(Tax Update) New LHDN Tax Audit Framework 2025: What SME Bosses Must Know Before It's Too Late

(Tax Update) New LHDN Tax Audit Framework 2025: What SME Bosses Must Know Before It's Too Late

If you're running a business in Malaysia, especially an SME, there's one tax update you shouldn't ignore in 2025.

On 15 March 2025, the Inland Revenue Board (LHDN) released a brand new audit guideline — officially called Rangka Kerja Audit Cukai dan Cukai Potongan Majikan (RKA CPM).

Sounds technical? Don’t worry — in this blog, I’ll explain in simple, practical terms what it means for SMEs, why it matters now, and how you can prepare before LHDN comes knocking.

1. What is RKA CPM?

Let’s break it down.

RKA CPM is the new combined audit framework issued by LHDN. It replaces the older tax audit frameworks for:

  • Income Tax

  • Employer Tax

  • Petroleum Income Tax

  • Withholding Tax

Instead of dealing with separate documents or guessing which guideline applies, now there’s one standard framework — clear, structured, and officially effective.

If you're an SME boss, especially with employees and regular tax filings, this framework directly affects your business operations.

2. Why is LHDN Doing This?

LHDN is professionalising and modernising its tax audit approach. The aim is to:

  • Encourage better tax compliance

  • Improve fairness and transparency

  • Ensure audits are done consistently across all industries

So no more “tak tahu lah ini audit ikut guideline mana.” Everyone, including LHDN officers and taxpayers, follows the same set of rules.

3. What Does It Mean for SME Businesses?

Here’s how RKA CPM affects your SME:

A. You Are Now Under A Clearer Radar

Whether you’re running a small retail business, a service firm, or a manufacturing company — if you file taxes or employ staff, your business is now covered under this new framework.

Even if you think “My business kecil saja lah,” LHDN’s audit team may still pick your file for review.

B. Two Types of Audits

  • Desk Audit (Audit Meja) – They check your tax return and documents remotely.

  • Field Audit (Audit Luar) – They visit your office/factory to inspect your operations and records.

The framework explains how both audits work — step-by-step — including timelines, documents needed, and how findings will be communicated.

C. Taxpayers Have Rights Too

SMEs always fear audits. But under RKA CPM, LHDN must:

  • Notify you in writing

  • Allow you to respond to audit findings

  • Give you a chance to appeal through proper channels

It’s no longer a “black box” process. It’s now transparent, structured, and standardised.

4. What Should SME Bosses Do Now?

Here’s my professional advice — based on 35 years in audit and tax advisory.

Step 1 : Get Your House In Order

  • Make sure your accounts are up-to-date

  • Ensure your tax returns (Form C, EA forms, CP22, CP58, etc.) are accurate

  • Keep supporting documents for at least 7 years

Step 2 : Train Your People

Your staff must know how to respond to an audit. For example, employer obligations like PCB, CP38, and E-filing must be done correctly.

Train them on what documents LHDN may request — payslips, contracts, bank statements, and invoices.

Step 3 : Talk to Your Tax Agent

Don’t wait until you get an audit letter.

Schedule a review with your tax agent to check:

  • Whether your business has any audit risk

  • If you’ve underreported or made genuine mistakes

  • How to correct past filings (yes, there’s a Voluntary Disclosure option)

5. This is Not a Threat. It’s an Opportunity.

Yes, the word “audit” can trigger panic. But RKA CPM is actually good news for SMEs — if you act early.

It means no more guesswork, no more takut-takut. You now know the rules of the game.

The earlier you prepare, the better your chances of passing an audit without penalty, stress, or sleepless nights.

Final Reminder

RKA CPM is now in force.

If you’re an SME boss, this is your wake-up call.

Don’t say “nobody told me.”
Don’t wait for LHDN’s email.
Don’t assume you’re too small to be audited.

Audit is no longer random. It’s real. It’s structured. And it’s here.

Stay ahead, not behind. Be ready. Be smart. Be compliant.

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