Tax audit continues to be a core enforcement activity undertaken by the Inland Revenue Board of Malaysia [“IRBM”] under the Self-Assessment System [“SAS”] to enhance and promote voluntary compliance with the tax laws and regulations.

The IRBM is currently taking an approach based on the concept of Awareness, Education, Services (A.E.S) in conducting tax audit activities, with the aim to cultivate a more transparent tax compliance culture, improve taxpayers’ understanding of tax obligations and encourage voluntary tax compliance.

On the other hand, tax investigation is a more severe enforcement measure undertaken by the IRBM to ensure compliance with the tax legislations by taxpayers.

Generally, tax investigation will be initiated when there is reasonable suspicion, supported by credible information or evidence, that a taxpayer has deliberately evaded tax.

In most instances, both tax audit and tax investigation will result in additional taxes and penalties payable for under-statement, incorrect reporting or omission of income.

Given this environment, our proven methodologies, effective engagement and extensive experience in liaising with the IRBM place us in a strong position to manage and resolve tax audit and investigation cases efficiently and professionally. Our approach emphasises clear communication, sound technical assessment and strategic negotiation to achieve amicable resolution with the IRBM.

Our tax audit and investigation services include:

• Replying to queries raised by the IRBM
• Preparation of workings, computations, reconciliation and supporting schedules required by the IRBM
• Reviewing and appealing on proposals given by the IRBM
• Submitting alternative proposals to the IRBM to resolve issues in dispute
• Attending meetings and discussions with the IRBM in the pursuit of an amicable settlement with the IRBM

As a pre-emptive measure to mitigate the potential tax exposures and penalties, we also offer “prudential tax audit” (a.k.a. health check) services. This exercise is designed to identify significant areas of concerns, ensure compliance with prevailing tax rules and regulations and recommend corrective measures, where necessary, before the conduct of an actual tax audit or investigation.

Our “prudential tax audit” services include:

• Undertaking a high-level review of the financial statements, tax returns and computations, etc. to identify significant areas of concerns
• Reviewing supporting documents to ensure that the tax treatments adopted are in line with the prevailing tax legislations
• Providing recommendations and corrective actions to strengthen tax compliance and reduce exposure to future audit risks

While tax audits and investigations remain integral components of the traditional enforcement landscape, the IRBM is increasingly emphasising on co‑operative tax compliance model, in line with the principles promoted by the Organisation for Economic Co-operation and Development (“OECD”). In support of this direction, the IRBM has introduced the Tax Corporate Governance Programme, which aims to cultivate a more transparent and collaborative relationship between taxpayers and the tax authority. Central to this initiative is the expectation that companies adopt clearer oversight, stronger accountability and well‑documented controls through a robust Tax Control Framework [“TCF”]. Companies with transparent processes and reliable internal controls often experience smoother engagements with the IRBM and may face reduced scrutiny during tax audits or investigations, as fewer areas of concern are likely to arise.

In this evolving environment, we are ready to support our clients throughout their journey of strengthening tax governance and enhancing their TCF, helping them build structures that promote consistency, resilience and long‑term compliance.