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Malaysia: Tax audit framework for finance and insurance

Malaysia: Tax audit framework for finance and insurance

The Malaysian Inland Revenue Board (MIRB) issued an updated “Tax Audit Framework Finance and Insurance.” The updated framework is effective 18 November 2020.

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Updates to the framework include:

  • The MIRB will issue a letter Surat Memohon Dokumen dan Maklumat to the taxpayer by official e-mail, fax or mail to acquire documents and information
  • In the case of a field audit, a letter Surat Pemberitahuan Lawatan Pematuhan will be issued to the taxpayer at least 14 calendar days prior to the date of visit, notifying the details in relation to the field audit. In the absence of an audit visit,
  • A letter Surat Penentuan Permulaan Tempoh Penyelesaian Kes will be issued to the taxpayer to inform the commencement date for computation of the audit case-settlement period

Under the framework:

  • The MIRB may visit any of the taxpayer’s premises or related premises by advance notification.
  • An audit examination may be extended to related/controlled companies or businesses.
  • In the event of collection of taxpayer’s original documents and records, a list and acknowledgement of receipt of the documents and records must be provided by the audit officer, and the list must be signed by the audit officer and the taxpayer or tax agent.
  • There is a shorter time frame for a taxpayer to object to the MIRB’s audit findings (18 days instead of 21 days).
  • There is a shorter time frame for settlement of a tax audit (90 calendar days instead of 120 calendar days from the commencement date of audit visit or the date of the Surat Penentuan Permulaan Tempoh Penyelesaian Kes is issued, whichever is applicable for cases in relation to business activities related to financial leasing, factoring, credit card services, stock broking, stocks and bonds, financial market services and operations / other financial intermediaries, business as a broker, agent and adjuster).
  • A penalty may be imposed in an amount equal to 100% of the tax undercharged in the event of an understatement or omission of any income as a result of the audit findings. Other possible penalties range from 35% to 55%.

Read a November 2020 report prepared by the KPMG member firm in Malaysia 

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