Be Ready for Tax Audits and Investigations

Published: 5 Aug 2024

At YYC, we're dedicated to ensuring you're always ready for tax audits and investigations. Since the implementation of the Self Assessment System (SAS) in 2004, it's been mandatory for individual taxpayers in Malaysia to calculate their own chargeable income, file tax returns, and make payments by specified deadlines. A striking report from the Inland Revenue Board of Malaysia (IRBM) in 2022 revealed that over 31,000 entities hadn't declared their incomes, leading to an estimated RM665 million in lost taxes.

This statistic highlights the crucial role of the IRBM in conducting thorough tax audits and investigations to ensure full compliance. Over the years, we've refined our audit processes for both businesses and individuals to mitigate any risks of non-compliance.

How Tax Audits and Investigations are Conducted

The audit process begins with a selection phase, where the IRBM uses an automated system to evaluate risk profiles and other criteria. If your case is selected, you'll be notified to submit the necessary documentation. Typically, a standard tax audit and investigation wraps up within three months, although more complex cases may extend beyond this timeframe.

Key Triggers for a Tax Audit and Investigation

Be aware of these common triggers:

• Significant fluctuations in income or expenses
• Consistent business losses
• Discrepancies between reported income and actual spending
• Failure to submit tax returns
• Providing conflicting information

Best Practices During a Tax Audit and Investigation

Cooperation is key. Engaging promptly and fully with IRBM officers and responding swiftly to their inquiries can smooth the tax audit and investigation process, ensuring it concludes without complications.

Documentation for Tax Audits and Investigations

It's essential to maintain detailed records and supporting documents such as invoices, receipts, and documents for personal reliefs. These records, which should be kept for seven years, are crucial in defending your position during an audit.

Scope and Penalties of Tax Audits and Investigations

As of June 30, 2024, roughly 525,000 taxpayers had been audited and investigated, incurring penalties and additional taxes totaling RM3.7 billion. The IRBM typically reviews up to three years of filings but may extend this to five years in instances of suspected negligence or fraud. Non-compliance can result in severe penalties, with fines reaching up to 300% in cases of willful evasion.

Post-Audit Procedures

If you disagree with the outcome of a tax audit and investigation, you have 30 days to appeal the assessment. It's crucial to settle any additional tax liabilities and penalties promptly to prevent further charges.

Preparing for Future Tax Audits and Investigations

With Tax Administration 3.0 and e-Invoicing now in effect, the IRBM is boosting its focus on high-net-worth individuals, the shadow economy, aggressive tax planning, online activities, cross-border transactions, and offshore financial assets. In today's era of transparency, maintaining a meticulous and compliant tax profile is more important than ever. Regular tax health checks and thorough documentation are advisable to stay prepared for any tax audit and investigation.

At YYC, we're equipped to help you navigate the complexities of tax audits and investigations. If you're concerned about your tax situation, don't hesitate to reach out. We're here to provide the solutions you need to optimize your tax position. Stay audit-ready and compliant, and remember, with the right support and preparation, 'YES YOU CAN' successfully manage any tax audit and investigation.

** We have a dedicated team of staff providing quick response and excellent customer service. Feel free to contact us to find out more.