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Updated Tax Audit Framework

Inland Revenue Board “IRB” has recently revised the Tax Audit Framework “TAF” which took effect from 1st May 2022 onwards are as follows:

(a) Tax Audit Framework (replacing the Tax Audit Framework dated 15 December 2019);

(b) Tax Audit Framework Finance and Insurance (replacing the Tax Audit Framework Finance and Insurance dated 18 November 2020); and

(b) Tax Audit Framework for Petroleum (replacing the Tax Audit Framework for Petroleum dated 15 December 2019.

Here are some highlights on the important changes:



Voluntary disclosures

The revised TAF emphasize that voluntary disclosures are only for taxpayers who have submitted their tax returns. The penalty rate is 15%.

However, if taxpayer has made a voluntary disclosure and subsequently makes additional voluntary disclosure within 6 months from the due date of the submission of the tax return form, there will be a penalty of 10% on the additional voluntary disclosure.

No penalties for cases involving technical adjustments

Technical adjustments refer to cases which involve different interpretations of the legislations, according to the facts and issues or the particular case.

The new TAF mentioned that no penalty shall be imposed under audit findings involving technical adjustments under Section 113(2) ITA.

However, this does not apply to cases where public rulings, guidelines, practice notes, income tax regulations, income tax exemption orders or rules has been issued by IRB.

Penalty under Section 113 (2) of Income Tax Act, 1967 “ITA”

Penalties for shortfall of taxes discovered during an audit will be imposed on a graduated scale ranging from 1st offence of 15%, 2nd offence of 30% and 3rd offence of 45%. The determination of tax penalty rate for 1st and 2nd offence will be based on the record of penalties raised under Section 113 (2) of the ITA between the period from 1 January 2020 to 30 April 2022.

If no penalty has been imposed during the stipulated period, any audit findings from 1 May 2022 will be taken as the first offence with the penalty rate of 15%.

If 1st penalty has been imposed during the stipulated period, any audit findings from 1 May 2022 will be taken as the 2nd offence with the penalty rate of 30%.

This material or communication has been prepared for the sole purpose of providing general information and is not intended to be relied upon as accounting, tax or other professional advice. Consent has to be obtained from the firm prior to any act of republishing or circulating to the general public. While the information is considered correct at the date of publication, changes in circumstances or updates in tax ruling after the time of publication may impact its accuracy and reliability. We have not, by means of this material or communication, rendered any professional advice or services. Thus, we shall not be responsible for any losses sustained by any person who relies on this material or communication. Please refer to our tax advisors should you require our consultancy services.


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