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B12 TAX INVESTIGATIONS
A. NATURE
To create and maintain public confidence in the tax administration system, the tax system must be fair,
transparent and equitable. Compliance with the tax legislation must be strictly enforced and tax offences
such as non-compliance and tax evasion should be penalised, as provided for in the Income Tax Act 1967
(ITA). For enforcement purposes, the Inland Revenue Board (IRB) carries out tax investigations.
Tax investigations normally imply surprise visits made by the IRBs officers to a taxpayers business
premises, personal residences, agent/representatives and various third parties premises. It generally
involves an examination of the taxpayers business and/or individual books, records and documents. Such
examination is to ensure that the correct amount of tax is collected, to ascertain the persons responsible for
the offence, to pursue criminal prosecution and enhance voluntary compliance with tax laws and regulations.
The investigation will only be carried out in cases where it is suspected based on precise and definite
evidence that the taxpayer is deliberately trying to avoid paying tax or has committed an act of wilful evasion
under ITA and other Act such as Real Property Gains Tax Act 1976, Petroleum (Income Tax) Act 1967,
Promotion of Investments Act 1986, Stamp Act 1949, Labuan Business Activity Tax Act 1990 and Anti-
Money Laundering and Anti-Terrorism Financing Act 2001 (AMLATFA).
The IRB issued a tax investigation framework which is effective from 1 Oct 2013. The areas covered in the
framework inter alia are:
(a) Selection of cases and years of assessment covered;
(b) Tax investigation methodology;
(c) Rights and responsibilities of investigation officer, taxpayer and tax agent/representative;
(d) Offences and penalties;
(e) Payment procedures;
(f) Appeals; and
(g) Investigations under the AMLATFA.
B. INVESTIGATION ACTIVITIES
The focus is to gather admissible evidence with a view to prosecute the tax evader who has committed an
offence pursuant to the provisions in the ITA, Penal Code (Act 574), Criminal Procedure Code (Act 593),
Evidence Act 1950 (Act 56), Whistleblower Protection Act 2010 (Act 711) and any other relevant Acts.
The IRB officers can also conduct the investigation pursuant to the provisions under the AMLATFA for the
purpose of tracking the proceeds of tax evasion as the offences under S. 112 (non-submission of tax
returns), S. 113 (makes or furnishes incorrect returns) and S. 114 (wilful evation) of the ITA are serious
offences in the Second Schedule of the AMLATFA. Action can be taken to freeze, seize and confiscate
the movable and immovable property acquired through the proceeds of tax evasion.
TAX INVESTIGATION FRAMEWORK

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The IRB offices will notify the taxpayer whether the investigation is being carried out under the ITA,
AMLATFA or both. Even if the investigation is carried out under the ITA, it does not preclude the
investigation to be carried out under the provisions of the AMLATFA at any time.
C. SELECTION OF CASES AND YEARS OF ASSESSMENT COVERED
Case selection methodologies for investigation employed are:
i. Selection through risk analysis;
ii. Information from informers and / or the public;
iii. Review of income tax return;
iv. Information based on intelligence; and
v. Information from other law enforcement agencies.
D. RIGHTS AND RESPONSIBILITIES
1. IRB
(a) An investigation officer must adhere to rules and code of ethics drawn up by the IRB and is
required to carry out his duties in the following manner:
Professional, well mannered, trustworthy, honest and with integrity;
Always ready to give explanations on the objectives of investigation and the rights and
responsibilities of taxpayers;
Knowledgeable and fair in administering tax laws;
Respect the rights and responsibilities of the taxpayer and tax agent / representative.
(b) The investigation officer is prohibited from:
Having any personal or financial interest whatsoever in a business being investigated;
Proposing and suggesting to the taxpayer that a certain tax agent/representative be appointed
as the tax agent/representative of the case;
Abusing his position or power in carrying out his duties as provided under S. 118 of the ITA;
and
Disclosing any information obtained during the investigation to irrelevant persons.
2. Taxpayer
(a) The taxpayer has the right to know the consequences of failing to submit the necessary
information and documents requested by the officers;
(b) The taxpayer has the right to the identification of officers;
(c) The taxpayer has the right to appoint an approved tax agent or a team of
advisers/spokespersons any time on the condition that a proper written authorisation letter to act
on the taxpayers behalf is submitted to the IRB;
(d) The taxpayer has the right to appoint an attorney during the process of investigation and / or
prosecution held;
(e) The taxpayer is allowed to bring along interpreter(s) during the interview/discussion session if the
taxpayer is not conversant in Bahasa Malaysia or English;

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(f) The taxpayer is allowed to make copies of documents which are used in the investigation and
retained by the IRB; and
(g) The taxpayer is required to:
Provide the investigation officers with access to and make copies of records and documents in
the custody of, or under the control of, or belonging to the taxpayer;
Permit investigation officers to take possession of records and documents in the custody of, or
under the control of, or belonging to the taxpayer;
Where records and documents are maintained in a language other than the national
language, to render a translation in the national language of the said records and documents
within the time specified not being less than thirty (30) days from the date of service of notice
by the DGIR. For East Malaysia, translation is permitted either in the national language or in
English, as the case may be;
Provide complete responses for request of information either in writing or orally; and
Co-operate with the investigation officers.
(h) The taxpayer is prohibited from:
Appointing an unapproved tax agent;
Giving any form of gifts to the investigation officer and transacting any business with the
investigation officer;
Making any form of payments to the investigation officer; and
Obstructing or hindering the investigation officer in the exercise of his functions. Such
obstruction is an offence under S. 116 of the ITA. Upon conviction, the person who obstructs
the investigation officer could be liable to a fine between RM1,000 to RM10,000 or
imprisonment for a term not exceeding one year or both.
3. Tax Agent
(a) The conduct of a tax agent is governed by the code of ethics formulated by IRB which is based
on principles of integrity, accountability, transparency and social responsibility and as prescribed
under S. 153 of the ITA;
(b) A tax agent is expected to carry out his duties in the following manner:
Professional and fully conversant with tax laws and practices;
Be honest, trustworthy, transparent, act with integrity and give fullest co-operation when
dealing with the taxpayer and IRB;
Provide good advice to the taxpayer and fulfill his obligations as required under the tax laws;
Always give complete and accurate feedback relating to the progress of the investigation and
advise the taxpayer correctly based on the true facts of the investigation case;
Safeguard the confidentiality of all information and ensure that information is not disclosed to
any unauthorised party; and
Promptly notify the IRB upon having ceased to be a tax agent to the taxpayer.
(c) The tax agent is prohibited from:
Using information acquired or abusing his position as tax agent to his own advantage;
Delaying investigation work or acting irresponsibly towards entrusted duties; and
Offering inducements to the investigation officer.

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E. OFFENCES AND PENALTIES
For any omission or understatement of income as a result of an investigation, penalties will be imposed
based on the provisions of S. 112, S. 113 and S. 114 of the ITA. A summary of the offences and penalties is:
Offences Penalties
Failure to furnish a return in accordance with
S. 77(1) or 77A(1); or give notice of chargeability
pursuant to S. 77(3) [S. 112]
A penalty of between RM200 to RM2,000 or 6 months
imprisonment or both [S. 112(1)].
Makes an incorrect return by omitting or
understating any income affecting his own
chargeability or the chargeability to tax of
another person [S. 113 (1)(a) and (b)]
Be liable to a fine of between RM1,000 and
RM10,000, plus a special penalty of double the
amount of tax undercharged (200%).
Wilful evasion of tax [S. 114] A fine of between RM1,000 and RM20,000 or to
imprisonment for a term not exceeding 3 years or
both, and shall pay a special penalty of treble the
amount of tax (300%).
F. APPEALS
A taxpayer who was convicted by the court and is dissatisfied with the conviction may appeal to a higher
court.
G. INVESTIGATIONS UNDER THE AMLATFA
Failure to furnish a return (S. 112 of the ITA), making an incorrect return (S. 113 of the ITA) and wilful
evasion of tax (S. 114 of the ITA) are regarded as serious offences in the Second Schedule of the
AMLATFA. Any person who has been convicted of money laundering offences under Section 4 of the
AMLATFA, will be liable to a fine of not more than RM5 million or imprisonment for a term not exceeding 5
years or both.
Investigations under the AMLATFA and the ITA can be conducted separately or simultaneously.
Taxpayers responsibilities under an AMLATFA investigation:
Allow the officer access to any premises and allow himself to be examined;
Present when being called for inspection by the officer;
Answer any questions raised by the officer;
Provide any information or a clear statement upon request by the officer;
Co-operate and comply with any genuine request made by the officer in the performance of his duties;
Do not hide and provide any property, document or information that may be reasonably required by the
officer of which he has control over the documents being requested; and
Do not destroy any property, record, report or document for the purpose of preventing seizure or
confiscation of the respective property, record, report or document.
For failure to comply with the above obligations, a taxpayer will be committing an offence under Section 34
of the AMLATFA and will be liable to a fine of not more than RM1 million or imprisonment for a term not
exceeding one year or both. A further fine not exceeding RM1,000 will be imposed for each offence
repeated after the conviction.