What is Tax Investigation?
Where the Tax Authority has preliminary information or reasons to believe that a taxpayer is evading tax, the Authority will trigger tax investigation actions. The investigation may cover individual income tax, corporate income tax and GST.
It is important to examine and understand the nature of the tax queries raised by the Authority and acts on how best to deal with it. There have been cases the investigation ends up in court where there are sufficient evidence available for the Authority to prosecute the taxpayer for tax evasion.
So if a taxpayer realises that there are some irregularities in his tax affairs and does not know how to resolve them, it is best that he seeks professional advice on how best to navigate his way out of the trouble. It is strongly recommended that he consults a tax specialist as soon as possible. You can seek an initial discussion with us and we will give you the necessary guidance.
How long does a Tax Investigation take?
It depends on the scope of the tax investigation, complexity of the underlying irregularities, and the level and sincerity of the taxpayer’s cooperation he renders to the Authority in the process of the investigation. Normally, an investigation on average may take about 15 to 24 months to complete.
Outcome of Tax Investigation?
Prosecution
Where the Authority has established a prima facie case that offences have been committed, it may consider initiating court proceedings to prosecute the errant taxpayer and/or any abettors for tax evasion or other tax related offences.
Wilful Evasion
For wilful evasion, the penalty could go up to treble the amount of the tax. For serious fraudulent evasion, the penalty is set at 4 times the amount of the tax.
Composition
In some cases. a “composition” penalty may be imposed on the errant taxpayer in lieu of prosecution and conviction in court for that offence, for example, just incorrect return made.
No Further Action
Where there is no evidence of wrongdoing, for example, where the irregularity is in the nature of technical interpretation, the case may be closed with just appropriate tax adjustments made and little or no penalty imposed.