Tax Investigation

1. What is tax investigation?
Tax investigation normally begins with a surprise visit to the taxpayer's business premises, personal residences, agent/representatives and various third parties' premises to take possession of the required documents and books of accounts for investigation purposes.

2. What is the aim of tax investigations?
The aim of tax investigations is to investigate taxpayers who are suspected to be involved in fraud, willful defraud or negligence in reporting their income.

3. What is the difference between tax audit and tax investigation?

Tax audit is just a normal routine inspection on a taxpayer's operation, financial records and other supporting documents which substantiate the position taken in the tax return without any suspicion. Tax investigation is an investigation carried out on a taxpayer suspected to be involved in fraud, willful defraud or negligence in reporting their income and there are certain proofs to prove it.

4. What happens if IRB finds out if there is fraud, willful defraud or negligence in reporting my business's income?

In cases where fraud, willful defraud or negligence is detected, the IRB is empowered to revise the tax computations, taking into account tax lost beyond the 6 years of investigation notwithstanding that the taxpayer may not have records for those periods. Additional assessment will be issued to recover the tax lost, coupled with penalties, which can be up to 300%. In serious cases, or for repeated offenders, the taxpayer may be prosecuted and if he is found guilty, imprisonment of up to 3 years can be imposed.

5. What is considered willful evasion of tax?

Willful evasion of tax means any action or deed deliberately performed or done with the purpose or intention of evading or assisting any other person to evade tax and would include any of the following:

• Deliberate omission of any income from a return;
• Making a false statement or entry in a return;
• Giving a false answer(orally or in writing) to a question asked or to a request for information made for the purpose of the Act;
• Preparing or maintaining false books of account or other records, or authorizing the preparation or maintenance of false books of accounts or other records;
• Falsifying books of accounts or other records, or authorizing the falsification of books of accounts or other records; and
• Making use of any fraud, art or contrivance, or authorizing the use of any fraud, art, or contrivance.

6. Where can I obtain more information on tax investigation?

The IRB has issued a framework for tax investigation to ensure that the tax investigation is carried out in a fair, transparent and impartial manner. This framework outlines the rights and responsibilities of the taxpayers, tax agents and investigation officers. For more information, please read the "Framework for Tax Investigation" published in the IRBM website ( http://www.hasil.org.my/ ) or consult a tax consultant.

Please contact me at comsecretarial@gmail.com if you need professional assistance on this topic. I am more than willing to assist you.

Tax Audit

1. What is tax audit?Tax audits involve a visit by the Inland Revenue Board (IRB) officer to business owners ("tax payer") corporate premises to review tax payer's operation, financial records and other supporting documents which substantiate the position taken in the tax return.

2. What is the aim of tax audit?

Tax audit is required to ensure that tax payers report the correct amount of income and pay the right amount of tax which is computed in accordance with the tax laws and regulations. For the government, it works as an enforcement tool ensuring that the Self Assessment System is strictly complied with to prevent any loss of revenue of the government.

3. What is the Self Assessment System?

The Self Assessment System is a process requiring tax payers to compute, report and pay the right amount of tax by themselves or with the help of a tax consultant.

4. What if IRB finds out that I understated or omitted my company's income?

If that happens, you are subjected to a penalty equal to the amount of tax undercharged (100%) or equal to triple the amount of tax payable (300%).

5. How to avoid the penalty?

There is actually no way to avoid the penalty but Director General of Inland Revenue (DGIR) has the discretionary power to abate the penalty. It is recommended to keep a full set of records and accounts to avoid any misunderstanding in the tax audit process.

6. Where can I obtain information on tax audit?

You can obtain further information by reading the "Framework for Tax audit" published in the IRBM website ( http://www.hasil.org.my/ ), or consult a tax consultant.

7. What is included in the guide?

The main areas covered in the guideline are as follows:

(i) The main objectives of audit.

(ii) The basic procedures involved in a tax audit.

(iii) The rights and responsibilities of IRBM, taxpayers and tax agents.

(iv) Complaints and appeal procedures.

(v) Penalty and offence.

Please contact me at comsecretarial@gmail.com if you need professional assistance on this topic. I am more than willing to assist you.