HASiL tax audit: types of audit, the process and your rights as a taxpayer

What is a tax audit?

A tax audit is an examination conducted by the Inland Revenue Board of Malaysia (HASiL / LHDNM) to ensure that taxpayers report income and pay tax correctly.

Under the Self-Assessment System (STS), audit is HASiL's main activity to improve voluntary compliance. A taxpayer can be selected for audit at any time — but selection does not mean the taxpayer has committed an offence.

Source: HASiL — Income Tax and Employer Audit Framework (RKA CPM) 2025, §1.2.

Two types of audit

HASiL conducts two types of audit:

Desk audit — carried out based on available documents and information, usually at HASiL's office.
Field audit — involves further examination outside HASiL's office, including visits to the taxpayer's premises if necessary.

Source: HASiL — Tax Audit Framework (RKAC) 2018, §3.1.

Note: Further procedural differences between desk audit and field audit are not detailed in this draft — this item still awaits official confirmation from HASiL — check again with HASiL before deciding. against RKAC 2018.

How should audit officers act?

Audit officers are required to:

Be professional and ethical;
Explain the purpose of the audit as well as the taxpayer's rights and responsibilities;
Request only relevant documents and account books;
Give the taxpayer the opportunity to provide explanations and feedback;
Ensure the taxpayer's rights are protected.

Source: HASiL — RKA CPM 2025, §8.1.1.

Your responsibilities during an audit

As a taxpayer or employer, you are responsible for:

Cooperating with the audit officer;
Providing reasonable facilities and assistance (referred to in Public Ruling No. 7/2000);
Answering questions put to you;
Complying with notices issued under section 81 of the Income Tax Act 1967 / notices under section 34 of the Tax Proceedings Act (APCP).

Source: HASiL — RKA CPM 2025, §8.2.1.

Your rights during an audit

You have the right to:

Explain and give feedback on the audit findings;
Appoint a registered tax agent to be present during the audit / interview (with an official letter of appointment);
Use the services of an interpreter during the interview if needed.

Source: HASiL — RKA CPM 2025, §8.2.3 & §8.1.1.

What is prohibited during an audit

Giving gifts or transacting business with the audit officer is prohibited throughout the audit period.
Obstructing an officer from carrying out duties is an offence (e.g. under section 116 of the Tax Proceedings Act / section 54 of the Tax Proceedings Act).

Source: HASiL — RKA CPM 2025, §8.2.2.

Note: Specific penalties for failing to cooperate and the timeframe for action are not detailed in this draft — this item still awaits official confirmation from HASiL — check again with HASiL before deciding. for details.

Simple example

Mei Ling runs a small business and receives an audit notice letter from HASiL. She does not panic — being selected for audit does not mean she has committed an offence. She prepares the relevant account books and supporting documents, answers the officer's questions, and makes sure only relevant records are requested. She also appoints a registered tax agent to be present during the interview. Throughout the audit period, she gives no gifts to the audit officer.

(Illustrative example to show the concept — not specific tax advice.)

Frequently Asked Questions (FAQ)

Q. Will I be penalised just for being selected for an audit? A. No. Being selected for an audit does not mean you have committed an offence — audit is HASiL's main activity under STS to improve voluntary compliance.

Q. Can I bring my tax agent during the audit? A. Yes. You have the right to appoint a registered tax agent to be present during the audit / interview, with an official letter of appointment. You may also use the services of an interpreter during the interview.

Q. What happens if I do not cooperate? A. Cooperating and providing reasonable facilities is your responsibility; obstructing an officer from carrying out duties is an offence. Specific penalty details are not detailed in this draft. This matter is still awaiting official confirmation from HASiL — re-check with HASiL before making decisions.

Q. What documents can the audit officer request? A. Audit officers should request only relevant documents and account books and should explain the purpose of the audit as well as your rights and responsibilities.

Glossary

STS — Self-Assessment System.
Desk audit — audit based on documents, usually at HASiL's office.
Field audit — further examination outside HASiL's office, including visits to premises.
Registered tax agent — accredited representative appointed to represent a taxpayer.
APCP — Tax Proceedings Act.
Public Ruling No. 7/2000 — HASiL ruling referred to for reasonable facilities and assistance during an audit.
Section 81 (ACP) — provision relating to notices during an audit.