Msg.iris-12-024-Income From Salary And/Or Arrears From Salary Must Be Declared.
Work in Arrear – Income Declared or Else
Income from salary arrears must be declared.
The Malaysian Inland Revenue Board (IRB) has issued a new ruling stating that all income from salary arrears must be declared for tax purposes, regardless of when the income was actually earned.
This new ruling is a significant change from the previous practice, which allowed taxpayers to defer paying tax on salary arrears until the income was actually received.
What are salary arrears?
Salary arrears are payments of salary that are owed to an employee but have not yet been paid. This can occur for a variety of reasons, such as financial difficulties or administrative delays.
Under the new ruling, all salary arrears must be declared for tax purposes in the year in which they are earned, regardless of when they are actually paid.
This means that taxpayers who have received salary arrears in the past may need to file amended tax returns to declare the additional income.
How to declare salary arrears
Salary arrears can be declared on the taxpayer's income tax return using the following steps:
1. Include the amount of the salary arrears in the total income section of the return.
2. Specify the year in which the salary arrears were earned in the relevant section of the return.
3. Attach a statement to the return explaining the reason for the salary arrears.
By following these steps, taxpayers can ensure that they are complying with the new ruling and avoiding any potential penalties.
What are the penalties for not declaring salary arrears?
Taxpayers who fail to declare salary arrears may be subject to penalties, including:
- Additional tax on the undeclared income
- Interest on the additional tax
- Penalties for late filing of amended tax returns
In some cases, taxpayers may also be subject to criminal prosecution.
Conclusion
The IRB's new ruling on salary arrears is a significant change that will impact many taxpayers. Taxpayers who have received salary arrears in the past should review their tax returns to ensure that they have declared all of their income. Failure to do so could result in penalties.
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