The Inland Revenue Board (IRB) of Malaysia has continued to increase the intensity and scope of tax audits in Malaysia.
The IRB has extended the coverage of tax audits to many areas including stock transfer, related-party transactions, restructuring and international transactions.
This increases the possibility of additional tax assessment and liabilities, and as such, an expert understanding of tax laws and audit processes is required.
GSK & Associates provides tax services including navigating the entire process of tax audits on behalf of the taxpayer.
We have assisted taxpayers, both individuals and corporate clients, on tax audits in which we have managed to reduce their final tax liabilities significantly compared to initial tax audit findings.
We have an experienced in-house team as well as external consultants to deal with tax officials in order to effectively respond to the tax authorities’ requests and enquiries.
Contact us for a non-obligatory discussion and proposal. We guarantee you on absolute confidentiality of all such discussions.
Updates on tax audits:
1. Reduced rates for tax audit penalties
Effective 1 May 2022, the penalties imposed under Section 113 (2) of the Income Tax Act, 1967 (ITA) are at a new, reduced graduated scale.
Section 113 of the ITA relates to incorrect returns due to omitting or understating any income or giving incorrect information in relation to changeability to tax.
We believe the change is due to a court case in which the Court had affirmed that the imposition of penalties under section 113 (2) of the ITA is not mandatory, and that LHDN is vested with a discretionary power to decide whether a penalty should be imposed in a particular tax audit case.
Click here for full information on the reduction of the rates of penalties.
2. Updates on recent tax audit/investigation findings
In August 2022, an investigation branch of LHDN audited a taxpayer and found that there was understatement of income. The taxpayer was charged a penalty under section 113 (2) of 45% instead of 15% as per the TAF issued on 1 May 2022. The reason given was that the investigation branch was following "tax investigation framework" which has no change in the penalty rate. Our argument was that the offence and penalty imposed were under Section 113 (2) and therefore, being a first time offence, the penalty should be 15%. Eventually, the penalty was reduced to 25% as a partial compromise.
Find out how
we can help you
Manager, GSK @ Kuala Lumpur