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Tax Audit involves examination of documents and books of accounts for the correctness of reported income and expenses claim. Tax authorities personnel normally, will inform and advice the taxpayer of their intention on which day and the estimate time for audit together with the scope of audit, so that the required records and relevant documents can be collated.

During the tax audit, the taxpayers are obligated to –

a)      provide full and free access to all premises, properties, books and documents;

b)      allow the tax audit personnel to extract all documents without making payments;

c)      provide reasonable facilities and assistance.

Duration of a tax audit is restricted to 6 years and the scope can general compliance, or just focus on issue such as interest restriction, withholding taxes, tax incentives on reinvestment allowance, double deductions and others.

The tax authority may raise additional assessment together with penalty ranging from 60% to 100% in order to recoup the tax lost.


Tax Investigation is conducted by tax personnel by surprise and known as back duty case. It relates to tax evasion through fraud, or willful default of a taxpayer to deliberately under declaring his chargeable income.

Tax authority normally will arrive the taxpayer’s premises and take possession of the required documents and books for investigation purposes. Should the tax authority required additional information, notice may be served on the taxpayer, creditors, bankers and others in order to formulate a best judgment of the tax affairs of the taxpayer.

Although the Act specifies a taxpayer must maintain all accounting and related records for 7 years, tax investigation may go beyond that in the event there’s any element of fraud, willful default or negligence on the taxpayer.

The tax authority may raise additional assessment together with penalty ranging from 60% to 300% in order to recoup the tax lost. In serious cases, or for repeated offenders, the taxpayer may be prosecuted and if found guilty, imprisonment up to 3 years can be imposed.


#7-2, Jalan 4/93,
Taman Miharja, 55200 Kuala Lumpur.
Phone: 603-9281 1588
Fax: 603-9281 6885


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