LHDN Tax Audit in Malaysia: How It Works, Penalties and When to Get Help (2026)

How LHDN tax audits work under the 2025 Tax Audit Framework: triggers, years covered, penalty rates, Form Q appeals, and when to hire a tax agent.

CukaiMax Team1 February 2025Updated 16 October 20266 min read

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An LHDN tax audit checks that your return matches your records. Under LHDN's Tax Audit Framework (effective 15 March 2025), an audit usually covers up to three years of assessment, or five for fraud, wilful default or negligence. Penalties for an incorrect return start at 15% of the tax undercharged for a first offence.

This guide explains how the process runs, what it can cost you, and when it makes sense to hire an approved tax agent.

What is an LHDN tax audit?

It is LHDN's review of whether the income, deductions and reliefs on your return are correct and supported by records. The 2025 framework replaced LHDN's earlier audit frameworks and uses two review methods.

Review method	How it starts	Where it happens
General review	A letter requesting documents and information	By correspondence with LHDN
Comprehensive review	An audit visit, or a letter fixing the start of case settlement	Your premises, another agreed place, or an LHDN office (in person or virtual)

Cases are mainly selected by computerised risk analysis. A completed audit is not reopened for the same year and issue unless new issues or information come up.

What triggers an LHDN audit?

LHDN does not publish its selection criteria. Selection is mainly computerised, based on tax risk and the information LHDN holds from other sources. For individuals, the common gaps are the ones LHDN can check against data it already has:

Employment income on your return that differs from what your employer reported in C.P.8D, which LHDN pre-fills into e-Filing.
Relief claims you cannot support with receipts.
For business owners, declared income that does not match bank deposits or sales records.

You cannot rule out an audit, but you can make sure every figure on your return has a document behind it.

How does an audit work step by step?

Notice. You receive a letter requesting documents, or notice of a visit. Check the years and items listed, and the response date.
Documents. You send what is requested: usually Form EA, receipts for reliefs, bank statements, and for businesses, sales and expense records.
Review. LHDN compares your documents with your return. For an on-site review, document examination usually takes one to three days.
Findings. LHDN tells you whether there is an adjustment and, if so, how it was worked out.
Assessment. If tax is owed, LHDN issues an additional assessment. Tax under an additional assessment is payable within 30 days, with a 7-day grace period (RF Filing Programme 2026, guide note 6).

What penalties can an audit lead to?

Under the 2025 framework, the rate depends on how many times you have been penalised before, and whether you came forward first.

Situation	Penalty rate on tax undercharged
Incorrect return, first offence	15%
Incorrect return, second offence	30%
Incorrect return, third and later offences	45%
Technical adjustment (a genuine difference in interpretation)	0%
Voluntary disclosure before an audit starts, within 6 months of the filing deadline	10%
Voluntary disclosure before an audit starts, after that	15%

A disclosure only counts as voluntary if it reaches LHDN before audit action begins. Wilful evasion is handled separately: under section 114(1) of the Income Tax Act 1967 it carries a fine of RM1,000 to RM20,000, up to three years' imprisonment, or both, plus a penalty of 300% of the tax undercharged (HASiL offences and penalties).

What if I disagree with the result?

File Form Q within 30 days of the date on the notice of assessment. That is the appeal route under section 99. LHDN does not accept appeals by letter or by phone. If you miss the 30 days, you can apply with Form N and give reasonable grounds, such as illness or a flood.

LHDN then has 12 months under section 101 to review the appeal. If it is not settled, the appeal goes to the Special Commissioners of Income Tax (Bernama, 20 November 2025). Filing an appeal does not pause payment of the assessed tax.

Do I need professional audit support?

Not for a simple case where you have the documents. Get help when the amounts are large, your records are incomplete, or business income is involved.

You can usually handle it yourself if…	Consider an approved tax agent if…
LHDN is asking about one or two relief claims	The audit covers business income or several years
You have every receipt and your EA	Records are missing and need to be rebuilt
The figures match and you just need to send copies	LHDN proposes a penalty you think is wrong
	The letter mentions investigation or wilful evasion

Only a tax agent approved by the Minister of Finance under section 153 of the Income Tax Act 1967 can act for you before LHDN. Before you appoint one, search their name on the MOF tax agent register and check that the approval is still valid. Our guide to finding a tax consultant covers the checks in full.

Fees vary by firm and case, and there is no official fee scale. The CukaiMax tax professional directory lists public prices with the date each one was seen. Get a written quote before you engage anyone.

How can I prepare before an audit happens?

Keep your records in order now, so an audit becomes a matter of sending copies.

Keep documents for seven years. LHDN asks individuals to keep records and supporting documents for seven years for audit purposes (HASiL FAQ).
File each receipt under its year and relief. Medical, lifestyle and education receipts are much easier to produce when they are already grouped.
Claim only what you can prove. A relief with no receipt is the easiest adjustment for LHDN to make.
Fix mistakes early. If you find an error before LHDN contacts you, a voluntary disclosure attracts the lower rates above.
Keep copies of everything you send, with the date and how you sent it.

CukaiMax stores your receipts and sorts them by relief category, and the Free plan includes unlimited uploads. The Personal plan (RM99/year) adds an LHDN audit-pack ZIP of your accepted proof, so you can send LHDN the receipts for a given year in one file.