LHDN Tax Audits and Investigations in Malaysia: What to Do When LHDN Writes to You
The Inland Revenue Board of Malaysia (LHDN, also known as the IRB or HASiL) audits taxpayers to check that income was correctly reported and tax correctly paid, and investigates where it suspects deliberate evasion. Either can end in an additional assessment with penalties, and an investigation can also lead to prosecution under the Income Tax Act 1967.
NZSK advises companies, directors, professionals and individuals during LHDN audits and investigations: on replies to document requests, interviews, voluntary disclosure, settlement proposals and, if agreement is not reached, the appeal. Your tax agent or accountant prepares the computations; we handle the legal questions and work alongside them. We advise after reviewing your documents at a consultation.
Key Deadlines
30 Days
To appeal an LHDN assessment on Form Q
30 Days
For a Customs review or Tribunal appeal
1 Month
To claim goods seized by Customs
5 Years
Usual LHDN look-back for additional assessments
What is the difference between an LHDN tax audit and a tax investigation?
A tax audit is a civil check of whether your returns were correct. It follows LHDN’s Tax Audit Framework for Income Tax and Employer, in force since 15 March 2025, takes place at an LHDN office (a desk audit) or at your premises (a field audit), and usually covers one to three years of assessment.
A tax investigation is used where LHDN suspects income was deliberately omitted or understated. Investigation officers can enter premises and take records, penalties are heavier, and the case can be referred for prosecution. If an investigation team calls or visits, or your audit turns into an investigation, take legal advice immediately.
What powers does LHDN have during an audit?
LHDN can call for returns and books (section 78), bank statements (section 79), access your premises and documents and take copies or originals (section 80), and require information within a set time (section 81). You must keep records and supporting documents for seven years from the end of the year of assessment in which the return is furnished (sections 82 and 82A).
Companies also submit specified documents to LHDN electronically after filing their return (section 82B), and audit document requests may arrive through LHDN’s online system. Reply on time and in full, but answer the question asked, check each answer against your accounts, and keep copies of everything you provide.
What penalties apply after an LHDN audit?
The Income Tax Act 1967 allows a penalty equal to the tax undercharged for an incorrect return (section 113(2)). Under the 2025 Tax Audit Framework, LHDN normally applies lower rates:
- 15% of the tax undercharged for a first offence, 30% for a second and 45% for a third or later offence;
- no penalty for a purely technical adjustment; and
- 15% for a voluntary disclosure made before an audit begins, or 10% for an additional disclosure made within six months of the filing due date after an amended return.
LHDN has said that cases found through an investigation may attract penalties of 60% and above. Wilful evasion is an offence under section 114, punishable by a fine, imprisonment or both, with a penalty of treble the tax undercharged.
How far back can LHDN go?
LHDN can generally raise an additional assessment within five years after the end of the year of assessment (section 91(1)). There is no time limit where there has been fraud, wilful default or negligence (section 91(3)). Whether a mistake amounts to negligence is often the real issue in an audit, because it decides whether older years can be reopened.
What can you do when an audit ends with an additional assessment?
At the end of an audit, LHDN issues its findings and, if tax is payable, raises an additional assessment with penalties. You can then:
- respond to the findings with further explanations and documents before the assessment is raised;
- agree and pay, or ask for an instalment arrangement; or
- appeal on Form Q within 30 days after the notice of assessment is served (section 99).
Tax under an assessment is payable even if you appeal (section 103). Late payment attracts a 10% increase, with a further 5% if still unpaid 60 days later, and unpaid tax can be recovered by a civil suit and lead to a travel restriction. See our Tax Appeal (SCIT) page for the appeal process.
How NZSK handles LHDN audits and investigations
Bring the audit or investigation letters, your returns and computations for the years concerned, the accounts, bank statements and supporting documents for the items queried, and your correspondence with LHDN. We review your position before you reply or attend, advise on voluntary disclosure, prepare written submissions on disputed items, attend meetings with you where appropriate, and take over the appeal if agreement is not reached. We tell you plainly when a point is weak and settlement is the better course. Fees depend on the years and amounts involved and the volume of records; we give a fee quotation after the consultation.
Frequently Asked Questions
Speak to a Tax & Customs Lawyer Now!
- (+60)12-401 4799 | (+60)3-8060 0267
- [email protected]
Consultation by appointment — Mont Kiara, Kuala Lumpur & Puchong, Selangor
