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Capital statements is to justify the sources of funds to support their wealth. There is a possibility of income which was not reported to the tax authority if it is insufficient.

IRB will request capital statements and justify the sources of funds to support taxpayer’s wealth:-

  1. individuals with overseas bank accounts/funds
  2. individuals with lavish lifestyles and large remittances in and out of Malaysia
  3. individuals who suddenly have the capacity to buy luxury assets
  4. director/shareholder in family controlled companies/medium and large companies
  5. companies’ directors/shareholders are being investigated

IRB will collecting evidence to recover higher tax amount if there is understatement. A court of law will have to have valid evidence from the capital statement analysis to find a party guilty of a tax offence.

Capital statement comprises two forms

Form CP 103 which requires the individual to state balances of assets and liabilities

i.e. yearly balance sheet

Form CP 102 requires the taxpayer to state earnings and spending

ie: cash flow statement with income and expenditure

Taxpayers will be requested to prepare these statements for period of five years

The preparation of capital statement support by bank statements, fixed deposit certificates, dividend vouchers, credit card statements, as the prove to IRB.

There will be advantage on defence when you have record of non-taxable income such capital gains, foreign source income, gifts, reimbursements items etc.