Capital The statement is a summary of your property and liabilities for a tax year, to assess if your declared income for the same period corresponds to an increase in your money. This involves preparing a “balance sheet” of a person every year and determining an increase or decrease in his money which should be coordinated against the income declared by the person.
Although it seems simple, there are many complications that can arise that leads to disputes with tax authorities. To create a contribution, one has to collect documents to support bank statement, credit card statement, company accounts, sales and all kinds of assets, loan agreements, procurement of insurance policies, your various types of investments such as units, bonds, fixed deposits, shares, documents that are received, which are received, which are received.
You should also include local and foreign property, liabilities, income and expenditure in your capital details. Tax officers can ask you to prepare capital details for a maximum of five years according to the limit period provided in the Income Tax Act 1967.
Problems that arise
In recent years, proving that a person has received gifts has become very difficult. The initial point appears that gifts are not easily accepted as non-taxable objects. The burden of proving the gift is a real gift with the taxpayer, and he has to show the evidence in writing that the donor gave cash gifts and the financial ability to give the gift. The gift is also usually given with love and affection and is given between close friends or relatives. The gift in this event is given by the third party, the burden of evidence increases and the donor should be clearly announced in a deed, stating the cause of the gift. It should be unrelated to any commercial behavior or should not be obtained when using employment.
Tax Authorities often question loans received from third party whether the loan is real or it is a form of income. They are asking taxpayers to get information from the lender at the source of their funds. Effectively, they want the taxpayer to get information from the lender that is usually beyond the borrower control. If you cannot provide information, they are trying to convert the loan from third party in taxpayer’s income. This is not resonant with the law because the taxpayer cannot force the lender to disclose the source of his money.
A major headache for taxpayers in preparing a capital statement is explaining debit and credit entries in the statements of the bank as the transaction would have been several years ago after the preparation of the capital statement. Generally, taxpayers may not be hardworking to review their bank statement and to support specific transactions over the years. The tax authority has a tendency to take credit entries in the form of taxable income and personal expenditure in the bank statement that may not be correct as credit entries may represent reimbursement, capital receipts, interbank transfer, etc. Debit entries may represent the purchase of capital assets, interbank transfer, providing.
If the information is not available to backup your posts, the capital statement will reflect large discrepancies, resulting in the announcement of income and additional taxes. Overall, capital statements are never accurate because both sides will create perceptions that cannot be supported by evidence.
The burden of evidence here is with the taxpayer. However, tax officials may not be inappropriate because if the matter goes to court, they have to certify their position. Generally, capital statements are settled before the case referred to courts. ,
The article has been contributed by SM Thannemalai (www.thannees.com), Managing Director of Thanis Tax Consulting Services SDN BHD.
