How to get your payroll tax audit-ready before the authorities arrive

21 September 2018

By Lim Phing Phing (Director) & Quinnie Low (Senior Manager), Global Mobility Services, PwC Malaysia

The mere mention of the word "tax audit" is enough to make businesses and taxpayers nervous.  And yes, we have all seen the headlines of raids conducted by the Malaysian Inland Revenue Board (MIRB) to crack down on tax defaulters. But is it really something to be worried about? And what’s the difference between a tax audit and a payroll tax audit?

Let’s look at what comes under a tax audit. Under the Self-Assessment System (SAS), the onus is clearly placed on taxpayers and businesses to interpret and apply the tax legislation correctly in order to comply with their respective tax obligations. Essentially, the only way the MIRB can verify that these obligations have been complied with is by conducting a tax audit.

A payroll tax audit is no different. It aids the MIRB in verifying that the employer’s tax reporting obligations have been complied with and sufficient records are kept to demonstrate that these obligations have been met in accordance with the legislative requirements.

As an employer, if you are familiar with your tax obligations and are aware of the consequences of non-compliance, chances are, you would be prepared for the payroll audit should you receive a request from the MIRB.

That said, it is essential for businesses and employers to be audit-ready at any moment, rather than scrambling to begin preparations only when the MIRB submits a payroll audit request.  The latter scenario should be avoided for two main reasons:

  • Employers who are ill-prepared may not be able to adequately address questions or provide sufficient evidence on issues raised by the MIRB during an payroll audit; and
  • this increases the risk of being slapped with penalties by the MIRB.   

So, how do businesses get themselves audit-ready? Take a look at the guide below.

 

As you can see from the guide above, understanding your data and how they are captured for tax reporting purposes is necessary to adequately prepare yourself for an eventual payroll audit.  As an employer, there is no better time than the present to assess your payroll tax compliance status to determine if you need to enhance your business processes and policies, and mitigate any further risks from non-compliance.

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Contact us

Lim Phing Phing
Director, Global Mobility Services, PwC Malaysia
Tel: +60 (3) 21731651
Email

Quinnie Low
Senior Manager, Global Mobility Services, PwC Malaysia
Tel: +60 (3) 21731031
Email

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