The taxable period of an individual is from 1 April to 31 March. Income earned during the income tax year is assessed to tax in the assessment year, which is the year following the income tax year.
In general, income tax returns must be filed within three months from the end of the income year (i.e. by 30 June after the end of the income year). Tax returns for capital gains must be filed within 30 days from the date of disposal of the capital assets. If a taxpayer discontinues one’s business, returns must be filed within one month from the date of discontinuance of business. The failure of a taxpayer to file income tax returns, knowing that assessable income has been obtained, is deemed to have ‘fraudulent intention’.
Payment of tax
Advance payments are made in quarterly instalments throughout the income tax year based on the estimated total income for the year. The advance payments and any taxes withheld are creditable against the final tax liability. The date for settling the final tax liability is specified in the notice of demand issued by the IRD.
An employer is responsible for deducting income tax due from salaries at the time of payment to employees and must pay the amount within seven days from the date of deduction. If the employer fails to deduct and pay the tax, the employer is deemed to be a defaulter and held responsible for such payment. In addition, the employer is also responsible for filing the statement of annual salary within three months after the end of the income year, and failure to file within the stipulated deadline may result in a penalty of 10% of the tax to be deducted on the annual salaries.
Resident foreigners are subject to a monthly deduction of tax on salary.
Tax audit process
Under the Income Tax Law, if it is found that there is a fraudulent intention to evade tax, the assessment or reassessment of income tax can be made at any time on the income that has escaped assessment of tax.
Failure by a taxpayer to file a return of income knowing that assessable income has been obtained, failure to comply with the notice of the IRD to submit accounts and documents, including the tax return and profit and loss accounts within the time prescribed, or submitting forged instruments and other documents are included within the meaning of fraudulent intention. If the tax authority in the course of investigation finds that a taxpayer has concealed income or particulars relating to income, the taxpayer may be permitted to fully disclose the facts within the specified time. In addition, the taxpayer must pay a penalty equal to 100% of the tax increased on account of the concealment. If the taxpayer fails to disclose the particulars within the specified time or discloses less than the income concealed, the taxpayer will also be subject to prosecution, in addition to paying the tax and penalty. If the taxpayer is found guilty, the taxpayer may be punishable with imprisonment for between three to ten years.
Statute of limitations
The statute of limitation to raise an assessment is three years after the financial year end. It does not apply in cases of fraudulent default. Mere filing of the income return and payment of advance tax in time does not constitute a final tax assessment.