If the Malaysian Inland Revenue Board sends you a letter, you are likely to be the subject of an audit or investigation. How can you tell if you’re the target of a tax investigation or audit? This is the question that must be addressed. The answer is straightforward and simple. You should go over the letterhead that was given to you as soon as possible. If the letterhead is from the investigation department, your case is under investigation. If, on the other hand, the letter comes from a branch or state office, your taxes will be audited.
After reading this article, you will have a thorough understanding of the differences between a tax inquiry and a tax audit conducted by the Malaysian Inland Revenue Board. A table comparing and contrasting the two has been provided below to help you better understand the similarities and differences between the two.
| No | Details | Tax Investigators | Tax Auditors |
| 1 | Statutory provisions | Involves no less than 30 provisions in the ITA 1967 as per Tax Investigation Framework | Involves no less than 20 provisions in the ITA 1967 as per Tax Audit Framework |
| 2 | Visits | Conduct raids and searches in targeted premises without prior notice | Will inform taxpayers about the audit process prior to visits |
| 3 | Activity | Conduct raids on targeted premisesObtain, take possession, or seize documents / evidenceMay conduct investigation under AMLATFPUAA 2001May prosecute taxpayers in court | General audit conducted in IRBM officesComprehensive audit conducted in taxpayer’s premise |
| 4 | Objective | Deter tax evasionIdentify and prosecute tax evadersCreate fairness to compliant taxpayersEnhance voluntary compliance | Encourage voluntary complianceCreate tax awarenessTax education |
| 5 | Coverage period | No investigation period limit if proven cases of fraud, wilful default or negligence | Comprehensive audit of up to 3 years which may be extended to 5 years depending on issues detectedNo audit period limit if proven cases of fraud, wilful default or negligence |
| 6 | Case selection | Risks analysisInformers’ informationIntelligence informationOther law enforcement agencies’ informationReview of details from income tax forms submitted | Risks assessmentsInformation from 3rd partySpecific industry selectionSpecific issues of a group of taxpayerslocality |
| 7 | Types of assessments | Composite Assessment AssessmentAdditional Assessment | AssessmentAdditional Assessment |
| 8 | Appeals | Cases concluded by composite assessments are deemed final and conclusive | Appeals based on Section 97A(2), Section 99 until Section 102 of the ITA 1967 |
| 9 | Type of taxpayers | Investigates all types of taxpayers without boundaries | Select taxpayers based on location of taxpayer and job scope of auditor either individual, trust, partnership or company |
| 10 | Duration of field work | Raid conducted in 1 day | Audit visits 1 to 3 days |
| 11 | Bank Records | Request bank statements through Financial Services Act 2013Freezing, Seizing, or Forfeiture & other records under AMLATFPUAA 2001 | Request bank statement through taxpayer |
| 12 | Place of visit | Business premiseResidential Auditor Tax agent Third partyOthers as may required | Business premiseIRBM officeOther places as agreed by both parties |
| Frameworks | https://phl.hasil.gov.my/pdf/pdfam/Tax_Investigation_Framework_2020_2.pdf | https://phl.hasil.gov.my/pdf/pdfam/RK_Audit_Cukai_2022_1.pdf |
Furthermore, the tax investigation department and offices conduct raids or searches in premises for evidence of tax evasion. When necessary, they will also issue a composite assessment. They may also request bank statements directly from banks during the investigation process to aid the investigation. The investigation officer may take over by conducting audits on taxpayers who are not registered with the branch. Finally, they may use sections of the AMLATFPUAA 2001 for their audit work.
In a nutshell, the goal of auditing and investigating is to assist taxpayers in complying with the Income Tax Act of 1967. You have nothing to worry about if you have no intention of evading taxes. Be a good tax payer and contribute to the growth of the country. You are Malaysia’s unsung hero.
