IRB TAX INVESTIGATION FRAMEWORKrehdainstitute.com/wp-content/uploads/2019/02/5.-Tn.-Abang-Ehsan-Bin-Abu-Bakar.pdf1. Income Tax Act, 1967 2. Petroleum Income Tax Act, 1967 3. Real Property

ABANG EHSAN

ABANG ABU BAKAR

Division Director

Large Taxpayer

Branch,

IRBM

26TH FEBRUARY 2019

IRB TAX INVESTIGATION FRAMEWORK &

MECHANISM

TOPICS COVERED

Number of

Taxpayers

02

Audit

v/s

Investigation01

Tax

Investigation

Framework 05

Strategies:

Non

Compliance

What is the

difference?1 H & 4 W

Fairness to

compliant

taxpayers

04

Voluntary

Disclosure

Special Voluntary

Disclosure

Programme

03

Common

Pitfalls

Property

Developers &

Contractors

3

TAX INVESTIGATION FRAMEWORK

PROCEDURES ON TAX INVESTIGATION

RIGHTS & RESPONSIBILITIES OF:

TAX OFFICERS

TAXPAYERSTAX

AGENTS

TAX LEGISLATION

SECTION 78 : Specific returns and

production of books

01

02

03 04

SECTION 79 : Statement of bank

accounts, etc.

SECTION 80 : Access to buildings

and documents, etc.

05

SECTION 81 : Information

SECTION 112 : Failure to furnish return

SECTION 113 : Incorrect returns

SECTION 114 : Wilful evasion

INVESTIGATION ACTIVITIES

01 Inspection of books, documents, objects,

articles, materials & things – business &

personal

02 Collect evidence for any legal proceedings

03 Investigation according to AMLATFPUAA –

offences under S112 / 113 / 114 ITA 1967(2)

04 To inform taxpayer: IRB investigation /

AMLATFPUAA / both

6

OBJECTIVES OF INVESTIGATION

1. Collect the correct

amount of tax

4. Deter Tax Evasion

3. Enhance voluntary

compliance

2. Identifying &

prosecute tax evaders

5. Fairness to compliant

taxpayers

7

PERIOD OF INVESTIGATION

SECTION

91 (3) ITA

1967

No limitation for the period

covered in cases of fraud,

wilful default or negligence

8

SELECTION OF CASES

1. Risk Analysis

Informers

2. Analytics Analysis :

Information from other law

enforcement agenciesInternal Profiling

Information

Return Forms

UNEXPLAINED EXTRAORDINARY WEALTH

10

INVESTIGATION PROCESS

11

RIGHTS AND RESPONSIBILITIES

IRBM

OFFICER

TAXPAYER TAX AGENT

12

CONFIDENTIALITY OF INFORMATION

All information obtained from the

taxpayer during investigation and use

the information ONLY for the purpose

of Income Tax or another tax law

13

PAYMENT PROCEDURES

• Taxpayer Is Encouraged To Make Full Payment Of Taxes & Penalties Assessed In One Single Payment

• Installment Payment Plan -25% Of The Total Tax Liability As Initial Payment

• Failure To Settle Tax Liability-Increased Under Subsection 103(7) And 103(8) ITA

CIVIL SETTLEMENT

• On Conviction The Accused Is Required To Pay A Fine And / Or Special Penalty According To Court’s Decision

• Tax Liability Must Be Paid To IRBMPROSECUTION ACTION

14

APPEALS

SECTIONS 99 TO 102 OF THE INCOME TAX ACT LAY THE GROUND RULES FOR APPEALS RELATING TO ASSESSMENT RAISED BY IRBM

AUDIT VS INVESTIGATION

Tax Guidlines

2007 - P.U.(A)

276 & 277

Public Rulings

No.2/2009 –

Constructions

Contracts

FRS 201 –

Property

Development

Activities

MFRS 111 –

Construction

Contracts

1 April 2018

Audit Framework

1. Reduce tax liabilities in an

impermissible way.

2. Upholding rule of law to ensure

minimum tax leakages.

Tax avoidance

1. Verify accuracies of tax

computation

2. Ensure that a tax audit is carried

out in a fair, transparent and

impartial manner.

Audit objectives

16 May 2018

Investigation Framework

1. Illegally avoiding tax liabilities

2. Attempt to evade tax liability by

unfair means

3. Omitting income liable to tax

Tax evasion

1. Ascertain failure to furnish return

or give notice of chargeability

2. Submission of incorrect returns /

willful evasion

Investigation objectives

COMMON PITFALLSPROPERTY DEVELOPERS &

CONTRACTORS

ACTS AND LEGISLATION

TAXATION

Tax Guidlines

2007 - P.U.(A)

276 & 277

INCOME TAX ACT

(ITA) 1967

Public Rulings

No.2/2009 –

Constructions

Contracts

Public Rulings

No.1/2009 –

Property

Development

ACCOUNTING

MFRS 15 –

Revenue From

Contracts With

Customers

w.e.f. 01.01.2018

MFRS 118 –

Revenue

FRS 201 –

Property

Development

Activities

MFRS 111 –

Construction

Contracts

01 02 03 04

01 02 03 04

PROPERTY DEVELOPERS

Organizational Chart Details on Projects Layout Plan

Development Approval C.F.O Project Cost Listing

Schedule on Recognition of Income List of purchasers for each project Stock Listing

CONTRACTORS

Organizational Chart Details on Projects Letter of Award / V.O

C.P.C Statement of Final Account Project’s Cost Schedule

Schedule on Recognition of Income LAD Other Related Details

COMMON PITFALLS

Recognition of Income Expenses

Cost of projects Others

VOLUNTARY SETTLEMENTSpecial Voluntary Disclosure Programme

Tax Reform Voluntary

Disclosure

WHEN

WHAT

WHO

Income reported for YA 2017 &

preceding years

1. Income Tax Act, 1967

2. Petroleum Income Tax Act, 1967

3. Real Property Gains Tax 1976

4. Stamp Act 1949

Types of taxpayers

1. Non registered taxpayers

2. Registered taxpayers but have not submitted ITRF

3. Registered taxpayers, filed in ITRF but did not report

correct information on income or disposal of assets

4. Persons who failed to pay stamp duty on instruments

after 6 months from stamping period

Period / Penalty

1. 3 November to 31 Mac 2019 – 10%

2. 1 April to 30 Jun 2019 – 15%

3. 1 July 2019 onwards – 80% till100% or 300%

Efficient tax system

1. Broaden tax base

2. Increase compliance rate

3. Increase revenue

4. Instill public confidence in

the tax system

COMMON PITFALLSHealth check

Mathematical error

Double & triple check your computation

Non Compliance

Failure to comply with any provisions of the

Income Tax Law

Failure to report all income

Mismatch with available information of

income received

Slacking on record keeping

Authenticity of transaction

Prolonged business losses

How long can a company survive with

negative equity? Loss to be carried forward

or transfer within the group

Huge tax refunds

Subject to full audit prior to refunds

STRATEGIES TO COMBAT NON COMPLIANCEFairness to compliant taxpayers

Audit & Investigation.

Enhance enforcement activities

Hasil Power Data

Increase the use of technology

CbCR, CRS, AEOI. & collaboration with

related agencies like JPJ, BNM, CCM

Increase in information

domestically & internationally

Active participation at OECD

Commitment to BEPS

CAT IRB workforce

Training

Increase exposure to international laws.

Greater awareness & interaction

between domestic & International law

WAY FORWARDMalaysia A New Dawn

1. Register in the tax system

2. Assess tax liabilities accurately

3. File tax returns in time

4. Pay the right amount

Responsible taxpayers

1. Assist taxpayers in their tax obligations

2. Advise taxpayers on any tax issues

3. Facilitate improvement of tax compliance

Registered tax agents

1. Collect taxes for the government

2. Verify the accuracies of tax returns

3. Conduct enforcement activities

4. Engaging with taxpayers / tax agents to enhance tax

compliance

Efficient tax system

Taxpayer

Tax Agent

Tax Authority

NAVIGATING A NEW TAX LANDSCAPE