Tax Investigation
Rising Global Consultants
Tax Investigation
Tax investigation is a form of enforcement by the Inland Revenue Board of Malaysia (IRBM) to ensure the accuracy of tax returns by investigating taxpayers suspected of fraud, willful deception or negligence in filing tax returns
Tax investigation involves the investigation of a taxpayer’s business and books of accounts, whereby the tax investigator will usually make unannounced visits to the taxpayer’s place of business (which may also be personal residence, offices of agents/representatives and third parties) and keep the required documents and books of accounts for investigation
Tax Audit
Desk audit
The taxpayer receives an official letter from the Inland Revenue. This letter will specify the documents to be examined and the deadline given to the taxpayer to deliver them. If the taxpayer is unable to prepare the documents within the deadline, he may additionally apply to the Inland Revenue for an extension of the deadline for delivery of the documents. The audit will be carried out in the Inland Revenue Department and the officer in charge of the Inland Revenue Department will inform the taxpayer of the results of the audit in writing after the inspection, which may serve as a guideline for the on-site audit
On-site audits
The taxpayer will receive an official letter from the Inland Revenue. This letter will state the time and date of the Inland Revenue officer’s visit and the scope of the documents they will be examining (e.g., the tax year to be examined). The taxpayer will be interviewed and questioned by the officer during this audit. The taxpayer must prepare all documents requested by the Inland Revenue Department in advance.
We would like to emphasize that tax evasion is not allowed in Malaysia. When the Inland Revenue Department discovers any tax evasion by the taxpayer, they will issue a penalty ticket (either imprisonment or both). Therefore, we do not assist our customers to evade taxes. We believe that as a good citizen, every taxpayer is required to pay income tax on their income under the Income Tax Act 1967
Pre-trial stage
Once your file is selected, the Internal Revenue Service (IRB) will notify the taxpayer to request documentation. The entire review process can take up to three months to finalize. Case selection for tax audit purposes is made through IRBM’s computerized system, which is based on risk analysis, third-party information, specific industry categories, and specific taxpayer groups or locations
On-site audit phase
Auditors will conduct interviews with taxpayers. The purpose of the interview is for the auditor to meet with the taxpayer to learn about the taxpayer’s business activities and discuss the audit. The taxpayer will be asked to explain its business activities, accounting and record keeping systems
Post-audit phase
Upon completion of the tax audit, the auditor will prepare a report of findings for approval by the Branch Audit Manager. The taxpayer will have 21 days to respond or appeal by submitting an official letter of objection and related evidence. If no objection is filed within 21 days from the date of notification of the proposed tax adjustment, the taxpayer will be deemed to have agreed to the proposed tax adjustment
Investigation fines
Failure to provide an income tax return is an offense under section 112 of the Income Tax Act. A taxpayer who fails to provide an income tax return for one year may be fined between RM200 and RM20,000 or sentenced to imprisonment for up to six months, or both (under section 112(1) of the Income Tax Act)
Filing an incorrect or incomplete tax return or giving false information about one’s own or another person’s tax liability is an offense under section 113(1) of the Income Tax Act. If found guilty, the taxpayer may be fined between RM1,000 and RM10,000 and must also pay an additional special penalty equal to twice the unpaid tax
Willful tax evasion is an offense under section 114(1) of the Income Tax Act. Taxpayers who commit this offense can be fined between RM1,000 and RM20,000, imprisoned for up to three years, or both. They must also pay a special penalty equal to three times the unpaid tax
Under the Income Tax Ordinance 1967, the Director General of Inland Revenue (DGIR) is empowered to `investigate’ and `audit’ any taxpayer, and non-compliance and evasion are penalized under the Ordinance
The Inland Revenue has the authority in cases where crimes such as fraud, willful deception or negligent filing of tax returns are found:
- Additional assessment: The Inland Revenue will further investigate the taxpayer’s income and expenses
- Heavy penalties: penalties start at 45% and go up to 300%, depending on the circumstances of the taxpayer’s violation (depending on the circumstances, taxpayers will be subject to special penalties that start at 21%)
- Penalty: Another type of penalty depends on the circumstances of the taxpayer’s violation
- Imprisonment: Omission or under-reporting of income and over-reporting of expenses are considered criminal offenses
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Phone Number: +60 3-8682 1802 | E-mail: officer@rising.com.my