  • Personal income tax: Imposed on the income of individuals, this includes earnings from employment, business, investments, and other sources and is based on a progressive tax rate that increases as income levels rise.
  • Corporate income tax: This tax is levied on the profits made by businesses and corporations in Malaysia. Herein, the tax rate can vary depending on the type and size of the business.
  • Real property gains tax (RPGT): This tax is applied to the gains made from the sale of real property, including land and buildings. The tax rate varies depending on the holding period and type of property.
  • Import and export duties: Taxes are imposed on imported and exported goods, which include customs duties and excise duties.
  • Withholding tax: This is a tax deducted at the source on payments made to non-residents for services, royalties, dividends, etc.
  • Other taxes: Malaysia also imposes a few other types of taxes, like capital gains tax, inheritance tax, and more, under specific circumstances.
• Tax enforcement: The IRBM enforces tax laws and regulations and conducts audits and investigations to ensure and reinforce compliance.
• Refunds and incentives: It processes tax refunds and provides incentives to taxpayers for specific activities, such as investments in certain sectors.
• Taxpayer registration: It's IRBM’s duty to register taxpayers and issue them tax identification numbers to make sure individuals and businesses are on its radar.
   
• Taxpayer assistance: IRBM Malaysia offers guidance and support to taxpayers to help them understand and fulfil their tax obligations. A few things include:
  • Guidance and information: On tax matters through its official website, publications and contact centres.
  • Taxpayer education: IRBM hosts educational programs and seminars to inform taxpayers about their rights and responsibilities covering topics like tax planning, filing procedures, tax-saving strategies, etc.
  • Online services: It offers online services to simplify the tax compliance process and enable taxpayers to manage things like filing tax returns, making payments, accessing tax-related information, etc.
  • Tax workshops: The IRBM occasionally conducts workshops and seminars that provide detailed insights into tax laws and compliance requirements.
  • Compliance assistance: IRBM also aids businesses and individuals to help rectify non-compliance issues, such as underreporting income or late filing of taxes.
• Policy development: The IRBM also helps shape tax policies to keep pace with the evolving financial landscape. For example, modifying tax laws to accommodate digital transactions, aligning tax policies with technological advancements and more.
• International relations: The IRBM is also responsible for collaborating with tax authorities around the world to prevent tax evasion and facilitate the exchange of information. 

Powers of LHDN (IRBM)

The IRBM possesses various powers, including:

• Entering into contracts.
• Utilizing all movable and immovable property of the Board, including raising loans by mortgaging such property.
• Engaging in activities, either independently or in collaboration with other organizations or international bodies, to enhance understanding of taxation.
• Offering technical advice or assistance, including training facilities, to tax authorities of other nations.
• Imposing fees or charges for services provided by the Board.
• Granting loans to its employees for purposes approved by the Board.
• Providing recreational facilities and promoting activities beneficial to the welfare of its employees.
• Offering training for its employees and funding scholarships or other forms of training.
• Undertaking any action incidental to its powers.

Conclusion

Understanding the role of IRBM (LHDN) Malaysia is important for taxpayers and businesses to not only know about paying taxes but also about determining the appropriate authorities for each compliance.