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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:


Topics

Details

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%.


Source: https://phl.hasil.gov.my/pdf/pdfam/RK_Audit_Cukai_2022_1.pdf



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