INTRODUCTION

Disagreements between taxpayers and MIRA with respect to the tax position of the former are usual occurrences. The most efficient approach for any business is to take proactive measures to avoid practices that could give rise to such disagreements.

Disagreements relating to tax liability may arise after an audit or investigation conducted by MIRA. However, taxpayers are entitled to seek redress through the tax dispute resolution mechanisms prescribed in the tax laws.

The relevant tax laws, and accounting principles and practices are vital to successfully contest a decision of the MIRA. It is advisable for taxpayers to seek professional assistance from the onset of a tax dispute to ensure their interests are best protected.

AUDIT AND INVESTIGATION

Prior to commencing an audit, MIRA will give a written “Audit Notice” to the taxpayer of its intention to audit the taxpayer’s accounts and documents. The written notice will be issued by MIRA within 2 (two) years from the date of filing or required for filing a tax return. Notices that do not fall within this statutory time period may usually be considered invalid.

The purpose of the audits is to determine whether the taxpayer complies with tax laws and regulations, and has declared and paid the correct amount of tax. It may be in connection with GST, BPT or withholding tax liabilities.

Towards the conclusion of the audit, MIRA officials will disclose the audit findings and inform the taxpayer of required changes to comply with the tax laws and regulations. Even at this stage, the taxpayers will be allowed to point out any flaws in the audit assessment and justify their claims. MIRA may agree with any such assertions and change their initial findings.

Throughout the audit, taxpayers are obliged to cooperate with MIRA and provide the auditors with all relevant materials and documents that may have a bearing on the tax liability. It is in the best interest of taxpayers to disclose such information during the audit to avoid potential disputes in the future. However, disputes are inevitable and if there are legitimate grounds to challenge the audit and tax assessment by MIRA, taxpayers can seek redress.

The tax dispute resolutions mechanism consists of the following processes:

Objecting a tax assessment of MIRA pursuant to an audit or investigation
Appealing the decision of MIRA issued after reviewing the objection

OBJECTING A TAX ASSESSMENT

Upon conclusion of the audit, MIRA will issue an “Audit Report” detailing their findings along with a “Notice of Tax Assessment” if MIRA has determined that the taxpayer is required to pay additional taxes previously not declared.

Taxpayers are entitled to object in writing against the decision of MIRA in assessing their tax liabilities within 30 (thirty) days – excluding public holidays – from date of notification of the decision. Under normal circumstances, taxpayers are not allowed for an extension of the 30-day period. However, MIRA has the discretion to accept late objections in exceptional circumstances such as accidents, natural disasters or illnesses.

The objection maybe founded on two main grounds: (1) the tax assessment violates the rights of the taxpayer, or (2) the procedures adopted by MIRA in the determination of the tax assessment violates the rights of the taxpayer.

The objection must be filed in the form of a “Notice of Objection” and must include in detail the reasons for objecting against the decision. The objection filed will be reviewed by the Objection Section of MIRA. MIRA is required to make a decision with respect to the objection within 120 (one-hundred and twenty) days from the date of filing of the objection.

Even if an objection has been filed against a tax assessment, pending the outcome of the objection taxpayers are required to pay the tax amount in dispute before the due date. Failure to do so will result in imposition of fines and penalties. Where the Objection Section of MIRA decides in favor of the taxpayer, the tax paid will be offset against other tax liabilities of the taxpayer.

If MIRA fails to make a determination with respect to the objection within the 120-day period, the objection may be deemed allowed.

APPEALING TO THE TAX APPEAL TRIBUNAL

Any decision issued by MIRA pursuant to an objection filed can be appealed to the Tax Appeal Tribunal. Taxpayers are required to file such an appeal within 30 (thirty) days from the date on which MIRA made a decision with respect to the objection.

Appeals can only be filed with the Tax Appeal Tribunal after the taxpayer has settled at least 30 (thirty) percent of the tax amount in dispute. The 30-percent payment does not include any fines or interests accrued relating to the disputed tax amount.