RPGT: Amendment of Section 15 – Additional Assessments

"Section 15 Additional Assessments" is read as follows:-

Section 15(1) [Where Director General may make additional assessment]

The Director General, where in respect of any year of assessment it appears to him that no or no sufficient assessment has been made on a person chargeable with the tax, may within five years after the end of that year of assessment make on that person whatever assessment or additional assessment he considers to be appropriate.

Section 15(2) [Fraud or wilful default]

The Director General, where it appears to him that a person chargeable with the tax has been guilty of any form of fraud or wilful default in connection with or in relation to the tax, may at any time make an assessment in respect of that person for the purpose of making good any loss of the tax attributable to the fraud or wilful default.

Section 15(3) [Determination or withdrawal]

Where in a year of assessment—

1. any assessment made under this Act or the Income Tax Act 1967 in respect of a person for any year of assessment has been determined by the court on appeal or review; or

2. any exemption granted to any person under this Act has been withdrawn for failing to comply with any condition imposed in granting such exemption,

the Director General may, in the first-mentioned year of assessment or within five years after its expiration, make an assessment in respect of that person for any year of assessment for the purpose of giving effect to the determination or withdrawal, as the case may be.

Section 15(4) [Failure to retain and remit payment]

Where pursuant to section 21B and subject to subsection 14(5), an acquirer fails to retain and remit the amount required under that section, and the failure is by reason of an incorrect or wrong notification furnished to him under section 13, there shall be included in the assessment made in respect of the person who furnished such notification, a sum equal to ten per cent of the tax payable by that person.

Section 15(4A) [Director General’s discretion]

Notwithstanding subsection (4), the Director General may, in his discretion for any good cause shown, remit the whole or any part of the sum referred to in that subsection and where the sum remitted has been paid, the Director General shall repay the same.

Section 15(5) [Meaning of “tax payable”]

For the purpose of subsection (4), “tax payable” means the amount of tax charged on the chargeable gain, excluding any allowable loss referred to under subsection 7(4).

Basic Understanding

15(1) Where the Director General may make additional assessments:

• Within five years after the end of a tax year, the Director General can make additional assessments on a person if it seems that either no assessment or an insufficient assessment has been made regarding the tax that person owes.

15(2) Fraud or wilful default:

• Suppose the Director-General believes a person has intentionally committed fraud or willfully defaulted in connection with the tax.

• In that case, an assessment can be made at any time to recover the lost tax due to fraudulent activity or wilful default.

15(3) Determination or withdrawal:

• If, in a tax year:

  • An assessment made for a person is determined by the court due to an appeal or review, or

  • An exemption granted to a person is withdrawn for not meeting certain conditions,

• The Director General can make an assessment within five years after that tax year or during that year to account for the court's decision or the withdrawal of the exemption.

15(4) Failure to retain and remit payment:

• If, according to section 21B and subject to subsection 14(5), a person fails to retain and remit the required amount due to incorrect information provided in section 13, an additional amount equal to 10% of the tax payable by that person can be included in the assessment.

15(4A) Director General’s discretion:

• For valid reasons, the Director General has the discretion to forgive or reduce the amount mentioned in subsection (4). If any amount is forgiven and has already been paid, the Director General must repay it.

15(5) Meaning of “tax payable”:

• For the purpose of subsection (4), "tax payable" refers to the amount of tax charged on the taxable gain, excluding any allowable losses mentioned in subsection 7(4).

In simple terms, this section gives the Director General the authority to make additional assessments within a specified time frame, especially in cases of fraud, wilful default, court decisions, or withdrawn exemptions.

There are provisions to include additional amounts in assessments for failure to meet certain requirements, and the Director General has the discretion to reduce or forgive these additional amounts in certain situations.

Finance (No. 2) Bill 2023

Let's break down the proposed amendments to "Section 15 Additional Assessments":

(a) Subsection (1A) - Assessment for Tax Repaid by Mistake:

• A new subsection, (1A), is introduced.

• The Director General can make an assessment if it's discovered that tax, either in full or in part, has been repaid to a person by mistake (either factual or legal).

• However, there are limitations:

  • No assessment can be made if the repayment was in accordance with the prevailing practice of the Director General at the time.

  • The assessment cannot be made more than five years after the tax has been repaid.

(b) Subsection (2) - Inclusion of "Negligence":

• Subsection (2) is amended to include "negligence" alongside "fraud" and "wilful default."

• This means the Director General can make an assessment if a person has been guilty of fraud, wilful default, or negligence, aiming to recover any lost tax due to these actions.

Tax Impact:

• The proposed amendments give the Director General the authority to assess a person for tax that has been repaid due to a mistake of fact or law.

• Including "negligence" broadens the circumstances under which the Director General can assess, emphasising the importance of compliance and accurate reporting.

• Taxpayers should be vigilant in their tax affairs to avoid potential assessments due to mistakes or negligence.

Effective Date:

• These amendments are set to come into operation on 1 January 2025.