Know your rights: Unannounced visits from RMCD GST officers

29 February 2016

by Nicolaos Giannopoulos

For the majority of indirect tax authorities around the globe, unannounced visits to taxpayers’ premises by their audit officers are a tool to be seldom used; only in instances when there is a genuine risk that the destruction of records and data (crucial evidence to a tax audit) is imminent, is the element of surprise crucial.

Recently, here in Malaysia, there have been instances of Royal Malaysian Customs Department (RMCD) Goods & Services Tax (GST) officers visiting business premises unannounced, requesting specific information from the business, with very little (if any) risk to RMCD’s GST revenue.

From a practical and equitable standpoint this is regrettable: it is not practical for a business to put in place processes to enable it to produce any record pertaining to a specific date in the blink of an eye, and it is unfair to expect such.

So what can you do if faced with such a scenario?

Firstly, request to see the authority card or badge of the RMCD GST officer[1] and any relevant documentation from the RMCD authorising their visit. If the officer is not able to produce identification, it is within your rights to refuse to comply with any request, demand or order made by the RMCD GST officer[2].

A relevant point to touch on is set out in Sections 80 and 81 of the GST Act (‘Powers of enforcement, inspection and investigation’ and ‘Access to premises’, respectively).

I want to be very clear here: the authority to visit taxpayers’ premises unannounced is limited to only “senior officers of goods and services tax” which is defined in Section 2 of the GST Act. Such powers do not apply across the board to each and every RMCD officer of goods and services tax unless “they have been conferred with the powers of asenior officer of goods and services tax” in accordance with Section 5(4) of the GST Act.

Meaning if the officers are not RMCD senior officers, or GST officers with senior officer’s powers conferred upon them, then they have no right to visit business premises unannounced.

Secondly, assuming the RMCD GST officer has complied with the above request then, in accordance with Section 165 of the GST Act, upon request from the GST officer to produce any document[3], you must comply.

If your records are stored electronically (e.g. tax invoices issued from your front end system), Section 36 (3) requires that such records be readily accessible and convertible into writing. This implies making such records available without hesitation and within a reasonable time frame.

Section 165 is however silent with respect to any time frame with which to produce the document requested (stored electronically and otherwise) and does not state specifically that it must be produced immediately. This may be an opportunity for you to take the position of not producing the document on the spot, provided it is ultimately produced and provided to the RMCD.

Concluding remarks

The default position should always be to assist the RMCD GST officer where possible; collaboration always works better than confrontation.

However in the event an RMCD GST officer visits your business premises unannounced, making on the spot demands for information, it is important to know and understand your (and RMCD officers’) rights and obligations under the GST Act.

If you wish to discuss any of the points in this article or require assistance in such an event, please feel free to reach out to anyone of our GST advisors.

Nicolaos Giannopoulos is an Executive Director with PwC Malaysia's Indirect Tax Advisory Group.

NOTES:

[1] “officer of goods and services tax”, is defined (Section 2 of the GST Act) as “any officer of customs acting in the fulfilment of his duties under this Act, whether the duties are assigned to him specially or generally, or expressly or by implication”.

[2] Sub-section 6(2) of the GST Act

[3] ‘document’ has the same meaning as Section 3 of the Evidence Act 1950.