One Day Left to File Tax Return
Have YOU file in Your Tax Return?
It will take only about 10 minutes to file your Tax Return before 30 April 2009!
Employees are required to submit their tax return Form BE for year of assessment (YA) 2008 on or before April 30, where the income assessed is in relation to the basis period of Jan 1 to Dec 31, 2008.
Do you aware that all your Internet Marketing, affiliate commission and blogging income are Taxable?
Every income is Taxable irregardless whether Online or Offline income derive from either local or foreign.
Therefore your Adsense, Clickbank, Cost Per Action (CPA) etc are Taxable.
Since the Internet Marketing is a business, you can deduct expenses like:
- Monthly Hosting Fees
- Annual Domain Costs
- Internet access fees
- Computers etc
I use the e-Filling when submit my Tax Return.
All the Documents like below MUST be kept for at least 7 years for auditing purposes.
- Salary and Any Income Statement
- Deduction Receipts
- Share Dividend voucher
- Copy of the BE Form
Please consult your Tax Consultant for more tax advices. 🙂
Only 2 thing in Life that is Certain:
- Tax
- Death
Collect taxes without fear or favour, including from millionaires
——————————————————————
THE Dewan Rakyat recently heard that tax defaults involving several millionaires and a sum of RM247.8mil, represents only the tip of the iceberg as those involved come from just three places – Kuala Lumpur (KL), Sarawak and Penang.
Altogether, the top 100 high income earners owe more than RM320mil as of September. A millionaire from Penang is reported to be the top defaulter after owing the Inland Revenue Board more than RM36mil. The second highest tax defaulter is from Sarawak (RM20.5mil).
Civil suits have been initiated to recover the backdated amounts. The third highest defaulter hails from KL (RM19mil); fourth and fifth from Sarawak (RM13mil and RM9.4mil respectively); sixth, seventh and eighth from KL (RM7mil, RM6.94mil and RM6.9mil respectively).
For those of us in the salaried category, it is indeed a heartache to read such a report.
How can so many, owing collosal amounts of taxes, get away scot-free when the rest of us faithfully pay up via salary deductions?
It is certainly not a fair system when those who pay on time end up funding the nation’s development as money received from them are targeted for specific uses, often channelled to the ministries and agencies for spending.
Most of these defaulters comprised people in business either as sole proprietors or partners.
There may be genuine cases where people may file their appeals.
Even then, they should still pay their taxes as the appeal is a separate process. Some may negotiate for instalments stretching for over a year.
The question that arises at this juncture is how long have those debts been outstanding, and why does it appear to be so difficult to collect the money owed?
“The collection process should be improved to enable people to quickly restructure their debts,” said tax expert Dr Veerinderjit Singh.
The authorities should be more forthcoming in divulging the details. Why was there no legal action taken all this while?
There should be severe action taken on the backlog of outstanding amounts which can be put to good use, especially in current tough times.
It is true that from an accounting standpoint, this money owed is accrued as government revenue but it is still not yet cash in hand!
There should be a system to ensure that every citizen pays up, without fear or favour. Ideally, everyone should be subject to the same law. In some countries, tax defaulters are named.
Is it time for some kind of shock therapy to be administered via the “name and shame” route?
Penalty charges for those who do not pay on time should also be reviewed in case the present rates or timeframe are not strong enough to act as powerful deterrents; however, delays in refunds should also then be accompanied by some interest payments.
·Senior business editor Yap Leng Kuen believes that persuasive power should be initially used to ensure that there is enough time and warning to pay up.
In this spirit of responsibility, all of us should not procrastinate until civil action is initiated, where usually, a longdrawn process follows – from obtaining a judgement and then enforcing it, by which time, things can turn nasty and involve seizure of assets or declaration of bankruptcy.
from:biz.thestar.com.my/news/story.asp?file=/2009/12/23/business/5355495&sec=business
What a waste of our money, IRB
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I HAVE been a taxpayer for the last 25 years. About three years ago, I started using the e-Filing system to pay tax. All went well and I knew from then that the Inland Revenue Board (IRB) would not be sending tax forms to us.
This year, the IRB sent out forms to the three million taxpayers informing them that no forms will be sent to them. If each letter costs 30 sen, the IRB would have spent an estimated RM900,000 just on postage. Take in the costs of paper, envelope and manpower, it would easily be about RM1mil.
This is a waste of taxpayers’ money. It would have been cheaper to advertise or inform taxpayers through the employers or national television. This could have saved quite a bit of the cost incurred in this process. Only Pos Malaysia, a government-linked company, would have benefited from this exercise. Can the powers-that-be in IRB explain this decision?
WASTE NOT,
Kuala Lumpur.
fr:thestar.com.my/news/story.asp?file=/2010/1/7/focus/5422807&sec=focus
Making it less taxing for online payers
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WE would like to thank the writer for his comments in “What a waste of our money, IRB” (The Star, Jan 7).
Not everyone remembers the “once-a-year” affair of tax form submission. Frequent reminders have to be made to inform taxpayers to log into the system and file in rather than doing it manually.
The letters were issued to encourage all e-Filing users to fully utilise the system which is proven to be easy, accurate and safe as well as to highlight the following:
> The e-Filing system can be used by March 1, 2010;
> The short-cut address to e-filing is e.hasil.gov.my, without having to go to the main web-site;
> The steps to be taken if taxpayers forget their password; and
> The different deadlines for submission of various Tax Forms.
In getting taxpayers to jump start filing their returns rather than facing system/line congestion in the last few days before the deadline, an early personalised reminder is always crucial.
Should there be a campaign done via the mass media, the cost of advertising would be much more exorbitant compared to the letters issued. This is due to the fact that there is a need to reach out to taxpayers in terms of their segment and locality.
Even advertisements over the national television incur costs and might not reach everyone since many taxpayers now choose to watch much more popular channels other than national television.
Advertisement in various newspapers would incur more cost considering different taxpayers read different newspapers. For readers information, we currently have around 1.4 million e-filers.
Should the writer have any inquiry on this issue, he may contact us at 03-6209 1603. We appreciate his views and feedback to improve future services.
MAZLAN WAN CHIK,
Director,
Corporate Communications Division, Lembaga Hasil Dalam Negeri.
fr:thestar.com.my/news/story.asp?file=/2010/1/11/focus/5444045&sec=focus
E-filing now open for 2009 income tax
PETALING JAYA: The e-filing for the 2009 income tax return forms is now open, said the Inland Revenue Board (IRB).
The service is accessible through its e-filing website e.hasil.gov.my or through its official website hasil.gov.my.
The IRB, in a statement yesterday, urged tax payers to hand over their income tax return forms and not wait until the last minute as it could jam up its server.
The deadline for individual tax payers (BE and M forms) is April 30 while businessmen (Forms B and M) have until June 30 to do their filings.
Those who jointly file their income using the P Form have until June 30 to do so.
It added that employers have until March 31 to complete their E forms.
Those who have not used e-filing can apply for pin numbers using e-mail at pin at hasil.gov.my or contact 1-300-88-3010.
For more details, contact the IRB public relations officer Masrun Maslim at 03-6203 1380.
fr:thestar.com.my/news/story.asp?file=/2010/3/5/nation/5797636&sec=nation
Two million taxpayers expected to use e-filing
PETALING JAYA: The Inland Revenue Board (IRB) hopes to receive two million income tax returns online this year, said public relations officer Masrun Maslim.
“As at last Sunday, the department had received 26,000 returns since the opening of the e-filing system this month,” he said when contacted yesterday.
Last year, the department received almost 1.6 million income tax returns online, and submission of tax returns through e-filing is rising.
“We are expecting more people to submit their tax returns through the e-filing website e.hasil.gov.my
“Malaysians are urged not to leave it to the last minute. Please submit your returns early,” said Masrun.
The deadline for individual taxpayers (BE and M forms) is April 30, and for businessmen (Forms B and M) it is June 30.
Those who jointly file their income tax returns using the P Form have until June 30 to do so.
Employers have until March 31 to complete their E forms.
Those new to e-filing can apply for personal identification numbers by contact 1-300-88-3010.
fr:thestar.com.my/news/story.asp?file=/2010/3/10/nation/5826315&sec=nation
Investment income – is it taxable?
IT IS the time of the year when some of us may feel uneasy as the deadline for filing our personal income tax return gets nearer. You may drag your feet when having to complete the return form (Form B or Form BE as the case may be) and procrastinate till the last minute as obviously paying taxes is not as exciting as receiving money from your investments.
After having received money from your investments in say, shares and property, have you considered whether the receipts are taxable?
Dividend income
In general, people are under the impression that dividend income is not required to be reported in the tax return. This is only true provided the dividend income is tax exempt as in the case where the dividend that is received is either a single tier dividend or is paid out of the exempt profits of the dividend-paying company. In the case where you received dividends where income tax has been deducted at source, such dividend income is taxable and consequently has to be declared in your income tax return.
Depending on your level of taxable income, you may actually obtain a tax refund from the Inland Revenue Board (IRB) if your tax bracket is at 24% or below.
Generally, the tax deducted by the company on the taxable dividend is at the rate of 25%. On the other hand, if your tax bracket is at 27%, then you are required to pay the 2% differential to the IRB.
In order to determine whether your dividend income is taxable or otherwise, you can look at the dividend vouchers. However, one common mistake in the reporting of taxable dividend income is where the actual amount received is declared as opposed to the gross dividend income, as stated in the dividend voucher.
Rental income
The other common investment income is rental income. Reporting of rental income would be simple if only the gross rental received without claiming deduction for expenses incurred in deriving the rental income was reported. As a smart investor with diversified investments, every penny saved or earned would be additional funding for your next investment.
Therefore, you should claim all the permissible expenses against the gross rental income. The permissible expenses would include assessment, quit rent, service charges, sinking fund contributions, fire insurance and property loan interest. In the case of a bank loan taken to finance a property which generated rental income, one has to remember that it is only the loan interest that is deductible and not the entire loan repayment amount.
Other rental-related expenses such as property agent’s commission and repairs may be deductible against the rental income. However, you would need to scrutinise such expenses in detail to establish if they are indeed deductible.
In the case of the property agent’s commission, where the property owned is being rented out for the first time, the commission paid for securing the first tenant would not qualify for a tax deduction. Subsequent commission paid to the property agent for securing tenants for the same property (after the first tenancy) would be deductible. Likewise, not all repair expenses incurred on the property could be deducted against the rental income.
If you were to repair a leaking roof and install a canopy at the verandah of the house at the request of the tenant, the expense incurred on the canopy would not be deductible as it would not be regarded as repairs and maintenance expense although the repair of the roof should qualify for a deduction.
Some points to take note of
Bearing in mind the penalty that can be imposed by the IRB in the event of an understatement of income in the tax return, you would have to be careful when determining the types of expenses to claim against your investment income. It is important that you do not make a claim for otherwise eligible expenses if you do not have the supporting documents to justify your claims.
If you have a property jointly owned with your spouse, the rental income will be taxed based on your share in the property. Correspondingly, your spouse would have to report the rental income based on his or her share in the property.
Where you and your spouse have investment income, you may be thinking of whether you should be filing for separate assessments or opting for a combined assessment. For most couples, a combined assessment is not beneficial as the combined income would push the tax rate to a higher bracket.
Further, a separate assessment would allow each person to claim the personal relief of RM8,000 whereas a combined assessment would only allow the person to claim either a wife or husband relief of RM3,000 in addition to the personal relief of RM8,000.
This would mean a loss of relief of RM5,000.
·Pauline Tam is executive director, KPMG Tax Services Sdn Bhd.
fr:biz.thestar.com.my/news/story.asp?file=/2010/3/25/business/5927473&sec=business
Two more days for employers to complete E forms
PETALING JAYA: Employers have two days left to complete their E forms for the income tax returns for assessment year 2009.
Internal Revenue Board (IRB) public relations officer Masrun Maslim reminded employers to submit the forms to avoid the hassle of last-minute submission.
He said that although many people were now switching to e-filing, they should not wait to submit their returns till the last minute.
He added that the e-filing system had also been upgraded to cope with the surge in online tax returns.
The deadline for individual taxpayers (BE and M forms) is April 30 and June 30 for businessmen (Forms B and M).
Those who jointly file their tax returns using the P Form have until June 30 to do so. As of Sunday, the IRB received 238,411 tax return forms online.
“This is an 85.87% increase from 128,266 during the same period last year,” he said yesterday. He added that 1.53 million income tax return forms for individuals for 2009 have been sent by the IRB since February.
fr:thestar.com.my/news/story.asp?file=/2010/3/30/nation/5957322&sec=nation
Many taxpayers opt to file returns early
JOHOR BARU: Several people have already started to file their income tax returns with the Johor Inland Revenue Board (IRB) instead of waiting until the last minute.
Among the early birds who turned up at the IRB office were technician Zainodin Rohed, 35.
“I came early to learn how to do e-filing,” he said, adding that he hoped to do it from his computer at home from next year.
Lo Kam Mee, 40, said he wanted to file his income tax returns early in order to avoid last-minute queues and hassle.
Businessman Sadir Mohammad Mikar, 63, said the e-filing system was very easy to use as it only took him a couple of minutes to fill in the form and submit it electronically.
Johor Baru IRB deputy director and public relations officer Norazam Sulaiman said its Taxpayers’ Month, which started on Thursday, would end on April 30 for salaried employees.
“For those that have business income, it will end before June 30,” he said, adding that the e-filing counters at the office would only be open on weekdays between 8am and 5.30pm to encourage the public to file their returns early.
“However, past experience shows that many people will still do their taxes late. We have placed about 50 computers at the office lobby for taxpayers to do e-filing,” he said.
fr:thestar.com.my/news/story.asp?file=/2010/4/5/nation/5991472&sec=nation
No tax relief on gym fees
AS THE deadline for filing your tax returns looms and you are still unsure about specific things like what relief is allowed in respect of expenses for the purchase of sports equipment, see the answers provided by PremierOne Tax Consultants Sdn Bhd to some of our readers’ queries.
For starters, there is no tax relief on fees for gym membership and personal training sessions, and if you have business income in addition to your employment income, you should use Form B instead of Form BE.
Property
Q: In the event of joint ownership (husband and wife) of a house, and the housing loan (also under both names) has annual interest exceeding RM20,000, can both husband and wife claim a maximum tax relief of RM10,000 each if both file tax returns separately?
A: The tax relief of up to RM10,000 a year for interest expended to finance purchase of residential property for three consecutive years of assessment from the first year the interest is paid is subject to the following conditions:
(i) The taxpayer is a Malaysian citizen and a resident;
(ii) It is limited to one residential unit;
(iii) The sale and purchase agreement is signed between March 10, 2009, and Dec 31, 2010; and
(iv) The residential property is not rented out.
In the event where:
(a) Two or more individuals are eligible to claim relief for the same property; and
(b) Total interest expended by those individuals exceeds the allowable amount for that year, each individual is allowed an amount of relief for each year based on the following formula:
A x B/C
where A = total interest allowable in the relevant year;
B = total interest expended by the relevant individual in the relevant year;
C = total interest expended by all the individuals
In your case, you and your wife will each be entitled to claim RM5,000 tax relief each year.
> If the S&P is signed in Dec 2009 on 10/90 scheme (no progressive interest payment prior to hand-over), and the first instalment will only be due in March 2011, how would the interest tax rebate work?
In your case, the tax relief of up to RM10,000 a year for three consecutive years starts from the first year the interest is paid ÂÂ i.e. from year of assessment 2011 to 2013.
Sports equipment
> Purchase of sports items is exempted from tax to encourage healthy lifestyle among Malaysians. Does this include fees for gym membership and the personal trainer that we hire at the gym? Does this include items like training mat, fit balls, dumbbells, barbells, treadmill and others?
A maximum tax relief of RM300 is allowed in respect of expenses for the purchase of sports equipment for any sports activity as defined under the Sports Development Act 1997, evidenced by receipts for the purchase.
The sports activities listed in the First Schedule of the Sports Development Act 1997 include athletics, badminton, body building, canoeing, fencing, golf, recreational, sepak takraw, table tennis, water sports, and more.
Gym membership and personal training session costs do not qualify for tax relief since they are not sports equipment.
To date, the LHDN has not issued a specific list of qualifying sports equipment. Equipment such as dumbbells and barbells may arguably qualify as sports equipment.
Derivative pension / retirees
> I am a retired government servant who receives a monthly pension. My late wife was also a government servant and I am now getting her derivative pension. Nota Penerangan BE (Section C5) says that a person is only entitled to one tax-exempt pension.
Am I considered to be receiving two pensions (hence my late wife’s derivative pension becomes taxable), or does it refer to a taxpayer who before his retirement had two jobs, which each gives him a pension?
Part 1 of Schedule 6 of the Income Tax Act 1967 sets out a list of incomes that are specifically exempted from income tax. In your case, the two relevant provisions under this Schedule are paragraph 30 and paragraph 16. Paragraph 30 (referred to in Section C5 of the Nota Penerangan BE) provides, among others, that Malaysian pensions paid to a person on reaching the compulsory retirement age from employment shall be tax exempt.
However, where a person is paid more than one pension, it further provides that this exemption shall apply to the highest of the pension paid.
Paragraph 16 provides for a tax exemption in respect of pensions granted to any person relating to widows’ and orphans’ pensions and pensions paid under an approved scheme to or for the benefit of the widow, child or children of a deceased contributor to the scheme.
Your own pension is tax exempted under paragraph 30, whilst the derivative pension of your wife that you received is governed under paragraph 16. The term “widow” is interpreted strictly by the LHDN and therefore, the exemption under paragraph 16 would only apply to a woman whose husband has died but would not apply to a man whose wife has died. On this premise, the derivative pension you receive does not fall within the paragraph 16 exemption and would therefore be taxable.
> I retired in Dec 2008 and I have received two types of payment from my ex-employer in 2009 as follows:
1) Proportionate bonus for July 1, 2008 to Dec 12, 2008.
LHDN treated this as 2008 income and I was taxed as such. On appeal this was changed to a 2009 income.
2) Salary and bonus arrears arising out of a new collective agreement from previous years up to Dec 31, 2008.
LHDN is of the view that arrears are different from the proportionate bonus and has to be taken as 2008 income. Is this so?
Further, I understand there is another provision: “for the purposes of this Act, any income of a person from any source … may be ascertained for any period … notwithstanding that the person in question may have ceased to possess that source”. LHDN took this provision to cover only bonus (earlier argument by them was “how can you get bonus when you have retired? Therefore, it has to be treated as a working year income!”).
The provision you referred to is S5(2)(a) of the Income Tax Act 1967 which states, For the purposes of this Act, any income of a person from any source … may be ascertained for any period … notwithstanding that — (a) the person in question may have ceased to possess that source or any of those sources prior to that period.
This emphasises the chargeability of any income notwithstanding that the income source has ceased.
Section 25 of the Act provides the basis period (calendar year for individuals) to which the gross income from an employment is assessed. Prior to year of assessment (YA) 2009, where income from an employment is receivable in respect of the whole or part of the relevant period, it shall when received be treated as gross income of the person for the relevant period. However, with effect from YA 2009, S25(2A) was introduced such that where director’s fee or bonus is receivable in respect of the whole or part of the relevant period, the director’s fee or bonus when received in any relevant period shall be treated as gross income in the year of receipt. This was introduced to facilitate the filing of individuals’ tax returns under self assessment and to ease the administrative work of the LHDN.
Therefore, other than director’s fee and bonus that is receivable in respect of the preceding year and taxed in the year of receipt, other types of income from employment (such as, in your case, arrears out of a new collective agreement concluded in 2009) should be taxable in the year when it was first receivable i.e. the relevant year where such employment payment relates to.
Shares and dividends
> I would like to seek your help on how to fill in the Borang BE submission for dividend received from a company. Do I need to declare dividend as income? May I know how to provide dividend amount and the tax deducted in the Borang BE? Dividend voucher particulars given as below :
Gross dividend RM10,000; tax 25% RM2,500; and net dividend RM7,500. The company paid me RM7,500.
The dividend warrant that you received shows a gross dividend amount, tax deducted (25%) from the dividend and net dividend paid out. You should declare the dividend at gross (i.e. RM10,000 and not net at RM7,500) in item C2 in your Borang BE and can deduct the Section 110 tax credit of RM2,500 against your total tax under item E10 in Borang BE. Any excess is a repayment due to you.
>I have received dividends for my unit trust as follows:
Taxable income RM50.89; Malaysian tax: RM12.72; Single-tier income RM4.91; Non allowable expenses RM26.03; Non-taxable income RM140.31; Distribution equalisation RM0.00; Net payable: RM157.36.
How will the dividends be taxed?
The net amount payable of RM157.36 payable to you is arrived at as follows:
Taxable income (gross) 50.89
Less : Tax at source (25%) (12.72)
Equals: 38.17
Add : Single tier income 4.91 (taxexempt)
Add : Non taxable income 140.31 (nontaxable)
Equals: 183.39
Less: Non allowable expenses (26.03)
Net payable 157.36
The amount of the unit trust distribution that you should bring to tax is RM50.89 and you are entitled to claim the section 110 tax credit set-off of RM12.72.
Transport/leave allowance
> Regarding yearly leave passage, I went for a family trip to Bangkok last December. Do I claim the amount for my whole family or just me alone? Is it claimable for this year’s submission?
The yearly leave passage claim mentioned in a previous article (Sunday Star, March 21, 2010) refers to a situation where an employee is being provided with benefit-in-kind in the form of leave passage(s). The leave passage BIK is not taxable to the extent that it is in relation to the following travels for the employee and his immediate family:
(a) Leave passages including meals and accommodation for travel within Malaysia not exceeding three times in any calendar year; or
(b) One leave passage for travel between Malaysia and any place outside Malaysia in any calendar year, limited to a maximum of RM3,000.
The claim referred to is not in respect of a tax deduction for costs expended by taxpayers for private or family trips where leave passage is not provided by the employer.
> What is the difference between petrol allowance, travel allowance and car allowance? I am currently given a fixed monthly car allowance of RM2,000 for sales trips. Can I claim for exemption of RM6,000 or more if I can show proof with my petrol expenses via my credit card statements and my regular car servicing/maintenance bills?
Different employers use the terms you mentioned interchangeably and each term is not specifically defined in the tax legislation. Based on your description, the RM24,000 per annum allowance given to you would be for official duties travel.
The provision of petrol card, petrol allowance or travel allowance or toll card or a combination therein by an employer to the employee for official duties in exercising his employment is exempted from income tax up to a maximum of RM6,000 per year.
Based on the LHDN’s second addendum to Public Ruling No.1/2006 issued on Feb 25, 2009 on Perquisites from Employment, where the amount of allowance that you receive exceeds RM6,000 per annum for travelling in exercising your employment, you can make a further deduction with supporting documents or evidence in computing your employment income on the amount spent for official duties.
Records pertaining to the further deduction and the exempted amount should be kept for a period of seven years for tax audit purposes.
> My EA Form has a column for long service award of RM500. Am I entitled to a claim?
Pursuant to paragraph 25C, Schedule 6 of the Income Tax Act 1967, long service award, whether in money or otherwise, provided to an employee in relation to his employment is exempted from tax up to a maximum of RM2,000 per year provided that the employee has exercised employment for more than 10 years with the same employer. (The Second Addendum to Public Ruling No 1/2006 on Perquisites from Employment dated Feb 25 2009 refers to employment with the same employer or with companies within the same group of companies for more than 10 years.)
The amount of leave passage and long service award that is shown in the Form EA provided by your employer should reflect the respective net amounts after deducting the exempted amount of leave passage and long service award, as applicable. Please confirm with your employer the amount declared in your Form EA.
Medical
> I had a heart bypass done last year. Since my insurance coverage did not cover the total cost of the bill, I had to fork out a certain amount. In this case, am I still entitled to the RM5,000 tax relief under serious illnesses? For life-time medication, am I entitled for life-time tax relief, or just a one-off? Am I allowed to claim on pharmacy bills as these are cheaper than hospitals?
You are entitled to the tax relief of medical expenses for serious diseases of up to a maximum of RM5,000 per annum, regardless of whether the insurance policy partly or totally covers your medical bill for the heart bypass.
Provided that the medications are prescribed for the treatment of serious diseases and evidenced by receipts and certifications issued by a registered medical practitioner with the Malaysian Medical Council, it should qualify.
Pharmacists are not registered under the Malaysian Medical Council, and it would be difficult for you to substantiate your claim as you would not have the required receipts and certification, which is a critical requirement for the claim.
Part-time business
> I am a full-time employee and do some small sales of things I make. I have a business licence so that I can sign agreements with companies to take products on consignment.
However, I do not earn that much. Last year, for instance, I only made about RM2,200. How do I declare this income keeping in mind I am also a full-time employee, and how do I deduct the expenses? What kind of expenses are deductible? What can I do to make sure that this small enterprise is worth carrying on without driving up the tax bill?
If you earn business income in addition to your employment income, you should notify the LDHN and obtain a Form B (instead of Form BE). You should prepare a profit and loss account for the business as well as prepare a tax computation to arrive at the business statutory income. This amount should be entered under item C1 of Form B. You should refer to the Nota Penerangan B2009 for further guidance. The Form B must be filed with the LHDN not later than June 30 every year.
You are entitled to claim expenses (non-capital in nature) wholly and exclusively incurred in generating your business income. In addition, you can claim capital allowance on qualifying capital expenditure incurred on assets you use in your business. If you make a business loss, you can deduct this against your employment income in the same year.
> My son is currently servicing his PTPTN study loan. Can this be considered as education fees?
An individual is entitled to claim a tax relief of up to a maximum of RM5,000 for fees expended by that individual on himself for:
(a) Any course of study up to tertiary level, other than a degree at Master’s or Doctorate level, undertaken for the purposes of acquiring law, accounting, Islamic financing, technical, vocational, industrial, scientific or technological skills or qualifications;
(b) any course of study for a degree at Master’s or Doctorate level undertaken for the purpose of acquiring any skill or qualification in any institution or professional body in Malaysia recognised by the Government or approved by the Minister, as the case may be.
Therefore, your son (and not you, as the father) will be entitled to claim the tax relief if the course he is undertaking satisfies the above criteria.
> What is CP38? My pay slip shows I was deducted a certain amount for this.
A CP38 deduction arises where the LHDN issues a specific directive to an employer (with a corresponding notification to the employee) requiring the employer to make monthly deductions from the monthly remuneration of a particular employee on his prior year(s)’ outstanding tax liability.
This CP38 is in addition to the Schedular Tax Deduction which is a deduction on current income (Pay As You Earn) where employers make automatic mandatory deductions from their employees’ remuneration every month.
PremierOne Tax Consultants Sdn Bhd is part of the PremierOne Group that provides a full range of corporate services including taxation planning, audit and assurance, corporate exercise advisory, accounting, company secretarial and other financial-related services.
fr:thestar.com.my/news/story.asp?file=/2010/4/11/focus/5988821&sec=focus
Tips on how to file your income tax and claim exemptions
EVERY employee when filing the tax return (Form BE) for year of assessment (YA) 2009 on April 30 has to understand the concept of income exemption, deduction and relief in order to maximise the tax benefits available under the Income Tax Act 1967 prior to paying the legally required amount of income tax.
Income Exemption: Generally, any amount paid by the employer to the employee in relation to having or exercising an employment will be taxed. This refers to employment income such as salary, bonus, gratuity, commission, allowance, director fees and many other forms of remunerations as stated in section 13(1) of the Act.
The Government, however, would from time to time legislate through the Act or gazette order (PU(A) Orders) on the category of income paid by the employer where tax exemption will be granted. This means that such income will be excluded from the income tax computation.
In short, the phrase “income exemption” refers to employment income that is excluded from taxability.
Deduction: Employee can only deduct expenses incurred in carrying out the employee’s duties provided allowance has been received from the employer. This generally refers to travelling allowance, entertainment allowance and meal allowance.
Income tax only imposes tax on net income, ie. after deduction of the required expenses incurred in discharging the performance of the employee’s duties. The amount to be taxed is mathematically computed as follows:
With effect from YA 2008, payments by the employer to the employee in the form of child care allowance, payment of traditional medicine and maternity expenses constitute tax exempt income to the employee. The amount paid in relation to these expenses by the employer is tax deductible against his business income and yet not taxable in the hands of employees.
The relationship between the employer and the employee is illustrated in the above table.
If the employee incurred on his/her own child care, medical expenses on traditional medicine or maternity expenses, these expenses are not deductible from the employment income due to the followings:
â—Ź no allowance has been received from the employer on these items;
● it is not related to the carrying on of the employee’s work;
â—Ź it represents personal expenses which are not permissible under the Act.
The Act only permits the deduction of expenses provided it is incurred “wholly and exclusively” (the sole objective test) in discharging the performance of employees duties as stated in section 33 of the Act.
Tax Planning: Since the expenses are tax deductible to employer, it would be tax efficient for the employee to forgo their bonus in exchange for these benefits as child care allowance, medical expenses on traditional medicine and maternity expenses that are given by the employer to the employee are tax exempt on the employee’s hand.
Alternatively, employer may consider providing these benefits to the employee at the additional cost to the business but it gives employee loyalty to the firm in long run.
Tax relief: The Act provides a list of items deductible from any income earned by a resident individual in order to relief him/her from tax burden. These expenses are essential to provide welfare to an individual and are given to any resident individual irrespective whether he/she is earning business income, employment income or investment income. The resident individual refers to an individual who has been staying in Malaysia for at least six months.
# The April 30 deadline looms for taxpayers to file their returns. Tax consultant Dr Choong Kwai Fatt from the Faculty of Business, Universiti Malaya, takes you through the basic issues with this introductory article and completes the rest of the journey online. The online link is
biz.thestar.com.my/data/files/taxadvice2010.pdf
fr:biz.thestar.com.my/news/story.asp?file=/2010/4/14/business/6027384&sec=business
Claims for medical expenses
Compiled by JOSEPH LOH
Can you claim for your Internet connection under the personal computer tax exemption? What are considered serious illnesses? These are some of the questions our readers are asking. Tax consultant company PremierOne answers their queries below.
Can I claim medical expenses for my mother-in-law? She is staying with me and I pay for all her medical fees.
The tax relief of up to a maximum of RM5,000 is in respect of medical expenses expended by taxpayer for his parents. In your case, you are not entitled to claim the tax relief for your mother-in-law.
If your wife is working and/or earning an income, she would be entitled to claim the medical expenses for her mother provided that the claim is evidenced by a medical practitioner’s receipt.
> We bought insurance coverage for my two children under my wife’s name but I am paying the premium using auto debit from my credit card. Can I claim this?
The tax relief is up to a maximum of RM3,000 in respect of insurance premiums paid for insurance on education or for medical benefits for individual, spouse or children. To qualify for the relief, the insurance policy must be in your name (as the claimant) and the insurance coverage for your two children must be in relation to education or medical benefits.
> What disease is considered a serious disease and where can I find the list in the Tax Guide Book?
The tax relief for medical expenses expended on self, spouse or child of up to a maximum of RM5,000 is available in respect of treatment of serious diseases which is defined to include AIDS, Parkinson’s, cancer, renal failure, leukaemia and other similar diseases such as heart attack, pulmonary hypertension, chronic liver disease, fulminant viral hepatitis, head trauma with neurological deficit, brain tumour or vascular malformation, major burns, major organ transplant and major amputation of limbs.
The definition can be found under item D6 in the IRB Tax Guide Book (Buku Panduan BE2009).
> Can I claim under serious diseases when I was hospitalised for cataract or ulcer in the stomach?
See above. Since the definition exemplifies diseases which are serious and chronic in nature, we think cataract and stomach ulcer may not fall within this definition.
> I purchased supplements which helps in controlling my sinus. However, this is not a prescription from a doctor. Am I able to claim for it?
See above. The purchase of supplements would not fall within this definition and therefore it is not claimable as a tax deduction.
> My daughter has been on anti-allergy medication for more than a year. Are her medical costs claimable?
See above. Since the definition exemplifies diseases which are serious and chronic in nature, this is unlikely to fall within this definition.
> I want to claim for my parents’ medical expenses but receipts are under their name. What should I do?
Tax relief of up to a maximum of RM5,000 is available in respect of medical expenses expended by an individual for his parents provided that the claim is evidenced by a medical practitioner’s receipt to certify that the treatment was provided for your parents.
Where the receipts are issued in your parents’ names, you may substantiate your relationship with your parents by showing proof such as your birth certificate, in the event of an audit by the Inland Revenue Board.
Combined assessment
> My wife only has dividend income of about RM3,500, so is it more beneficial for me to return a combined assessment?
You should opt for a combined assessment if your wife’s total chargeable income is less than RM3,000 (RM3,000 being the wife relief in a combined assessment).
In your case, you should opt for separate assessment. Otherwise, the RM500 excess of her dividend income over RM3,000 (wife relief) will be added to your own total chargeable income and assessed on you at your highest applicable tax rate.
However, please note that if your wife’s dividend income is a single-tier or tax-exempt dividend, then it is not taxable and need not be declared in your tax return.
Disabled family member
> I have a brother who has mental problems and has been staying at a nursing home in Petaling Jaya for at least four years. He is on full-time medication and consultation at Universiti Hospital. His monthly nursing home fee is RM650 per month, which totals RM7,800 per year. Can l claim tax relief of RM6,000 under disabled individual?
The tax relief of RM6,000 for disabled individual is applicable to a taxpayer who is himself/herself disabled. In addition, there is also a tax relief of RM3,500 for the taxpayer if his/her spouse is disabled.
In your case, you are not entitled to the tax relief in relation to your disabled brother.
Overseas and Internet income
> I am a Malaysian citizen. If I take up an offer as an independent consultant for a company registered outside of Malaysia, will I be taxed for my income? My monthly income will be TT into my Malaysian bank account from any of the above countries. My work will be mainly based in Malaysia with short trips to those countries.
Where your work is mainly based in Malaysia, your income as an independent consultant is taxable in Malaysia. The short trips overseas would most likely be regarded by the IRB as part of or incidental to your Malaysian business activities.
Your income would be taxable in Malaysia regardless of the fact that your principal is not a Malaysian company or that your monthly income is TT from a foreign country.
> I work for WHO. We have been getting two conflicting answers whenever this time of the year comes around. Every April, we will receive a letter (from WHO) stating that we are tax-free but depending on who we ask in LHDN, we would get various answers – from “yes, you are tax-free” to “no, you have to pay!” Can you clarify?
Our response is based on the premise that the letter from WHO specifically states that you, as an employee of WHO, are exempt from tax on your employment income.
If this is so, we suggest that you request from WHO a copy of the Malaysian government exemption order which specifically states that employees of WHO in Malaysia are not taxable on their employment income.
Without this order, your employment income is taxable income in respect of having or exercising employment in Malaysia.
Freelance work
> How do you start paying tax if you are a Malaysian who has not lived or worked in the country as an adult but has now returned at age 50? I did pay tax in the other countries I lived and worked in, of course. I now work on a freelance basis.
You would need to firstly register yourself as a taxpayer. We suggest you visit the nearest IRB office to inquire on this. The IRB will be able to assess, from your annual freelance income and your applicable tax reliefs, whether you are taxable or not.
If you are taxable, then the IRB will register you and issue the Form B for your completion.
Employee allowances
> If the company provides a car and petrol for its employee’s use, why does it fall under taxable income? How does it compute?
When the company provides to its employees a car for private use and pays for petrol, this is considered a benefit-in-kind and is taxable to the employees.
The computation of the car and petrol BIK is set out at length with examples in the IRB’s Public Ruling No.2/2004 on Benefits-in-kind (“BIK”) dated Nov 8, 2004. From YA 2008, the computation of the petrol BIK is fully set out in the Third Addendum of the Public Ruling No 2/2004 dated April 17, 2009, where the benefit on free petrol is taken to be the total value of petrol provided to the employees.
You can obtain these Public Rulings from the IRB’s website.
> Is there any way that this provision can fall under a category to minimise tax?
From YA 2008, the amount of the petrol BIK is exempted in respect of:
(a) RM2,400 per year with effect from YA 2008 to YA 2010 for travelling from home to place of work and from place of work to home;
(b) RM6,000 per year for travelling in exercising an employment.
The Third Addendum to the Public Ruling also sets the tax treatment for certain situations such as where an employee receives free petrol exceeding RM6,000 in exercising his employment.
The Finance Ministry has, on July 10, 2009, given the option for employees to either:
(a) Use the prescribed BIK value for petrol in the Public Ruling on BIK dated Nov 8, 2004, or
(b) Follow the provisions in the Third Addendum for petrol BIK.
> May I know whether a company that provides meals to its staff has to declare it in its Borang EA?
With effect from year of assessment 2008, meal allowance paid by employers is fully exempted from income tax to the employees. The amount of such exempted allowance is to be specified in Part G of the Form EA provided by the employer. The employees are not required to report such exempted allowance in their respective Form BE.
Further clarification on meal allowance exemption can be obtained from the Third Addendum to Public Ruling No.1/2006 and BE2009 Explanatory note, which can be found in the IRB’s website.
Rent income
> Can we deduct the initial costs to set up an apartment for rental – such as washing machine and television – against the rental income?
Where rental income is treated as a non-business income source, these initial costs cannot be deducted against the rental income because these costs are capital expenditure.
However, the IRB, in their Public Ruling No.1/ 2004 dated June 30, 2004, on Income from Letting of Real Property, allows the replacement cost of such equipment as a deduction against the rental income.
> Can the estate agent’s fee be deducted against the rental income?
Where rental income is treated as a non-business income source, the estate agent’s fees are deductible against rental income only when it is incurred after the date of first letting of the property. If it is incurred before letting commences, it is not deductible. Agent’s fees incurred after commencement are deductible.
> If there are a number of properties for rent, can this be consolidated in terms of rental income and expenses for the purpose of arriving at the taxable income? This is because a property may not have a rental income but has expenses, so can these expenses be set off against the other properties?
Based on the IRB’s Public Ruling No.1/2004 where rental income is treated as a non-business income source, the IRB has granted a concession where in computing the adjusted income from rent, the properties can be grouped into categories of residential properties, shophouse/commercial properties and vacant land.
The grouping into the three categories should include only those properties which have commenced receiving rental income.
> The rental income received on an apartment property is banked into a wife’s bank account even though the husband is the registered owner. The apartment was purchased in the husband’s name for loan purposes. The strata title to the property has not been issued. Is the income to be reported under the husband’s or the wife’s tax returns? (They have been filing separate assessments.)
The rental income is to be reported under the husband’s tax return since the property is registered under his name.
> In the same case as above, if the wife stopped work in the middle of last year, should the income come under the wife to maximise tax savings?
Yes. If the wife is not working and not earning income, it is more tax efficient to declare the rental income under her name but this is only possible for future reporting after/if the property is transferred to her as owner. For last year’s, the rental income has to be reported under the husband’s name.
> The property was rented out up till the middle of last year, so should the quit rent, assessment, insurance premiums, maintenance fee and sinking fund be taken proportionately?
Yes, the rental expenses should be taken proportionately.
> How and how much of the repairs and maintenance expenses are deductible?
Any expenses (except capital in nature or initial outlay) expended directly to generate the rental income from the property, including property quit rent and assessment, insurance and repairs and maintenance can be deducted against the rental income.
There is no maximum limit on the expenses incurred for tax deduction except that any excess over the rental income is not allowed to be carried forward to the next year. Say, if your rental income is RM24,000 and your expenses are RM30,000, the excess of RM6,000 is lost.
Computer
> The current tax deduction for the purchase of a personal computer for non-business use of up to a maximum of RM3,000 is given on an individual basis once in every three years of assessment. I bought a desktop computer in 2009 and submitted the tax deduction in year of assessment 2009. I intend to buy a notebook this year (2010). Am I entitled to claim the tax deduction in year of assessment 2012 or do I need to buy it only in 2012 in order to be eligible for the deduction?
You are entitled to claim a tax relief once in every three years of assessment for the purchase of a personal computer. Since you have purchased a desktop computer in year of assessment 2009 and made a claim for year of assessment 2009, you will not qualify for the tax deduction for the years of assessment 2010 and 2011.
In your case, you need to buy your notebook in year of assessment 2012 itself or thereafter in order to qualify for the next RM3,000 tax relief.
> The Internet line in my house is under my wife’s name but I am the one paying the bill every month. Can I claim for this?
There is currently no tax relief for Internet subscriptions. However, with effect from year of assessment 2010 until 2012, an annual relief of up to RM500 will be given on broadband subscription fees.
fr:thestar.com.my/news/story.asp?file=/2010/4/4/focus/5988503&sec=focus
E-ledger way to check on your tax status
By SYLVIA LOOI
IPOH: Taxpayers can now check the status of their accounts through the e-ledger system provided by the Inland Revenue Board (IRB) on its website.
IRB chief executive officer Tan Sri Hasmah Abdullah said the system was developed due to overwhelming requests from taxpayers who wanted to check on the status of their accounts online.
“The service is available to taxpayers who use the e-filing system,” she said here yesterday after launching the system, adding that the e-ledger system would have the previous year and the present year’s accounts.
“It is impossible for us to upload all accounts as it will slow down the system,” she explained, adding that through the system, taxpayers would be able to check whether records of tax transactions namely assessments, payments and repayments had been updated.
Taxpayers can distinguish whether they have a debit or credit balance and check whether tax assessment submitted through e-Filing had been updated in the ledger.
To use the system, Hasmah said taxpayers would need their identity card number and password used to access e-Filing.
Hasmah said taxpayers should also update their banking details.
“Starting next year, we will return the excess deductions through the taxpayers’ bank account,” she added.
Hasmah said IRB would not be able to access the bank account of a taxpayer to investigate his or her financial standing.
“For IRB to access a taxpayer’s bank account, we need a strong reason, especially if a person has been trying to avoid paying taxes,” she said.
However, Hasmah said the practise of sending cheques to return excess deductions would still be continued.
“There are still taxpayers who do not use e-filing while some who use e-filing fail to furnish us with their bank account number,” she said, adding that at present, there were 1.5 million taxpayers using the e-filing system.
fr:thestar.com.my/news/story.asp?file=/2010/11/2/nation/7340820&sec=nation
I’m wondering is the tax deduction apply for the things that we bought from oversea ie purchase computer from Singapore can we claim the tax deduction of RM3,000.00.
thanks
Simon,
Not sure abouut that…Maybe other reader can help