Tax audit when a nightmare begins

Under self-assessment, the responsibility of the taxpayer is to compute and comply with Malaysia Income Tax Act 1967, meanwhile the tax authority is to conduct a tax audit as a routine duty to ensure the compliance.

Type of audit

A desk audit refers to examination of client records and adjustment within the Inland Revenue Board (IRB) Office. Normally involve a simple adjustment such as claim of relief, the taxpayer is requested to furnish their document to the nearest IRB office. However, it may possibly refer to external audit.

On the other hand, an external audit will be conducted at the client’s office, therefore, pursuant to Section 79 and 80, Income Tax Act 1967, the officer have right to access the bank statement and relevant accounting record and premises. If the premises are not suitable, the client might recommend another location.

Selection of audit case

The selection an audit cases by a computer based on the criteria such as risk assessment, on the other hand, the selection might be based on rely from other sources for example, reveal by a third party, specific industry or location.

Pre-audit issue

The officer will inform the taxpayer within 14 days of written notice, what are the document required, which year to be audited, particular of officer and when the audit visit will be carried out.

The taxpayer could request the delay of the audit visit with reasonable ground, meanwhile the taxpayer may contact the Audit Manager to confirm the surprise visit.

During the audit

The audit begins with an interview by the officer with the taxpayer or accounting personnel to understand their business activity and the record keeping format.

The officer will go through their document, including the physical stock check and fixed asset in order to ensure the capital allowance claims is valid. Besides, the officer might allowed to inspect the non-business record such as their personal account or property. The taxpayer also facilitates the officer make a copy or borrow the relevant record bring back to the IRB office to verify. Before the officer takes away their record they have to list out the said record and the taxpayer will acknowledge accordingly.

If the records are kept in electronic, the taxpayer has to be printed out the record for the officer verify

Post-audit issue

The officer will be issued an audit report of the issues discovery during the audit and reason an adjustment. If necessary the taxpayer will invite to discuss the audit adjustment or the taxpayer may attend personally to understand the proceed of the audit.

If the taxpayer not satisfy with the audit adjustment, he / she might be appealed within 21 days from the date audit adjustment notification with additional information. If no appeal is received, then the officer will issue a Notice of Additional Assessment (JA). If no adjustment to the taxpayer will inform the accordingly.

Conclusion :

Every taxpayer will be subject to an audit at any time, therefore, the taxpayer should understand their rights and duty as a taxpayer.