• The ‘tax audit exemption program’ will not apply to withholding tax. Therefore an eligible taxpayer will still be vulnerable to a withholding tax audit.

• An eligible taxpayer can still apply for the ‘tax audit exemption program’ even if the taxpayer is currently subject to an audit investigation under a summons or enquiry. In that instance the audit investigation will continue for the specific period/year.

• An eligible taxpayer can still apply for the ‘tax audit exemption program’ even if the taxpayer has or intends to lodge a claim for a tax refund. The Revenue Department can still, however, audit the period/year for which the refund has been claimed. 

• In addition to the other qualifying requirements, taxpayers must have been incorporated at least 12 months before 31 December 2015. Therefore, a company incorporated on or after 2 January 2015 would be disqualified from the ‘tax audit exemption program’.

• An eligible taxpayer who has been placed into liquidation or plans to liquidate will be disqualified from the ‘tax audit exemption program’.

• To reiterate, the following periods will be exempt from tax audits and investigations (other than the specific exclusions) in respect of: 

• Corporate income tax: Any accounting period starting before 1 January 2016. 

• VAT, specific business tax (SBT) and/or stamp duty: Any income, transaction or instruments before 1 January 2016.

 

We wish to remind taxpayers that the ‘tax audit exemption program’ is only available until 15 March 2016 and taxpayers therefore need to act quickly should they wish to take advantage of it. 

The online application form relating to the program appears straightforward.  The applicant is required to fill in minimal information such as the company name, address, tax identification number, name of the authorized person etc. The acknowledgement of receipt will be issued to the taxpayer upon the submission of the application. 

Tax payers are being contacted directly by the Revenue Department to participate in the ‘tax audit exemption program’. Although there does not appear to be any obvious downside for taxpayers to register and co-operate with the Revenue Department’s request, we recommend that a cost/benefit analysis be considered in light of the taxpayer’s actual facts and circumstances before applying for the program. 

Under the law, the Revenue Department has the right to re-open/re-audit a period/year which was already historically investigated (subject to the 2-5 year prescription period). Where an eligible taxpayer has successfully applied for the ‘tax audit exemption program’, the risk of an audit being re-opened is mitigated.

The KPMG Tax Team is available to assist clients in assessing whether the ‘tax audit exemption program’ would meet their needs and improve tax compliance going forward.