Tax litigation in Malaysia—summary
Produced in partnership with Adeline Wong, Jason Liang and Kellie Yap of Wong & Partners

The following Private Client practice note produced in partnership with Adeline Wong, Jason Liang and Kellie Yap of Wong & Partners provides comprehensive and up to date legal information covering:

  • Tax litigation in Malaysia—summary
  • Tax audits
  • Selection of audit targets
  • The audit process
  • Information gathering power
  • Legal privilege
  • Appealing tax assessments
  • Appeal to the Special Commissioners
  • Further appeal to the High Court
  • Further appeal to the Court of Appeal
  • More...

Tax litigation in Malaysia—summary

Tax audits

Selection of audit targets

In Malaysia, taxpayers are required to determine their tax liabilities and assume responsibility for filing their tax returns correctly under the self-assessment system. Under the Income Tax Act 1967 (ITA 1967), returns filed by taxpayers are deemed to be assessments.

The Inland Revenue Board (IRB) aims to conduct audits on companies and individuals at least once every five years.

The IRB may review social media to determine whether an individual’s lifestyle is comparable with their declared income. Individuals with unexplained extraordinary wealth are particularly at risk of being audited.

For a company, an audit is more likely if there is an unusual variance in its taxable income, or if it indicates in its tax filing that it has a substantial related-party transaction but did not prepare transfer pricing documentation. Recently, there has been more focus on related party transactions and royalty withholding tax issues, among others. The IRB may expand the scope of the audit to include associated and controlled companies, without prior notice to the taxpayer. Also, companies that have been granted incentives, especially those whose incentives have expired or are expiring, are likely to be audited from an anti-avoidance perspective and/or a transfer pricing perspective.

The audit process

When dealing with IRB officers, the taxpayer should always be courteous and responsive to any requests by audit officers, keeping in mind

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