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07 June 2018 Malaysia issues 2018 tax investigation framework Following the release of the 2018 tax audit framework1 by the Malaysian Inland Revenue Board (the IRB), the IRB has issued the 2018 tax investigation framework (the 2018 TIF). The 2018 TIF is effective as of 15 May 2018. It is broadly similar to the 2013 TIF. Unlike the 2013 TIF, the 2018 TIF specifies that IRB officers can obtain clarification/documents from anyone relevant to the case being investigated in order to assist with the tax investigation. The 2018 TIF provides that an accredited lawyer can be present during the recording of statements from persons relevant to the investigation. This was not specifically stated in the 2013 TIF. After completion of the investigation procedures, the IRB would issue an official settlement or conclusion letter to the taxpayer. If the taxpayer accepts the settlement, the taxpayer will either sign an agreement or a letter of undertaking. The investigation is considered final and concluded after the case is approved by the IRB and an assessment is made. The 2018 TIF states that taxpayers who have been subjected to investigation will be placed under the IRB's monitoring program. However, the 2018 TIF does not provide any explanation of the monitoring program and it is not indicated whether this monitoring program is similar to the Monitoring Deliberate Tax Defaulter Program contained in the 2018 Tax Audit Framework issued in April 2018. The 2018 TIF also specifies that in cases where the taxpayers disagree with the findings of the investigation, the IRB may, at its discretion, issue tax and penalty assessments. Unlike the 2013 TIF, the 2018 TIF does not specifically state that taxpayers have the right to appoint qualified spokespersons/advisers at any time, or lawyers during the investigation and/or prosecution. The 2018 TIF stipulates full payment of tax and penalties on a lump sum basis. However, taxpayers may request installment payments. If approved, the first payment (which must be at least 25% of the total taxes and penalties) will have to be remitted on the date of the agreement, with the balance to be paid in accordance with the installment plan approved by the IRB, subject to certain conditions. It is also highlighted that higher penalty rates would be imposed2 in cases with longer installment payment periods as opposed to cases with full payment or shorter installment periods. Penalties and investigation under Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 The offenses and penalties have been updated in the 2018 TIF to reflect the current income tax legislation (Income Tax Act 1967). Details are as follows:
1 See EY Global Tax Alert, Malaysia issues 2018 tax audit framework, dated 12 April 2018 2 Malaysia does not impose interest on a tax due; accordingly, a higher penalty rate at the IRB's discretion may be imposed. Document ID: 2018-5740 | ||||||||||||||
