Tax Audit Malaysia

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 ( 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.

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More about Tax Audit:

Field Audit Process & the Role of Tax Agents

Tax Audit In Malaysia; YYC Advisors Perspective On The Self-Assessment System