Sales and Service Tax (“SST”) Audit

Sales and Service Tax (“SST”) Audit

Background

The Royal Malaysian Customs Department (“RMCD”) conducts various types of audits to ensure compliance with sales tax regulations and promote transparency in business operations. These audits play a crucial role in maintaining the integrity of the tax system and safeguarding the interests of both the government and taxpayers.

In this article, we will explore the different types of audits conducted by the RMCD. Understanding these audit types will provide valuable insights into the processes involved and the objectives they aim to achieve.

Type of Custom Audit

1.     Desk audit

A desk audit is a review of the taxpayer's records and documents conducted at the RMCD's office, and normally concerned with more straightforward issues. During this type of audit, the RMCD officers examine the taxpayer's sales tax returns, supporting documents, and other relevant records to ensure compliance with the sales tax regulations.  

2.     Field audit

A field audit involves a physical visit by RMCD officers to the taxpayer's business premises or registered address. The purpose of a field audit is to conduct an on-site examination of the taxpayer's records, accounting systems, and operations. RMCD officers may inspect the inventory, sales records, invoices, purchase orders, contracts, and other relevant documents to verify the accuracy of sales tax reporting and identify any potential non-compliance issues.

3.     Compliance audit

This is a comprehensive audit conducted on all transactions. RMCD officers will examine all the business record, conduct interviews, and perform any necessary inspections to verify that the sales tax reporting is being complied with.

4.     Refund audit

In cases where taxpayers claim refunds for overpaid sales tax, the RMCD may conduct refund verification audits to verify the accuracy and eligibility of the refunds claimed.

5.     Transaction audit

This type of audit focuses on examining the existence of the transactions and are correctly reported. These transactions may be selected based on risk assessment, random sampling, or specific criteria set by RMCD.

6.     Advisory audit

An advisory audit encourages voluntary compliance with tax laws and regulations. This audit allows taxpayers to come forward and correct any errors, omissions, or non-compliance voluntarily.

7.     Cancellation audit

This is a comprehensive audit of all transactions conducted prior to any cancellation. It is performed for companies that intend to cancel their SST registration.

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