GST : Tax Avoidance Clause?

As usual, if there is any fraud happening, the magistrates would issue a warrant, or search without a warrant, to the business entities. While running through the Guideline from custom, below is one definition on "SINGLE TAXABLE PERSON". Quite interesting is that, the Custom and the Act is giving solution on that by combining all business entities into one single taxable person regardless different business nature but sharing same kind of resources such as finance, economy and have closed relationship as an organisation in the business nature.

Let's have a look :-

Single Taxable Person : In General Guide from Custom

43. A single taxable person means two or more business entities which have been directed by the Director General to be registered under one registration number. Two or more business entities can be classified as a single taxable person when they artificially separate their business activities for the purpose of tax avoidance. All persons named in the direction by the Director General will be registered under one registration number and they may jointly nominate the name to be used for the registration of the single taxable person within fourteen (14) days from the date of the direction. Failing which, registration will be named as specified in the direction. The liability date for a single taxable person registration is the date specified in the direction.

Rang Undang-Undang CBP (GST) 2014
Arahan untuk mengira orang sebagai orang kena cukai tunggal

23. (1) Tanpa menjejaskan seksyen 20, jika Ketua Pengarah berpuas hati bahawa apa-apa perasingan aktiviti perniagaan adalah dibuat-buat yang menyebabkan pengelakan cukai, dia boleh membuat suatu arahan mengarahkan supaya orang yang dinamakan dalam arahan itu dikira sebagai orang kena cukai tunggal yang menjalankan aktiviti perniagaan yang diperihalkan dalam arahan itu dan bahawa orang kena cukai tunggal itu hendaklah bertanggungan untuk berdaftar berkuat kuasa dari tarikh yang ditentukan dalam arahan itu.

(2) Bagi maksud subseksyen (1), dalam menentukan sama ada apa-apa perasingan aktiviti perniagaan adalah dibuat-buat, hendaklah diambil kira setakat manakah orang yang berlainan yang menjalankan aktiviti perniagaan itu berkait rapat antara satu sama lain melalui hubungan kewangan, ekonomi dan organisasi.

For further explanation found from the General Guide GST,

Financial link refers to:

i. financial support given by one party to another;

ii. one party not financially viable without the support from another party; or

iii.common financial interest in the proceeds of the business

Economic link refers to :

i.seeking to achieve the same economic objectives;

ii.activities of one party benefit the other party; or

iii.supplying to the same circle of customers

Organisational link refers to:

i.common management;

ii.common employees;

iii.common premises; or

iv.common equipments

Example 1

X runs a restaurant business and sells food only whereas Y sells beverages. Both businesses share the same premise, employ the same employees and serve common customers. The total sales of food per year is RM 400,000 and that of beverages is RM150,000.

In this example, both businesses are not liable to be registered since their annual taxable turnover is below the prescribed threshold. However, it is obvious that the business activities of X and Y are intentionally separated in order to avoid from the requirement to be registered.

Both businesses fulfill the requirement to be registered as a single taxable person because of financial, economic and organisational links such as sharing thesame premise, having common customers, employing the same workers and utilizing common facilities such as chairs, tables, telephone and utilities.

As such, Customs will direct X and Y to be registered under one registration number.

Example 2

Encik Samy dan Encik Muthu own two partnership businesses providing legal services.

Legal firm A has a taxable turnover of RM300,000 and legal firm B has a taxable turnover of RM250,000. In this example, if it is proven that there are financial, economic and organisational links between the two legal firms, then these two partnership businesses will be directed to be registered as a single taxable person since the combined turnover of RM550,000 has exceeded the prescribed threshold.