In view of the self assessment regime implemented in Malaysia, is there any potential tax audit risk and penalty in relation to those payments without suppliers' invoices or official receipts?
Under the self assessment system, the Inland Revenue Board (IRB) would require the taxpayers to provide supporting documents to support the expenses incurred by the company. Thus, for those payments without suppliers' invoices or official receipts, the taxpayers need to prepare its own documents and documentation to ensure that those expenses are tax deductible under S33 of the Income Tax Act 1967.
Taxpayers are requested to prepare a payment voucher which details the payee name, IC no, address, nature of payments and also in relation to which business project if it is sub contractors. In addition, the original payment vouchers must be signed by the payee and it is advisable to photocopy the payee IC for reference.
If the company pay the payee using cheque, it is highly recommended that they photocopy the cheque (Account Payee Only) as the supporting documents. We have encounter cases in which IRB requested for a copy of the cheque to substantiate an expenses. As a results, the taxpayers need to liaise with bankers in order to obtain a copy of the cheque which was archive for many years. In conclusion, it is a time wasting and irritating process.
I understand that the administrative work recommended maybe time consuming but considering the tax penalty the IRB may impose, it is worthwhile to maintain proper documentation and documents in order to be tax audit savvy.
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