Titles In This Blog

LATEST !

• Real Property Gains Tax (RPGT) only for properties sold within 5 years of purchase
• Understanding RPGT
• Can RPGT be minimised ?
• BUDGET 2010
• - What is there for individual taxpayers ?
• - Special Telephone Line for Budget 2010 Queries
• Suggestions for Budget 2010
• Tax residence status of an individual

Individual tax

• How to minimise tax when filing Borang BE - A step-by-step guide
  
  
  Personal Information -- Section A : Personal Details -- Section B : Details of Husband / Wife -- Section C : Statutory Income & Total Income -- Section D : Relieves -- Section E : Tax Payable -- Section F : Tax Status for Year of Assessment 2008 -- Section G : Prior Years’ Income Not Reported Previously -- Section H : Estate Administrator’s Information -- Declaration -- Tax Agent’s Details and Signature of Person Preparing This Form
  
  
• What expenses can be claimed from rental income ?
• 2009 Schedular Tax Deductions /Potongan Cukai Berjadual
• Additional tax deductions available for individuals
• Income which are tax-free
• Purchase of sports equipment for tax deductions
• Traditional medical expenses for tax deductions

Potongan Cukai Berjadual (PCB) / Schedular Tax Deduction (STD)

• Why the Fuss with PCB 2009 ?
• Rebates to be deducted monthly ?
• New PCB System ?
• Potongan Cukai Berjadual (PCB) / Schedular Tax Deduction (STD) in Malaysia

Real Property Gains Tax (RPGT)

• RPGT only for properties disposed within 5 years of purchase
• Can RPGT be minimised ?
• Understanding Real Property Gains Tax
  

Others

• Is income from Google Adsense taxable ?

Q&As

• Q&A with the Income Tax Department

The Malaysian newspapers sometimes run series of Q&As for Income Tax issues. They are compiled as follows :-

• The Edge - 27/10/09 - Q&A with Deloitte Malaysia on Budget 2010
• The Star - 29/03/09 - Q&As
  
• The Star - 22/03/09 - Q&As
• The Star - 15/03/09 - Steps To Lessen The Pain

Feel free to put your comments here on other topics that might interest you or questions that you want answered.

Can RPGT be minimised ?

By POON YEW HOE

It may be possible by transferring properties to a company, but there are many pitfalls to consider

AT the recently concluded budget seminar of our firm, a major focus of the 650 attendees was the proposed real property gains tax (RPGT) of 5% to be imposed on disposals of property after Jan 1.

Resigned to the inevitability of the tax and the futility of objections, the ingenious ones posed the question to us on the possibility of tax minimisation by transferring their current properties to a company before Jan 1.

The plan calls for properties which were acquired many years ago at a cheap price (say RM1mil) to be transferred to a company controlled by them at the prevailing market price (say RM3mil).
The transfer will be effected before Jan 1, thus attracting no RPGT on the disposal.

In the future when the property is disposed off by the company, the company will only be taxed on the capital gain over and above the new cost of RM3mil.

If the disposal price by the company is RM4mil, the company will only pay tax on the capital gain of RM1mil (RM4mil less RM3mil) at the rate of 5%, thus resulting in RPGT of RM50,000.
A very ingenious idea indeed.

The comparison of taxes payable shows a tax saving of RM100,000 calculated as seen in the table.

Before anyone embarks on such a potentially lucrative move, one has to bear in mind many of the pitfalls, some of which are discussed below.

Date of disposal

For the purpose of this discussion, the term “chargeable assets” is used to refer to properties and other assets that can be caught under RPGT.

Chargeable assets include shares in real property companies which are companies that predominantly hold assets in the form of properties or shares in other real property companies.

Only chargeable assets disposed on Jan 1 or after will be assessed to RPGT. Those disposed of from April 1, 2007 to Dec 31, 2009 will not. A day is literally night and day for tax purposes!

But the term “disposal date” has a technical definition and it is not the date when the sales price is paid over as we usually consider a sale to be. In sales circles, as they say, a sale is not a sale until the money is collected!

However, for RPGT purposes, a sale is a sale on the day a written agreement is entered into.
Hence, the date that a sale and purchase agreement is entered into for the sale of a property is usually the date of disposal for RPGT purposes. But what if there is no written agreement?

The law provides that the date of disposal is the earlier of two dates – the date that the sales price is fully received or the date that the ownership is transferred. Disposals of this nature may have disposal dates being deferred to a later date, which may fall in the 5% taxable period!

Likewise, disposal dates may be deferred even much later if the sale is dependent on securing approvals from the “Government or an authority, or committee appointed by the Government” – for example, the state government, the Securities Commission (SC) or Foreign Investment Committee.

For these “conditional contracts” which are covered by Para 16 of Schedule 2 of the RPGT Act, the disposal date is when the last of the approvals is obtained.

If a sale and purchase agreement is signed in December 2009 that is subject to SC approval which is obtained in February 2010, the disposal will be treated as having taken place in 2010 and thus subject to the 5% RPGT!

Stamp duty on the transfer

Stamp duty is imposed on the documents for the transfer of title; for example, the memorandum of transfer for transfer of property.

The rates applicable are fairly steep for properties which range from 1% to 3% with the highest rate of 3% being applicable for transfer prices which exceed RM500,000.

Transfers of shares attract duty at the rate of RM3 for every RM1,000 of the transfer price or 0.3%.

However, to avoid stamp duty, one may wish to transfer the property without the transfer of title; for example, the owner holds the property in trust for the company.

What if no transfer of title is effected as in these circumstances? Will the issue of tax avoidance then arise? Perhaps.

Anti-tax avoidance in the RPGT Act

Section 25 of the RPGT Act contains the general anti-avoidance provisions which allow the tax authorities to disregard transactions, vary transactions or impose taxes that should have been imposed.

The law specifies that this right is available if the transactions had the effect of “altering the incidence of tax”, “relieving a person from tax liability” or “evading or avoiding any liability which would otherwise have been imposed”.

Besides these general anti-tax avoidance measures which are also found in the Income Tax Act to discourage income tax avoidance, Section 25 of the RPGT Act also provides for persons who provide loans to related parties; for example, Mr A providing loans to Company A which is owned by him.

The law provides that if Company A sells a property and the property was financed by a loan provided by Mr A, the disposal may be regarded as a disposal by Mr A and not by Company A.

However, the cost of acquisition to Mr A is the market value of the property when Company A acquired the property from Mr A. If Company A had acquired the property from Mr A at the true market value, this anti-tax avoidance provision of the RPGT Act should not pose any problem.

Previous rules by Ministry of Finance (MOF)

A few years ago, the Government had granted a similar tax free period from June 1, 2003 to May 31, 2004.

During that period, the MOF had issued some guidelines to curb the avoidance of RPGT by mandating that any disposal of property must be evidenced by a sales and purchase agreement which must be duly signed and stamped within the exemption period.

Sale of property to a company in exchange for shares .

Care should be taken if the property owner transfers a property to a company controlled by him in exchange for shares, or at least 75% in the form of shares. If the transfer is done this way, the shares may be considered to be chargeable assets.

In the future when these shares are sold, the gains will be subject to the RPGT of 5%. The cost of shares for RPGT purposes is not the par value of the shares but the price paid by the property owner for the property plus incidental expenses incurred by him on the acquisition; for example, legal fees.

As such, if Mr B transfers a piece of property acquired for RM1mil to his company (Company B) at market price of RM3mil in exchange for 3 million RM1 shares, and the shares are subsequently sold for RM4mil, the gains on disposal are calculated at RM3mil which is RM4mil sales price less the acquisition price to Mr B of RM1mil.

Indirectly therefore, Mr B is taxed on his full capital gains and not merely on the gains made by Company B owned by him.

RPGT or income tax?

Another aspect which has deep implications is whether the disposer had held the property as stock-in-trade or as a long term investment.

If held as stock-in-trade, the gains on disposal will attract income tax whereas if held as a long term investment, the gains will attract RPGT.

Some property investments which are disposed as part of a quick sale, or as a single isolated transaction in circumstances which give it a cloak of “adventure in the nature of trade”, could be caught under income tax.

Due to space constraints, we are unable to elaborate on this issue. If these disposals are caught under income tax, what then is the advantage of disposing the properties before Jan 1 if the disposer has to pay income tax at 25% on the gains upfront?

The obstacles can be quite challenging as seen above and careful navigation of the tax law is necessary. But I am sure good tax advisers will find a way out of the conundrum!

· Poon Yew Hoe is a partner of Horwath.

Understanding Real Property Gains Tax (RPGT)

Understanding your tax exposure
By Dr CHOONG KWAI FATT

Exemption order an interim measure to a complete RPGT system

IN Malaysia , real property gains tax (RPGT) is imposed with the intention to curb property speculations. It is imposed on the gains on disposal of Malaysian landed properties and the rate varies from 5% to 30% depends on the holding period.

With effect from April 1, 2007, the Government decided to exempt RPGT in view of the economic slowdown and it was aimed at assisting property developers in disposing of their houses, and spearheading the economic progress.

Prime Minister Datuk Seri Najib Tun Razak, who is also Finance Minister, on Oct 23, however, reintroduced RPGT to put in place a fair administration of taxes.

In a nutshell, an equitable system will now be in place as income tax are imposed on income derived by any person in Malaysia while RPGT, on capital gains on disposal of landed properties. There will not be any loss of revenue to the Government.

In the Budget 2010 speech, the Government’s intention was clear. It is to ensure that the Malaysian tax system is equitable and continue to be able to generate revenue for development purposes. In line with this, the Government proposed that a tax of 5% be imposed on gains from the disposal of real property from Jan 1 2010. Any agreements signed between now till Dec 31 remains RPGT exempted.

Finance Minister II Datuk Seri Ahmad Husni Mohamad Hanadzlah then, exercising his power under section 9(3) of the Real Property Gains Tax Act 1976 (RPGTA), gazetted Real Property Gains Tax (Exemption) Order 2009 which will take effect from Jan 1, 2010.

A fixed RPGT rate of 5% on gains from property gains is achieved through the application of this exemption order.

Malaysian individuals are accorded tax exemption of 10% of the chargeable gain (CG) from the computation of RPGT3. Thus, this would effectively mean that they will be paying less than 5% of RPGT rate while companies continue to pay 5%.

The RPGT Exemption Order exempts any person from the application of Schedule 5 of the RPGTA on the payment of tax on the CG arising from any disposal of assets on or after Jan 1, subject to the condition that the amount of CG exempted shall be determined in accordance with the following formula: A/B x C where:

A = Tax on CG at the appropriate tax rate reduced by the Tax on CG at 5%;
B = Tax on CG at the appropriate tax rate;
C = Amount of CG

Effectively, the exemption formula can be simplified as follows:
Chargeable gain x (Appropriate rate – 5%) / Appropriate rate

The appropriate tax rate to be applied on this exemption order depends on the holding period of the property which is summarised as perTable A.

Illustration: Malaysian citizen individuals

Chia Lat acquired a condominium in Bangsar for RM500,000 on Jan 1, 2008. On March 31, 2010 he decides to dispose the property for RM780,000. The RPGT to be paid by him would be as per Table B.

Illustration: Companies

Using the same example as above, and assuming the taxpayer is a Sdn Bhd, the RPGT payable would be as per Table C.

Mathematical confusion

The mathematical formula stipulated in the RPGT exemption basically restores to the fact that the RPGT is 5% on the CG. This is the mathematical equation:
Assuming the appropriate tax rate is y and CG is x, then the RPGT payable after the RPGT exemption would be :

[x – x(y - 5%)/y ] y =xy – xy + 5% x
= 5% of x

The Government has stated that the purpose of the RPGT is to have a fair administration of taxes. Thus the exemption is an interim measure to begin with RPGT of 5% taxes. In years to come, once the exemption order is revoked, RPGT payable would revert to the original position, ranging from 30% to 5%, depending on the holding period.

Policy reform: Currently, taxpayers are only required to keep accounting records for seven years under the law. It may not be feasible to impose 5% on the chargeable gain on gains derived from holding periods more than seven years. This would mean tax payers are required to keep their accounting records for an indefinite time to justify cost attributable to the acquisition.

It is therefore suggested that the Government impose 2% on selling price instead of holding periods exceeding seven years or as in the past, exempt these gains from RPGT. After all, the underlying purpose of RPGT is to curb speculation of properties rather than tax collection.

Moving forward, the Government may likely further align the taxes on landed transactions to be equitable with the income tax system. Therefore, it is crucial that the rakyat understand the Government’s overall objectives and appreciate that this exemption order is an interim measure to prepare the country for a complete restoration of the RPGT system when the time comes.

Once the country’s economy is paced and sustaining desired growth, this exemption may likely to be revoked and property gains will be back causing gains will be taxed at the appropriate rate.
Till then, this exemption order will continue to allow us to enjoy most of our short-term trading gains from real property transactions.

● Dr Choong Kwai Fatt is deputy dean, Research and Development, Faculty of Business and Accountancy, University of Malaya .

RPGT only for sales within 5 years of purchase

The following is an extract of a report in The Star newspaper on 24 December 2009.

PUTRAJAYA: The real property gains tax (RPGT) announced during the 2010 Budget will now only apply to property sold less than five years from its purchase, Datuk Seri Najib Tun Razak said.

The Prime Minister said the 5% tax would now only be imposed on property sold within five years of the date of purchase.

He said the decision would cause the Government to lose about RM200mil in revenue, adding the move was made following appeals from the Federation of Chinese Associations of Malaysia (Hua Zong) and the business sector.

“This was also decided upon as the Government wants to see a stronger growth in the property sector next year. We are willing to forgo a substantial amount of revenue so that the sector can expand and grow.

“The property sector has shown signs of improvement but we feel that it requires further impetus so that it can continue to grow from strength to strength.

Q&A with Deloitte Malaysia on 2010 Budget

Deloitte Malaysia 's Q&A on Budget 2010
by Financial Daily on Tuesday, 27 October 2009 03:40

KUALA LUMPUR: Following the tabling of Budget 2010 last Friday, Deloitte Malaysia worked together with The Edge Financial Daily to enlighten readers on how the various proposals would impact tax payers and consumers. The following are the answers provided by Janice Tan and Lee Chong Hoo of Deloitte Malaysia based on queries sent in by our readers.

Question 1: What is the impact on a worker earning, say, RM5,000 per month pursuant to Budget 2010?

A: He would not benefit from the proposed one percentage point reduction in the personal income tax rate from 27% to 26% as his chargeable income does not exceed RM100,000.

However, he would be entitled to claim the following additional/new tax reliefs proposed:-
• additional personal relief of RM1,000 (an increase from RM8,000 to RM9,000);
• additional relief of RM1,000 for premium paid on annuity scheme from insurance companies (please refer to further details in our answer to question 2 below);
• new relief on broadband subscription fee paid of up to RM500 per year for years 2010 to 2012.

Q2: How does the proposed additional relief of RM1,000 for premium paid on annuity scheme work and what annuity scheme will it encompass?

A: The additional relief of RM1,000 is in respect of premium paid on annuity scheme from insurance companies contracted from Jan 1, 2010 or additional premium paid on existing annuity scheme from Jan 1, 2010.

This is on top of the existing relief for premiums paid on life insurance or annuity scheme and contributions to the Employees Provident Fund (EPF) of RM6,000.

Where the premium paid on the new annuity scheme or the additional premium paid on existing scheme exceeds RM1,000, the excess can be claimed against any unutilised amount for the existing relief of RM6,000, subject to a cap of RM7,000 for the aggregate amount claimed.

The annuity scheme for the purposes of the above relief under Section 49(1) of the Income Tax Act 1967 (ITA) is an annuity scheme contracted for with an insurance company for securing on death a deferred annuity and not the existing annuity purchased through EPF Annuity Scheme. Currently, a separate relief of RM1,000 is given for the premium paid on the EPF Annuity Scheme under Section 49(1C) of the ITA.

Q3: I understand that Real Property Gains Tax (RPGT) will be reinstated from Jan 1, 2010. Is the 5% tax rate as announced in the budget a fixed rate regardless of the holding period of the properties? Will this just apply to an individual?

A: Notwithstanding the proposals in the Finance Bill, the Ministry of Finance has confirmed that a 5% rate of RPGT irrespective of the holding period and category of tax payers, ie whether individuals or companies, will be introduced through a Ministerial Exemption Order effective Jan 1, 2010.

Q4: I have an apartment under the joint names of my son and myself. I wish to change the ownership in the apartment to either be:-
a) jointly owned by my daughter and myself, or
b) solely owned by my daughter.
Will the above proposed transfers be subject to RPGT based on the Budget 2010 proposals?

A: The transfer of ownership from yourself to your daughter under (b) will be regarded as a gift between parent and child and thus will be exempted from RPGT.

However, the above exemption by way of gift does not cover the transfer of ownership from your son to your daughter. Your son may choose to exercise the once-in-a-lifetime exemption from RPGT for disposal of private residence.

Q5: What will be my obligations if I were to acquire a property after Jan 1, 2010 for a total consideration of, say, RM500,000?

A: You would need to withhold the lower of the amount of money consideration or 2% of the total consideration and remit the sum to the Inland Revenue Board (IRB) within 60 days from the date of disposal. Assuming the total consideration of RM500,000 consists wholly of cash, the amount required to be withheld and remitted would be RM10,000. In addition, you would also be required to submit a return on acquisition of chargeable asset under the existing requirement of the RPGT Act 1976.

Q6: Will my obligation be different if my purchase consideration is partly in cash, say, RM5,000 and the balance is paid by way of shares?

A: The amount required to be withheld and remitted to the IRB will be reduced to the whole amount of the money consideration of RM5,000 and not 2% of the total consideration.

Q7: What will happen if I do not fulfil my obligations as an acquirer under the RPGT Act?

A: Failure to comply with the above withholding requirement would result in a 10% penalty to be imposed on the acquirer and the withholding due plus the penalty would be regarded as a debt due from the acquirer to the government.

Q8: If I sell two properties, one at a profit of RM50,000 and another at a loss of RM15,000 in the same year, what is my chargeable gain?

A: It is proposed under Budget 2010 that any allowable loss arising from a disposal of a chargeable asset would be deducted against any chargeable gain arising from subsequent disposals. As such, your chargeable gain would be RM35,000 after deducting the allowable loss of RM15,000.

Q9: Currently I have two credit cards, one from Citibank and the other from CIMB. I am the principal card holder while my wife and two children are secondary card holders from both banks. I heard that I will be imposed a service tax on such cards effective from Jan 1, 2010. How will it affect me?

A: Effective from Jan 1, 2010, service tax of RM50 and RM25 would be imposed annually for each principal and secondary card respectively. As such, you would be subject to service tax totalling RM250 annually [(RM50 x 2) + (RM25 x 3 x 2)] for the above principal and secondary cards

Q10: I understand that tax incentives for health tourism would be enhanced whereby the exemption rate of 50% on the value of increased exports would be increased to 100% subject to 70% of the statutory income for each year of assessment? How does the exemption work and what would constitute exports for the purposes of the above exemption?

A: The amount of income to be exempted is computed based on the increase in the value of qualifying services exported for two consecutive basis periods.
Assuming the values of services qualifying for exemption are RM100,000 and RM200,000 for Year 1 and Year 2 respectively, the value of increased exports would be RM100,000 ie (RM200,000 — RM100,000).

As such, the amount of income to be exempted for the above example under the Budget 2010 proposal would be RM100,000 instead of RM50,000 based on the existing 50% exemption rate.
The above amount exempted would be allowed as a deduction against the person’s statutory business income (SI) in arriving at the chargeable income but is restricted to 70% of the SI for that year of assessment. Any unutilised amount can be carried forward to be deducted against future statutory income. Normally, statutory business income is computed by deducting allowable expenses and capital allowances from the gross income of the business.

To qualify for the aforesaid exemption, the healthcare services must be provided to the following foreign clients in Malaysia :

a) A company, a partnership, an organisation or a cooperative society incorporated or registered outside Malaysia ;
b) Non-Malaysian citizens who do not hold Malaysian work permits; or
c) Malaysian citizens who are non-residents living abroad.

For the purposes of the enhanced incentive, foreign clients would now exclude:

a) A non-Malaysian citizen that participates in Malaysia My Second Home Programme and his dependents;
b) A non-Malaysian citizen holding a Malaysian student pass and his dependents;
c) A non-Malaysian citizen holding a Malaysian work permit and his dependents; or
d) Malaysian citizens who are non-residents living abroad and his dependents.

However, healthcare services providers who are currently providing services to foreign clients who are excluded under the enhanced incentive can continue to enjoy the existing incentives.

This article appeared in The Edge Financial Daily, October 27, 2009.

Budget 2010 - What is there for individual taxpayers

The Budget 2010 announced on 23 October 2009 has a few changes to individual taxpayers. The Budget Speech can be viewed here with Appendices here.

The sections in the budget speech affecting individual tax payers are :-

24 & 25 IRB will use the MyKad number as a single reference number when dealing with taxpayers, hence doing away with Income Tax Reference Numbers starting with SG or OG.

40 Individual taxpayers will be given tax relief of up to RM500 per year for broadband subscription fees from 2010 to 2012.

88 Re-introduction of Real Property Gains Tax (RPGT) of 5% for gains arising from the disposal of properties from 1 January 2010.

89 Each principal credit card will be charged a service tax of RM50 per year and each supplementary credit card will be charged a service tax of RM25 per year with effect from 1 January 2010.

101 With effect from the Year of Assessment 2010, the maximum rate of individual income tax is reduced by 1% to 26%.

102 Personal Relief increased from RM8,000 to RM9,000

103 & 104 Income tax rate for 'knowledge workers approved by the Ministry of Finance', both Malaysians and foreigners who applied and commenced employment in Iskandar Malaysia between 24 October 2009 and 31 December 2015 be fixed at 15%

117 EPF contributors will be allowed to use Account 2 of their current and future EPF savings to obtain financing, subject to EPF's guidelines, to purchase a residential property. This scheme will be launched in January 2010.

122 & 123 The government will establish a 1Malaysia Retirement Scheme to be managed by the EPF for those retired and self-employed to contribute as savings for their retirement.

124 Employees' contribution to EPF will be reverted to 11% from the current 8%, voluntarily from January 2010 and mandatorily from January 2011.

125 Increase of the EPF/Life Insurance Personal Relief limit from RM6,000 to RM7,000 from the Year of Assessment 2010. However, the increase of RM1,000 is only for annuity premiums paid from 1 January 2010.

The Appendices concerned are Appendix 3, 14, 15, 16 & 17.

Special Telephone Lines for Budget 2010 Queries

The Prime Minister cun Finance Minister 1 is going to table the Budget 2010 on 23 October 2009.

As usual, the Inland Revenue Board has set up special telephone lines to enable the public to call and have their queries answered on anything announced in the Budget.

The dedicated telephone lines are :-

1. 03-6201 3037
2. 03-6201 3046
3. 03-6201 3048
4. 03-6201 3052
5. 03-6201 3054
6. 03-6201 3058
7. 03-6201 3059
8. 03-6201 3061

From the Media Statement in the website of the IRB, the telephone lines are open on 23 October 2009 from 7.00 pm to 10.00 p.m. only.

Suggestions for Budget 2010

The Prime Minister cum Finance Minister 1 has invited the public to give suggestions to be considered in the coming 2010 budget to be tabled on 23 October 2009.

The suggestions can be input at http://www.1malaysia.com.my/

I have sent in 4 suggestions on 12 October 2009 and they appeared in the website here. As the pages changes as and when more people give their suf=ggestions, I copied it here as follows :-

gtchye: Increase Personal Reliefs for Income Tax

The personal relief for income tax was increased from RM5,000 to RM8,000 in 1999. There has been no increase for 10 years. With the increasing cost of living, the personal relief should be increased to a minimum of RM10,000. (Sec 46(1)(a) of the Income Tax Act 1967)

Spouse and children's reliefs should also be increased to reflect the increased cost of a sustaining a family. (Sec 47 & 48 of the Income Tax Act 1967)

Life insurance premiums and employees' EPF paid should be separated and each given a limit of RM6,000. Insurance policies are getting too expensive and to encourage savings, premiums paid should be entitled to its own relief instead of combining it with EPF. (Sec 49 of the Income Tax Act 1967)

Relief for medical expenses for parents has not been revised since it was increased from the year of assessment 1996. This should be expanded to include medical expenses for children. (Sec 46(1)(c) of the Income Tax Act 1967)

Let's see if any of these are taken up in the Budget.

Tax residence status of an individual

In determining the income tax rate (hence the amount of income tax payable) of an individual, it is important to first determine if he/she is a tax resident under the Malaysian Income Tax Act, 1967 (ITA).

Many people seem to have the view that if an individual stays in Malaysia for 182 days or more, he/she is a tax resident under the ITA. Anything shorter than that, then the person is a non-resident and is subject to non-resident tax rate, i.e. a flat rate of 27% (Year of Assessment 2008).

This is far from true ! Section 7 of the ITA clearly provides more than one situations when an individual taxpayer is considered a tax resident.

Section 7 of the Malaysian Income Tax Act says,

7. (1) For the purposes of this Act, an individual is resident in Malaysia for the basis year for a particular year of assessment if-

(a) he is in Malaysia in that basis year for a period or periods amounting in all to one hundred and eighty-two days or more;

(b) he is in Malaysia in that basis year for a period of less than one hundred and eighty-two days and that period is linked by or to another period of one hundred and eighty-two or more consecutive days (hereinafter referred to in this paragraph as such period) throughout which he is in Malaysia in the basis year for the year of assessment immediately preceding that particular year of assessment or in that basis year for the year of assessment immediately following that particular year of assessment: Provided that any temporary absence from Malaysia -

(i) connected with his service in Malaysia and owing to service matters or attending conferences or seminars or study abroad;

(ii) owing to ill-health involving himself or a member of his immediate family; and

(iii) in respect of social visits not exceeding fourteen days in the aggregate, shall be taken to form part of such period or that period, as the case may be, if he is in Malaysia immediately prior to and after that temporary absence;

(c) he is in Malaysia in that basis year for a period or periods amounting in all to ninety days or more, having been with respect to each of any three of the basis years for the four years of assessment immediately preceding that particular year of assessment either-

(i) resident in Malaysia within the meaning of this Act for the basis year in question; or

(ii) in Malaysia for a period or periods amounting in all to ninety days or more in the basis year in question; or

(d) he is resident in Malaysia within the meaning of this Act for the basis year for the year of assessment following that particular year of assessment, having been so resident for each of the basis years for the three years of assessment immediately preceding that particular year of assessment.

(1A) For the purposes of subsection (1), an individual shall be deemed to be in Malaysia for a day if he is present in Malaysia for part or parts of that day and in ascertaining the period for which he is in Malaysia during any year, any day (within subsection (1)(a) and (c)) for which he is in Malaysia shall be taken into account whether or not that day forms part of a continuous period of days during which he is in Malaysia.

The wordings are rather lengthy.

In layman’s terms, it simply means that an individual is considered a Malaysian Tax Resident if he/she is :-

Sec 7(a) in Malaysia for 182 days or more in a calendar year ;

Sec 7(b) in Malaysia less than 182 days and this period is linked to last year or next year of 182 days or more ;

Sec 7(c) in Malaysia for 90 days or more and 3 out of 4 years before, either
( i) is a tax resident ; or
( ii) is Malaysia for 90 days or more

Sec 7(d) 3 years before he/she was tax resident and next year also tax resident.

In order not to re-invent the wheel, I found a good write up and explanation in a website here.

Per diem - Clarification finally

The IRB has finally issued the Third Addendum to Public Ruling No. 1/2006 on 29 July 2009 (view here) to clarify that per diem received is exempted, thus officially reversing their Second Addendum issued on 25 February 2009.

So what happen to all those taxpayers who included per diem received in 2008 in their tax returns ?

Understanding Income Tax issues are already complicated enough for the ordinary taxpayers, the IRB should stop being so frickle minded and make a public ruling without considering the effects on taxpayers and the to reverse it with another public ruling, especially after the tax filing deadline.

Why the fuss with PCB deductions 2009 ?

PCB deductions used to be a simple tax collection process imposed by the IRB. How much is your income for a month, follow the table provided by the IRB, follow the amount of estimated income tax payable and that amount is deducted from your monthly salary and remitted to the IRB.

At the end of the year, you receive the Borang EA from your employer and you calculate how much actual tax you have to pay, taking into account the relieves you have, claims, exemptions, rebates, etc and you fill up the Borang BE, send to the IRB and pay the difference between your actual tax and the total PCB deducted for the year.

If your total PCB deducted for the year is higher, then you get a refund from the IRB.

However, things get really complicated since January 2009. The PCB table is changed, calculation of PCB become totally impossible without a payroll software, TP1, TP2, etc.


Why has the PCB turned into something so complicated ?

The reason is this: The Malaysia IRB wishes to follow its counterpart is Singapore in implementing a system where all salaried employees will not have to file their tax returns (Borang BE) in future.

Refer to the Singapore’s Straits Times report on 7 May 2009 below.

http://www.straitstimes.com/Breaking%2BNews/Singapore/Story/STIStory_373767.html

The system will make the PCB a Final Tax, as opposed to an Estimated Tax as at now.

We are in the first year that the IRB is gearing towards this system. That is why there are so many teething problems and adjustments needed. How long more before the IRB can fully implement the Final Tax via PCB system is yet to be seen.

Rebates to be Deducted Monthly ?

The following article appeared in The Star newspaper on 6 August 2009.

Thursday August 6, 2009
Taxpayers can now have rebates deducted monthly

KUALA LUMPUR: The Schedular Tax Deduction (STD) scheme has been reviewed to enable the deduction of rebates and relief to be done on a monthly basis, Inland Revenue Board chief executive officer Datuk Hasmah Abdullah said.

Previously, she said rebates and relief were only taken into account when taxpayers claimed for it when they filed their income tax returns annually.

“By deducting on a monthly basis, we can have real-time payment of taxes due,” she said, adding that this was in line with the agency’s policy to provide the best service to the public by emphasising on accuracy of information.

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If I refer to the Borang TP1 now, there are already columns to state your rebates for :-

1. Zakat paid (Column D1)
2. Fees/Levy for employment permits paid (Column D2)

The only other rebates not stated is the personal rebates for those taxpayers with Chargeable Income of RM35,000 or less.

However, this rebate would have been taken into account when the employers input the data from Borang TP1 into their payroll system. The payroll system would have incorporated the personal rebates into their calculation to generate a new PCB deduction amount.

This is yet another confusing statement made by the IRB and picked up by the media without any substantial impact on the employees.

New PCB System ?

The Star newspaper published the following article on 10 July 2009.

No other information is available after the publication. A check in the LHDN’s website also does not show any new PCB system or table. Borang TP1 has been in use since January 2009.
It does not look like there is a ‘new’ tax deduction system from July. This announcement is confusing employees and employers and should be ignored.

Published: Friday July 10, 2009 MYT 9:07:00 PM
New tax deduction system from July
By SARBAN SINGH

PORT DICKSON: A new schedular tax deduction system from this month will eliminate the need for employees to pay an additional lump sum at the year-end to make up for the shortfall in monthly deductions.
Inland Revenue Board (IRB) chief executive officer Datuk Hasmah Adullah said that under the current system implemented in 2004, the board had on many occasions taken a big cut of the individual’s bonus to make up for the shortfall.
“We had cases where an employee’s entire bonus would go to the IRB (to make up for the shortfall). We do not want to do this any more as it is unfair to the taxpayer.
“It is better for us to make higher deductions every month. This is a better arrangement,” she said, adding that under new system, the taxpayer would have paid up almost all his dues by the end of the year.
She added that the new system would also allow for employees to submit their claims for rebates every month, along with a range of new reliefs.
Previously, the taxpayer was allowed to claim relief for himself, his spouse, their children, his Employees Provident Fund and insurance contributions, and zakat payment (if any), and claim other reliefs only when filing his returns at the end of the assessment year.
Under the new system, Hasmah said an employee can submit claims for rebates such as parents’ medical bills, purchase of a computer, tertiary education fees, medical check-ups, and book and sports equipment purchases to his employer every month using the PCB/TP1 form.
“When this is done, the tax to be paid for that particular month will be reduced automatically. This would practically be a real-time tax payment system.
“We want the taxpayer to benefit straightaway rather then wait till the end of the year,” she said.
She said under the new system, the employee could make monthly claims for 17 other reliefs announced in Budget 2009.
The employee, she added, would not have to submit receipts for the claims to the employer.
Among the new reliefs announced are for travelling allowance, petrol claims, parking fees, food allowance, caretaker fee, maternity and traditional medicine treatment (ayurvedic, acupuncture, etc) and subscription to broadband services.
She said taxpayers could submit their claims for rebates monthly, quarterly or twice a year.
Hasmah said employers who needed assistance on the workings of the new structure could enter the board’s website at www.hasil.gov.my and look for the schedular tax deduction (PCB) calculator icon.

Use EPF to Reduce Your Income Tax

The EPF (Employees Provident Fund) is a compulsory contribution for Malaysian employees and employers. Although foreigners are not required to contribute EPF, they can opt to contribute at the same rate as Malaysians. While the employees’ portion of contribution can be deducted as a relief from income for tax calculations, the employers’ portion is a tax-free income to the employees. It is this part of income that we want to concentrate in.

Employees have 8% (option to increase to 11%) of their salaries deducted and contribute to the EPF whereas employers pay 12%. Employers are allowed to contribute up to 7% more than the statutory rate of 12%, i.e. up to 19% under the Income Tax Act for employers to be able to deduct these contributions from the employers' taxable income. If an employer contributes more than 7% above the statutory rate, the excess is not allowed as a deduction when calculating the employers' income tax.

An employee can arrange for his/her employer to contribute 19% to EPF by lowering his/her salary. For example,

Original salary RM10,000 a month, Employer’s EPF (12%) RM1,200.
Cost of hiring to employer = RM10,000 + RM1,200 = RM11,200


The employee can ask his/her employer to consider paying less basic salary but increase the employer's contribution to EPF as follows :-


Adjusted salary RM9,412 a month, Employer’s EPF (19%) RM1,788
Cost of hiring to employer = RM9,412 + RM1,788 = RM11,200

So there is no difference to the employer, but for the employee, his/her taxable income is RM588 (RM10,000 – RM9,412) less a month, which is RM7,056 a year. If his/her tax bracket is at 27%, the tax saving would be RM1,905.12 a year !

Of course, the employee’s take home pay at the end will be less as well but the difference is credited into the employee's EPF account, which belongs to the employee anyway. The additional contribution to the EPF can be withdrawn for purchasing a house when needed, or as additional retirement fund when he/she retires.

For foreigners, they will be able to withdraw all the money they have in the EPF when they leave Malaysia, together with all earned dividends, tax-free.

Potongan Cukai Berjadual (PCB) / Schedular Tax Deduction (STD) in Malaysia

What is PCB/STD in Malaysia ? How does it work ? What is the minimum salary to be caught under the PCB net ?

Among the top searches that came to this site is on “PCB/STD”. This posting explains the workings of PCB/STD in Malaysia and how the calculations are computed.

PCB/STD is based on the commonly known “Pay-As-You-Earn” (PAYE) principal practiced in many countries. Before STD/PCB was introduced in Malaysia, taxpayers were subjected to “preceding year assessment” basis, meaning you declare this year, what you earned last year, and you pay tax this year for last year’s income.

For example, you earn salary of RM100,000 in the whole year in 2008. You only submit your income in Form BE in April 2009. As a result, you only pay your income tax in 2009 for your 2008 income.

This practice posed problems for IRB’s collection department mainly due to taxpayers who already spent their money earned in 2008 and they failed to set aside money to pay for their tax.

The PCB/STD was introduced to collect income tax as and when they are earned by taxpayers. Therefore, the IRB has directed employers to deduct a certain amount out of the monthly salaries of taxpayers to pay for their income tax. Hence, Pay-As-You-Earn (PAYE).

With PCB/STD, taxpayers are no longer paying income tax for preceding year’s income. The tax deducted is from the month’s income is to pay for income tax for that month’s salary.

PCB/STD is not a final tax. As income tax is collected based on an employee’s salary, taking into account his/her marital status, whether spouse working or not and number of children, it is only an estimate. What the STD/PCB fails to take into account are other things such as,

- whether or not you have life, medical or education insurance
- claims for purchase of personal computer
- claims for medical expenses for self, spouse or parents
- claims for purchase of books
- claims for purchase of sports equipments
- whether you have other income such as dividends or rental, etc

Therefore, the PCB/STD paid in a year can almost never be exactly the actual income tax payable.

When the final tax is calculated during the submission of Borang BE in April the following year, then only we will know what the actual tax payable is. If the actual tax is more than the accumulated PCB/STD for the year, the difference will have to be settled not later than 30 April the following year. If the accumulated PCB/STD is more than the actual tax, the IRB will repay the taxpayer.

What is the minimum salary a taxpayer earns before he/she is subject to PCB/STD ?

That depends on whether he/she is married, spouse working or not and number of children he/she has. A single person and a married person with 4 kids may earn the same amount of salary but the single person may be subject to PCB/STD but the married person may not.

Similarly, a married man whose wife is working and has 1 child may be subject to different PCB/STD amount compared to a married man whose wife is not working and has 3 kids.

To see if you are subject to PCB/STD, please refer to the table in the IRB’s website.

To calculate the PCB/STD, one must determine his/her category in the table. If an employee is single or married and his/her spouse is working, then he/she falls under Category 1. If he/she is married and his/her spouse is not working, then Category 2.If he/she is married and his/her spouse is working, then Category 3.

Under categories 2 and 3, there is K, K1, K2, K3, etc. This refers to number of children the employee has. K means no children, K1 – 1 child, K2 – 2 children, etc.

After determining which column he/she falls under, next is a take his/her monthly gross salary less employee’s portion of EPF (limited to RM500). Use the net amount to find the band of salaries in the first column. Then, follow the row to the correct category to get the amount of PCB/STD applicable.

A detailed example (though rather complicated) is given in the IRB's website here.

So you missed the Income Tax Form BE submission deadline, what now ?

The deadline for submission of Income Tax Form BE for 2008 was 30 April 2009. There may be many who missed the deadline for various reasons.

What happens next ? What are the penalties ?

Let us examine the Income Tax Act (ITA) to see what penalties are there and what the IRB’s practice is.

Section 112(1) of the ITA states that if you default in submitting the Form B or BE before the deadline ‘without reasonable excuse’, you are liable to a fine not exceeding RM1,000 or 6 months jail or both ‘on conviction’.

In practice, the IRB seldom use this Section to charge you (unless you are a big fish). This is because in order for them to apply this Section, they have to charge you in court and get a conviction. Note that there is still an escape clause “without reasonable excuse”. You may have a reasonable excuse and in order to get a conviction from the court, it may take years.

Section 112(3) says that if no prosecution in instituted, then the IRB may require you to pay a penalty equal to ‘three times the amount of tax payable’ (before any set-off, repayment or relief). If you have paid the penalty under Section 112(3), then you shall not be charged under Section 112(1) again.

So in practice, the IRB will usually fine you under Section 112(3). For normal salaried workers who file in Form BE, they usually impose a fine of RM50 for the first offence. If you are still late next year, they may impose a fine of RM100. The next year, RM150 etc.

It is interesting to note that Section 112(3) allows the IRB to impose a fine only if you are taxable. Note the wordings ‘three times the amount of tax payable’. If your tax payable is ‘0’, three times ‘0’ is still ‘0’.

So if your ‘Tax payable’ under item E9 of the Form BE is ‘0’, then you need not worry this year as the IRB will not be able to impose a fine on you. However, the IRB will take note that this is your first offence. If you are late again next year, they may fine you RM100 right away if you have tax payable.

The Star - 17/04/09

MORE TIPS ON LESSENING YOUR INCOME TAX BURDEN

This is the final of a three-part ACCA Easy Guide to Tax Filing for Employees, which looks at income tax threshold, child relief and penalties

FOR YA2008, employees need to make a minimum annual salary of RM26,804 before triggering income tax.

Married couples should ensure that the higher-earning spouse claims child relief to lessen the tax burden. Remember to abide by income tax regulations to avoid heavy penalties.

Income Tax Threshold

For YA 2008, an employee is required to file Form BE by or before April 30 through electronic filing or actual submission of the tax return form to the Pusat Pemprosesan at Pandan Indah, Cheras.

The employee is entitled to the following tax reliefs:

Employees must make a minimum salary of RM26,804 to be liable for income tax for YA 2008.

Example 1: An individual with only EPF contributions as relief.

An employee may not be required to pay tax on employment income exceeding RM26,804 if said individual employee incurred other tax reliefs on books, medical check-ups or life insurance premiums.

Example 2: Assuming an individual with a salary of RM30,062 has tax reliefs other than EPF contributions, he may not be liable for income tax. His tax payable is:

An employee earning annual salary exceeding RM30,062 may also not be liable to pay income tax if he incurred the following expenses:

(a) Medical expenses for parents RM5,000
(b) Medical or educational insurance for taxpayer, spouse, child RM 3,000
(c) Basic supporting equipment for taxpayer, spouse, child, parents RM3,000

An employee with an existing SG income tax reference number may need to file in a nil return on Form BE even though his annual salary for YA 2008 is below RM30,062.
Child Relief

Married couples can claim child relief for maintaining any child during the calendar year 2008 whether the child is their own, a stepchild, or a legally adopted child.

The amount of child relief is:

18-years-old or less (RM1,000); above 18 and studying in university or college (RM4,000).
Child relief is given for any number of children who are not married.

Child relief for disabled children is RM5,000.

An additional RM4,000 is granted if the disabled child is studying in university or college.
To minimise tax payable, child relief should be claimed by either spouse who has the highest taxable income.

Example: Li and Choo have three children below 18 years. Li’s total income is RM90,000 and Choo’s RM60,000 for YA 2008. The child relief entitlement is RM1,000 x 3 = RM3,000. (see charts above)

Penalties

The Income Tax Act 1967 imposes various penalties for non-compliance. These include:

(a) Non-submission of return

Return Form BE for YA 2008 needs to be submitted by or before Apr 30, failing which taxpayers incur a:

(i) Penalty that is 3 times of tax
(ii) Fine between RM300 to RM2,000

In practice, the tax authorities impose 2%-20% on the tax payable as the penalty instead of the statutory formula of 300%.

(b) Non-payment of final tax

The employer deducts the employee’s monthly tax which is paid to IRB on the 10th of every month. The difference between the actual tax and the total tax deducted by the employer must be paid to IRB on / before Apr 30. Failure to pay the final tax on Apr 30 will result in a late payment penalty of 10% being imposed.

An additional 5% will be imposed if the final tax or penalty is still not paid by June 30 (60 days after Apr 30)

(c) Not keeping sufficient records

Under the self assessment system, an employee is required to keep sufficient records on his tax affairs for seven years. Only the tax return Form BE is submitted to IRB by or before Apr 30.

These records comprise a copy of Form BE, salary slips, Form EA (Statement of Employment Income), and credit card statements in relation to petrol claims, travelling, parking, and toll charges incurred in relation to official duties.

Failure to maintain sufficient records is an offence and the penalty will be:

(i) A fine between RM300 to RM10,000 or
(ii) Imprisonment ≤ 1 year.

The Star - 16/04/09

IF YOU PAY MINIMUM EPF, HOW DOES IT AFFECT YOUR TAXES


INDIVIDUAL taxpayers need to be alert to amendments to the income tax regulations relating to bonuses and directors’ fees.

Taxpayers also need to consider the tax consequences if they elect to pay the mandatory minimum contribution of 8% to the Employees’ Provident Fund (EPF).

By opting to contribute 8% to EPF instead of the previous 11%, they lose out on dividends, decrease the potential size of their retirement nest egg, and could suffer additional income tax.
Bonus/directors’ fees.

Employees receiving director fees or bonuses in 2009 in relation to work performed in 2008 or prior to 2008 will only be taxed in year of assessment (YA) 2009 under a new amendment to the Income Tax Act 1967 to ease filing under the self assessment system via the Finance Act 2009 (gazetted on Jan 8, 2009).

These director fees or bonuses would be included in the EA Form 2009 to be submitted on April 30, 2010. They must not be treated as income in 2008 and should never be included in EA Form 2008.

Example 1:
Karmen Sdn Bhd pays a special bonus of RM8,000 to Fionna on April 1, 2009 for her excellent performance in 2008. The bonus of RM8,000 will be treated as income for 2009.

Example 2:
Yie Lin receives director fees of RM300,000 in relation to 2004, 2005, 2006, 2007, 2008 (or five years’ total) on March 1, 2009. The total director fees of RM300,000 will be treated as income in 2009.

The employer is required to deduct the monthly tax deduction in the year 2009 (year of payment) and pay the net amount to the employee or director.

There is a new monthly tax deduction table issued to take effect on Jan 1, namely Income Tax (Deduction From Remuneration) (Amendment) Rules 2008 [PU(A) 468/2008].

Paying bonuses and directors’ fees related to 2008 in year 2009 has the advantage of tax savings of 1% if and only if the annual income of such employees is RM250,000 and above.

EPF contributions: 11% or 8%?

With effect from Jan 1, the EPF Act 1991 has been amended to allow employees to contribute 8% of their salary to EPF.

Previously, the mandatory contribution was 11% of salary.

The employer will continue to contribute an amount equal to 12% of the employee’s salary to EPF.

Under the existing Income Tax Act 1967, income to be assessed remains at 100% of salary although the employee only receives 92% of salary.

Salary 100%
Less: 8% of salary to EPF (8%)
Net salary 92%

The employers’ contribution of 12% is not taxable on employees. The amount of EPF contributed by employees (8%) is available as tax relief.

EPF plus life insurance premiums paid on the life of the taxpayers or their spouses will be granted a maximum tax relief of RM6,000 in a particular YA (EPF + life insurance = RM6,000).

Although the Government meant well by lowering the EPF contribution from 11% to 8% to ease the taxpayer’s financial burden, taxpayers may ultimately end up paying additional tax due to reduced EPF contributions.

Assuming that an individual does not have life insurance premiums, full utilisation of the RM6,000 relief will require an individual to earn an annual salary of RM54,545 (computed as follows: RM6,000/11% = RM54,545).

An individual earning an annual salary below RM54,545 will end up paying additional tax if he reduces his EPF contribution from 11% to 8%.

Example:
Melissa earns an annual salary of RM50,000. She pays 11% of salary, or RM5,500, to the EPF and pays RM500 in premiums on her life insurance. Effective Jan 1, she is required to pay only 8% of RM50,000 to EPF.

The differences in tax payable as a result of contributing either 11% or 8% to EPF are shown in the table

Taxpayers need to think twice before opting to contribute just 8% to EPF.

Although employees whose income exceeds RM54,545 don’t pay additional tax if they contribute 8% to EPF, they risk losing out on a substantial retirement sum since their contributions will be lower by 3% (11%-8%) and interest will compound annually on a smaller lump sum.

EPF paid a dividend of 4.5% in 2008 and 2007. Although the EPF Act 1991 sets the mandatory contribution by employees at 8%, employees have the right to request their employers to continue deducting 11% of their salary for EPF to meet tax savings and retirement planning goals.

The Star - 15/04/09

TIPS FOR FILING YOUR INCOME TAX RETURNS

This first of a three-part ACCA’s Easy Guide to Tax Filing for Employees looks at additional goodies for taxpayers

IT’S tax season again! 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.

This time around, taxpayers get to enjoy additional tax goodies as part of the Government’s effort to cushion the impact of the economic downturn and higher cost of living on Malaysians.
Specifically, the Government announced via the Budget 2009 proposal and the second stimulus package on March 10, 2009, the following tax benefits for employees, which will take effect in YA2008. These benefits will help reduce taxable income and, consequently, the amount of tax payable.

Compensation for loss of employment

The tax burden is eased for retrenched employees as well as those who opt for voluntary separation schemes.

Employees who are retrenched on or after July 1, 2008 will be granted an income tax exemption of RM10,000 for each completed year of service with the employer or companies in the same group. This also applies to payments for employees who opted for voluntary separation schemes.
Example:
A is a salesperson working in Star New Enterprise from April 1, 2006. Due to the economic downturn in 2009, A was retrenched on Nov 1, 2008 and was paid compensation of RM25,000 for loss of employment. The amount to be taxed in YA2008 will be:
If the retrenchment was before July 1, 2008, then the amount exempted for each year of service will be RM6,000.

Tax-exempt employee benefits — allowances

The following tax benefits provided to employees from Jan 1, 2008 to Dec 31, 2008 will be tax deductible against business income for employers AND exempted from tax on employees. These benefits are also available for YA2009.

(a) Petrol card/petrol allowance/travel allowance
An employer providing petrol cards, petrol allowance or travelling allowance to employees to travel from home to workplace or office will be allowed up to RM2,400 a year.

(b) Meal allowance for working overtime, travelling outstation.

(c) Parking allowance.

(For (b) and (c), the allowance must be reasonable and justifiable depending on the nature of work and position of employee.)

(d) Medical treatment for employees, spouses and children to include traditional medicine such as ayurvedic treatment and acupuncture.

(e) Interest subsidies on housing, car and education. The total loan amount is restricted to RM300,000.

(f) Childcare allowance up to RM2,400 a year.

(g) Employers’ products or services which can be provided free or at a discount which must not exceed RM1,000 a year.

Employers involved in the manufacture of food and car accessories may consider providing the products to employees to reduce their cost of living in the current economic slowdown.

These allowances need to be disclosed in the Form EA as tax-exempt benefits although they are not taxable on employees.

Official duties – travelling allowance

When employers provide petrol cards, petrol allowance or travelling allowance to salaried personnel, such as reporters and other employees, to carry out official duties, this form of allowance is taxable on the employee and must be reflected in their respective EA Forms.

Employees must keep a record of the actual expenses incurred in relation to official duties and set off the amount incurred against the allowance received. This is an added burden and responsibility on the employee. The records have to be kept for a period of seven years.

Employees may end up paying additional tax under the self-assessment system if they report the employment income as per the EA Form without deducting the actual travelling expenses incurred while on official duty to carry out the employers’ business.

In the Budget 2009 announcement, the Government said petrol cards, petrol allowance, travelling allowance and toll cards for official duties up to RM6,000 a year will be tax-exempt.
This means that the employer will exclude RM6,000 a year from the taxable income of employees as reported in the EA Form. However, the employer needs to disclose this RM6,000 as a tax-exempt benefit in the EA Form.

Employees receiving travelling allowances not exceeding RM6,000 a year will no longer be required to keep the required receipts to substantiate their claims.

This incentive applies from YA2008.

However, if the employer provides, for official duties, petrol card, petrol allowance, travelling allowance and toll card exceeding RM6,000 a year, the employer is required to report in Form EA in two sections:

(a) Tax exempt benefits: RM6,000
(b) Part of taxable employment income – salary, bonus, entertainment allowance – and the petrol/travelling/toll amount in excess of RM6,000

In this case, the employee is now required to keep all receipts to substantiate her claims.

Example:
Ming Hui has marketed agricultural products for Duck Rich Sdn Bhd since 2007. She receives a travelling allowance of RM14,000 per year.

For the year ended Dec 31, 2008, the company will provide Ming Hui with Form EA disclosing taxable income of RM8,000 as part of employment income and a tax-exempt benefit of RM6,000.

Ming Hui incurred RM9,000 for travelling expenses to carry out official duties for YA2008. She is required to set off these travelling expenses against the amount received from her employer of RM14,000 (and not RM8,000). The amount taxable on her is RM5,000 (RM14,000 – RM9,000).

Ming Hui is required to maintain the receipts of RM9,000 for a period of seven years.

Q&A on some Income Tax Issues - The Star 29/03/09

Q. IF I am paid a fixed monthly travel allowance (with EPF contribution) which covers fuel for travel within Peninsular Malaysia, parking and toll, am I allowed to take advantage of tax exempt benefits? – GOH C.H.

A. YES, with effect from year of assessment 2008, tax exemption is given on petrol card, petrol allowance or travel allowance and toll card for official duties provided by the employer. The tax exemption is up to RM6,000 per annum.

Q. ARE dentures for parents eligible for tax rebate? – Lii

A. THE tax deduction for medical expenses for parents is up to a maximum of RM5,000.
Medical expenses that qualify would cover medical treatment for the parent evidenced by a receipt issued by a medical practitioner. It also includes dental treatment but this is limited to tooth extraction, filling, scaling and cleaning and does not include cosmetic dental treatment expenses such as teeth restoration and replacement involving crowning, root canal and dentures.
Therefore, the expense for your parent’s dentures would not qualify for the tax deduction.

On a separate note, it is important to differentiate that the RM5,000 maximum claim is for a tax deduction (i.e. to be deducted against your total income to arrive at your chargeable income) and not a rebate (i.e. a rebate is deducted from your income tax charge to arrive at your tax payable).

Q. I HAVE two questions:

1) The RM3,000 rebate for purchase of computers every three years. I last purchased a computer in August 2006. Can I purchase a new computer now (March 2009) to enjoy the rebate again or do I have to wait after August 2009 or some other date?

2) My wife and I jointly own two commercial properties which are rented out. My wife is a full-time housewife and has no income. I am at the maximum tax rate currently and on combined assessment filing. Can my wife take up the full rental income or at least 50% of the income and file for separate assessment?

If only 50% of rental income is allowed, do we need to split the property expenses like quit rent, insurance and assessment 50/50 also? – William Tan

A. FIRSTLY, it is important to differentiate a tax deduction from a tax rebate. The RM3,000 maximum claim for the purchase of a personal computer for non-business use is for a tax deduction (i.e. to be deducted against your total income to arrive at your chargeable income) and not a tax rebate (i.e. a rebate is deducted from your income tax charge to arrive at your tax payable).

Prior to year of assessment 2007, a RM500 rebate was given for the purchase of a personal computer used for non-business purposes on a household basis once in every five years of assessment.

Currently, the relief given is a tax deduction for the purchase of a personal computer for non-business use up to a maximum of RM3,000 given on an individual basis once in every three years of assessment.

Since your claim for the RM500 tax rebate was in year of assessment 2006 under the old tax provisions, you will be entitled to claim the RM3,000 tax deduction for another computer purchase anytime after the new tax provision took effect from year of assessment 2007. Therefore, you may purchase a new computer now (March 2009) and claim the RM3,000 tax deduction. Provided the existing law on the tax deduction does not change, your next qualifying purchase would be in year of assessment 2012.

2) Since your two properties are jointly owned, each of you would declare half the rental income equally in your respective tax return. Any expenses expended to generate the rental income from the jointly-owned properties (for example, property quit rent and assessment, insurance and repair and maintenance) must also be split equally to be deducted against the rental income.
Your wife may elect for a separate assessment to report her half share of the net rental against her personal tax relief.

Q. UNTIL last year, taxpayers could claim back excess tax paid on dividends received in 2007. Is this still possible in 2009? – Taxpayer

A. WHETHER you are still able to claim back the excess tax paid on dividends in year of assessment 2008 and 2009 would depend on the type of dividend that you receive from the company i.e. whether it is a franked (or tax deducted) dividend or exempt dividend.
With effect from year of assessment 2008 under the single-tier system, there is no further need for the company to deduct tax when paying dividends and any dividends distributed by the company will be exempt from tax in the hands of the shareholders.

However, transitional provisions in the tax legislation allow two options for companies with a credit balance in their section 108 accounts as of Dec 31 2007 when they want to pay dividends to the shareholders:

>The company can continue to use such credits in the section 108 account to pay franked dividends to shareholders up to Dec 31, 2013 or until the section 108 credits are exhausted, whichever comes earlier.

>Alternatively, the company may at any time make an irrevocable election to forgo the right to distribute franked dividends and pay dividend under the single-tier system.

The company, upon paying the dividend, is required to furnish the shareholders with a certificate warrant which will state whether tax has been deducted from the dividend or whether it is tax exempt pursuant to the single-tier system. If it is franked dividends, you can continue to claim back the excess tax paid, if any.

Q. I AM a sole proprietor. I draw a monthly salary from my business net EPF deduction of 11%. My business pays the employer’s portion of EPF contribution (12%). I understand the 12% EPF contribution for its proprietor is not a tax-deductible expense for the business. For my personal computation of tax payable, can I utilise the 11% deduction as a tax relief lumped together with my insurance premium giving a maximum relief of RM6,000? – Lim Jun Kean

A. THE 11% employee portion of EPF contribution is considered as part of your gross salary and subject to income tax (in addition to the sole proprietor business profit) on you. You are however entitled to claim the 11% EPF deduction as part of the maximum RM6,000 together with the life insurance premium tax relief in your personal tax return.

Q. I GET newspapers delivered to my home for which I get a monthly bill. Can I claim this as a deduction under reading materials?

Also, my mother has undergone ayurvedic treatment. Can I claim deduction under parents’ medical expenses? The expense is supported by official bills and receipts – S.Thiruchelvam

A. AN amount of up to a maximum of RM1,000 is deductible in respect of the purchase of books, magazines, journals or other similar publications (in hard copy or electronic form) for the purposes of enhancing knowledge of the individual, spouse or child. However, newspapers and banned reading materials are specifically excluded. Therefore, you cannot make a claim on your newspaper bills.

Medical expenses that qualify for the tax deduction for medical expenses for parents of up to a maximum of RM5,000 would include medical treatment evidenced by a receipt issued by a medical practitioner registered with the Malaysian Medical Council.

Unless the ayurvedic practioner is registered with the Malaysian Medical Council, the medical expenses will not qualify.

Q. I AM a retiree with no regular source of income except for dividends on investment in shares. Since the amount of yearly dividends I receive is less than RM30,000, I regularly claim RM4,000 to RM5,000 tax rebate under section 110 (dividends). Lately, I have received many Tier 1 dividends which do not indicate the amount of tax paid on behalf of the shareholders. Being a retiree, can I claim the tax rebate? If not, then all shareholders including retirees are paying the corporate tax of 25% on their dividends received. With the banks’ savings and FD interest rate of 2% to 3% per annum, how are the retirees going to survive? I hope you can assist by bringing up the plight of the retirees during the next budget dialogue. – Lim

A. WITH effect from year of assessment 2008, the single-tier system took effect. Under this system, there is no need for the company to deduct tax when paying dividends and any dividends distributed by the company will be exempt from tax in the hands of the shareholders.
However, transitional provisions in the tax legislation allow two options for companies with a credit balance in their section 108 accounts as at Dec 31, 2007 when they want to pay dividends to the shareholders:

>The company can continue to use such credits in the section 108 account to pay franked dividends to shareholders up to Dec 31, 2013 or until the section 108 credits are exhausted whichever comes earlier.

>Alternatively, the company may at any time make an irrevocable election to forgo the right to distribute franked dividends and pay dividend under the single-tier system.

If the dividends you receive indicate that no tax has been deducted, these dividends would be either exempt dividends or dividends paid under the single-tier system. In both cases, the dividends are exempt from tax in your hands and you are not entitled to claim the section 110 tax credits on such dividends.

You are correct in saying that retirees are one of the most-impacted group as a result of the single-tier system since under the previous full imputation system, you are able to get tax refund from claiming the section 110 tax credit due to your lower personal tax rate compared to the company tax rate. This has been brought to the attention of the relevant authorities in the dialogues and discussions by the professional bodies.

Q. I READ in the papers that the recent mini budget has increased the current RM6,000 tax relief per year of service to RM10,000 for retrenched workers. Is there a limit on the number of years and does it apply for voluntary separation and early retirement? – Worried Worker

A. THE tax exemption on compensation for loss of employment received by employees (including payment pursuant to a separation scheme where employees are given an option for an early termination of an employment contract) is increased from the current RM6,000 to RM10,000 per completed year of service with the same employer or with companies in the same group. It covers the voluntary separation scheme but does not cover early retirement.

There is no limit on the number of years of service. However, please note that the RM10,000 exemption is applicable on the number of completed years of service.

In addition, the increased tax exemption is only applicable on payments made in respect of individuals who have ceased employment on or after July 1, 2008. If the individual has ceased employment on or after July 1 2008, and tax clearance has been issued by the IRB with the RM6,000 tax exemption (prior to the mini budget announcement on March 10 2009), the individuals can make an appeal to the IRB for a reduced assessment.

Q. MY wife and I have a combined assessment. However, my wife was retrenched from her company on Dec 7. She has not found a new job and has had no income since then. Do I still continue to submit the combined tax assessment for 2008 and subsequent years despite her not earning any income? – Ismail

A. YOU should fill code 4 – “Diri sendiri, isteri tiada punca pendapatan” under Part A5 – “Jenis Taksiran” in your tax return. If your wife has received the year of assessment 2008 tax return, she should complete and file a “Nil” return to the IRB, together with a cover letter stating that she has no income in 2008.

Q. I OWN five units of properties with three units in joint names with my spouse and the others solely owned by me. My question is, every month my spouse will collect the rental on my behalf, and she also troubleshoots if there are problems with the houses. Since she uses her own transport, makes telephone calls, pays parking and toll fees, goes to the bank etc. can I pay her a salary for her help? My spouse is a housewife – Sam

A. THE tax law allows you to claim a deduction for expenses that you have expended to generate the rental income from your properties. These may include quit rent, assessment, insurance, repairs and maintenance, housing loan interest taken on the properties and rent collection fee paid to an estate agent.

As your wife is a “related party” and not a registered real estate agent, there could be more scrutiny by the IRB on the claim for the fee paid to her. For example, whether the fee payment is at market rate, whether the fee is commensurate with the services provided or is it excessive, etc. If a fee is paid to your wife, she will have to report the income in her tax return.

Q. I WRITE academic books and earn a few thousand from the payment of royalty. Actually, I am not selling the books or doing any business from the sale of the books. The publisher does all the marketing and selling. I just do the writing. Every year I report the income from the royalty together with my salary from the Government minus some of the expenses. My questions are:

(a) Presently I am given the OG or the B form. Should I be using the SG form instead because I am not doing any business?

(b) How is the RM20,000 exemption considered in a case like mine? – Anonymous

A. THE IRB have treated your royalty income as a business source and issued you a Form B (under an OG tax reference number). On the basis that you receive the royalty income and presumably claim some direct expenses against it, the tax treatment of your royalty income would essentially be the same whether it is reported under a Form B or Form BE. The tax filing deadline if the royalty is treated as a business source under Form B is June 30 whereas if it is a non-business source, the deadline is April 30.

There is a specific provision in the tax legislation to exempt RM20,000 royalty income or payment in respect of the publication of, or the use of or the right to use any literary work. You should exclude the RM20,000 exempt royalty income and declare the net (after deducting related expenses) balance of royalty income in your tax return.

Q. I WAS told by the officers at IRB that filling the HK-3 forms this year will be simple. I only have to fill in according to what is required by that form. Firstly, I don’t have to submit the dividend vouchers to the Income Tax office, together with the Borang BE.

Secondly, according to the instructions accompanying the borang BE, I have to correct/adjust for the Z, X and Y column. Is this correct? – K T KHOO

A. YES, you need to only submit worksheet HK-3 and are not required to submit the dividend vouchers in order to claim a tax refund on your dividend income.

If you are submitting your tax return via e-Filing, the computer system will calculate the re-grossing of the net dividends automatically. However, if you are submitting the hard copy of your return, you will need to compute the re-grossing yourself and complete the worksheet accordingly.

Q. YOU mentioned about investing in the National Education Savings Scheme (SSPN). What is this, and how does one apply for it? I’m a single father with two school-going boys. What can I do to reduce my tax deduction? – Andrew

A. FULL details regarding the National Education Savings Scheme (SSPN) can be found at http://www.ptptn.gov.my/ website for National Higher Education Fund Corporation.

Q&A with the Income Tax Department

TECHNICAL ISSUES

The following are some of the questions raised and answers given by the Lembaga Hasil Dalam Negeri (LHDN / IRB) during one of its Tax Seminars on the additional tax exemptions given to individuals. The original answer is in Bahasa Malaysia while the English translation is provided by me.

1. Does this exemption apply to petrol claim (reimbursement basis) ?

Jawapan
Penerimaan tuntutan bayaran balik bagi tugas rasmi yang dijalankan oleh pekerja bagi pihak majikannya tidak tertakluk kepada cukai pendapatan.

Answer
Reimbursements received for official purposes by an employee is not subject to tax.

2. Extend to fixed transport allowance?

Jawapan
Pengecualian diberi kepada elaun perjalanan, kad petrol atau elaun petrol

Answer
Exemption is given for travelling allowances, petrol cards or petrol allowances.

3. Extend to the BIK on petrol provided by the employer together with car?

Jawapan
Manfaat petrol dikecualikan jika majikan boleh menentukan tujuan dan amaun petrol diberi sama ada bagi tujuan perjalanan antara rumah ke pejabat (pengecualian sehingga RM2,400) atau bagi melaksanakan suatu pekerjaan (pengecualian sehingga RM6,000).
Jika majikan tidak dapat menentukan amaun bagi kedua-dua tujuan tersebut, maka pengecualian diberi sehingga RM6,000 setahun.

Answer
BIK on petrol is exempted if the employer can determine the purpose and amount of petrol given whether for travelling between home and work (exemption up to RM2,400) or for official duties (exemption up to RM6,000). If the employer is not able to determine the amount for the two purposes separately, then the exemption is given up to RM6,000 a year.

4. Travelling allowance RM8400, can it be automatically assumed RM2400 is for home to work place & RM6000 is for official duties?

Jawapan
Tidak boleh. Majikan perlu menentukan amaun dan jenis peruntukan yang diberi (sama seperti di atas).
Catatan: bagi persoalan 3 dan 4, jawapan yang diberi adalah tertakluk kepada keputusan selanjutnya (jika ada) dan akan dimasukkan dalam pindaan kepada Ketetapan Umum Manfaat Berupa Barangan dan Ketetapan Umum Perkuisit.

Answer
No. The employer has to determine the amount and type of allowance given (as explained above).
Note : for questions 3 & 4, answers given are subject to further decisions (if any) and will be included in amendments to the Public Ruling on Benefits-in-kind and Public Ruling on Perquisites.

5. Can the employee claim an abatement on the amount in excess of RM6,000 p.a? Does he need to maintain a travel log for the excess amount only or for the entire amount?

Jawapan
Bagi tuntutan elaun perjalanan yang melebihi RM6,000.00 pekerja perlu menyimpan kesemua rekod (bukan setakat lebihan sahaja) bagi tujuan audit.

Answer
For travelling allowances amounting to more than RM6,000, the employees have to keep all records (not only the excess amount only) for the purpose of auditing.

6. If the employee is given a car allowance of RM500 per month to cover petrol, road tax, insurance & maintenance costs, can the whole amount be exempted from tax?

Jawapan
Elaun kereta tidak dikecualikan

Answer
Car allowances are not exempted (i.e. they are taxable).

7. Employee received car allowance but actually he is not expected to travel for official duties qualify for exemption RM6,000?

Jawapan
Elaun kereta tidak dikecualikan

Answer
Car allowances are not exempted (i.e. they are taxable).

8. Employee change employment during the year & received RM2,400 from each employer for travel between home & office, what amount to be exempted?

Jawapan
Pengecualian diberi terhad kepada RM2,400 setahun kepada seorang pekerja tanpa melihat kepada bilangan majikan.

Answer
Tax exemption is given subject to RM2,400 a year for each individual without taking into account the number of employers .

9. Employees are given toll card (e.g. Touch n’ Go), not only for toll charged but also for other type of payment, what is the amount to be exempted?

Jawapan
Hanya kadar tol sahaja dikecualikan.
Tiada pengecualian bagi Touch n’ Go yang juga digunakan untuk lain-lain
bayaran.

Answer
Only the tolls incurred is exempted.
No exemption is given for Touch n’ Go that is used for other payments.

10. Allowance or fees for parking-exempted?

Jawapan
Elaun letak kereta atau kadar letak kereta dikecualikan bagi pekerja yang menerima peruntukan elaun tersebut sebagai sebahagian daripada penggajiannya.

Answer
Parking allowances or parking fees are exempted for employees who received these allowances as part of their remuneration from employment.

11. If exempted, does it extend to parking fee at LRT stations or limit at the office only?

Jawapan
Pengecualian diberi kepada pekerja yang diperuntukkan elaun meletak kereta dengan suatu amaun tetap oleh majikannya. Tanpa pengecualian, elaun tersebut merupakan sebahagian daripada pendapatan penggajian bagi pekerja tersebut. Pengecualian bukan merupakan satu potongan dalam menentukan pendapatan larasan/berkanun penggajian. Oleh itu, bayaran meletak kereta di kawasan pejabat atau di stesen LRT tidak menjadi isu.

Answer
Tax exemptions are given to employees who are paid a fixed amount of parking allowances by his/her employer. Without this exemption, this allowance would have been part of his/her remuneration. Exemption is not given as a deduction to arrive at the adjusted/statutory income. Therefore, payments made for parking whether at the office or at the LRT stations are not an issue.

12. What would be a reasonable amount to be paid to employee?

Jawapan
Majikan perlu menentukan suatu amaun yang munasabah.

Answer
The employers have to determine an amount which is suitable.

13. Can the employer pay the employee a daily allowance to subsidize their food costs?

Jawapan
Pengecualian hanya diberi kepada pekerja yang diperuntukkan elaun makan oleh majikan secara tetap, tanpa mengambilkira elaun tersebut diberi secara bulanan atau harian.

Answer
Tax exemption is only given to the employees who are given a fixed food allowances by their employers, without taking into account whether they are paid monthly or daily.

14. Does this exemption extended to ‘per diem’ which is paid to the employee to cover this meals while working outstation/overseas?

Jawapan
Tidak.

Answer
No.

(The IRB came out with a new Public Ruling later to exempt 'per diem'. See here.)

15. What if the per diem amount also covers laundry & phone calls?

Jawapan
Tidak berkenaan

Answer
Not applicable

16. Is there any limitation to the amount which can be paid as meal allowance?

Jawapan
Majikan perlu menentukan suatu amaun yang munasabah.

Answer
The employers have to determine an amount which is suitable.

17. What is the definition of childcare? Babysitter, kindergarten, maid etc

Jawapan
Pengecualian diberi kepada pekerja yang diperuntukkan elaun penjagaan anak oleh majikannya. Kepada siapa bayaran tersebut dibuat oleh pekerja tidak menjadi isu.

Answer
Tax exemption is given to employees who are given child care allowances by their employers. To whom these payments are eventually paid by the employees is not an issue.

18. Any age limit on the child to qualify for childcare?

Jawapan
12 tahun ke bawah

Answer
12 years and below

19. Any limitation on entitlement to exemption of childcare allowance? i.e if the husband gets an exemption on the childcare allowance received, can his wife also qualify for an exemption on the childcare allowance for the same child?

Jawapan
Pengecualian diberi secara individu terhad kepada RM2,400 setahun.

Answer
Tax exemption is given to each individual subject to RM2,400 a year.

20. Would this exemption apply to maid allowance provided by the employer?

Jawapan
Elaun Pembantu Rumah tidak dikecualikan

Answer
Maid allowance is not exempted.

21. Can a single employee with an adopted child quality for the exemption?

Jawapan
Pengecualian diberi kepada pekerja yang diperuntukkan elaun penjagaan anak oleh majikannya. Anak adalah sebagaimana ditakrifkan di bawah Seksyen 48, ACP 1967.

Answer
Tax exemption is given to an employee who is given child care allowances by his/her employer. ‘Child’ is as defined under Section 48, Income Tax Act, 1967.

22. Does this exemption extend to telephone allowance or limited to actual
bills only?

Jawapan
Pengecualian tidak terpakai kepada pekerja yang diperuntukkan elaun tetap telefon.

Answer
Tax exemption is not applicable to employees who are given fixed telephone allowance.

23. How about other related charges i.e registration, access fee, etc? Does this exemption extend to these items?

Jawapan
Ya.

Answer
Yes.

24. Does this exemption extend to goods & services of companies within a group or limited to the goods & services provided by the direct employer only?

Jawapan
Majikan tidak dipanjangkan kepada kumpulan syarikat

Answer
Employer is not extended to Group companies.

25. How to determine the loan amount? Is it based on outstanding loan balance or the original loan amount?

Jawapan
Pengecualian ke atas subsidi faedah bagi pinjaman perumahan, kenderaan bermotor dan pendidikan dikira menggunakan formula berikut:

A X B / C

Dimana;
A = perbezaan antara amaun faedah yang perlu ditanggung oleh
pekerja dengan amaun faedah yang kena bayar oleh
Pekerja dalam tempoh asas bagi suatu tahun taksiran.
B = jumlah agregat baki amaun principal pinjaman perumahan,
kenderaan bermotor dan pendidikan yang diambil oleh
pekerja atau RM300,000 dalam tempoh asas bagi suatu
tahun taksiran yang mana lebih rendah.
C = jumlah agregat amaun principal pinjaman perumahan,
kenderaan bermotor dan pendidikan yang diambil oleh
pekerja.

Answer
Tax exemption on subsidies for interest on housing loan, motor vehicles and education is calculated using the following formula :-

A X B / C


Where
A = difference between the amount of interest to be borne by the employee and the amount of interest to be payable by the employee
B = aggregate balance of loan or RM300,000, whichever is lower
C = total aggregate amount of principal loan

Note : For example,
Total loan taken = RM400,000 (Principal amount)
Balance loan = RM250,000 (Outstanding amount)
Total interest charged by bank = RM5,000
Total interest paid by employee = RM3,000
Total interest subsidised by employer = RM2,000

Tax exempt amount = (RM5,000 – RM2,000) X RM250,000 = RM1.667
RM450,000

Amount taxable = RM333 (RM2,000 – RM1,667)

26. Loan for education - for employee only or can extend for their children?

Jawapan
Untuk pekerja sahaja.

Answer
For employees only.

27. Would pickup trucks (e.g Toyota Hilux, Suzuki Equator, etc) qualify as passenger motor vehicles?

Jawapan
Pengecualian diberi kepada subsidi bagi pinjaman kenderaan selain daripada kenderaan yang dilesenkan oleh pihak berkuasa, yang berkaitan dengan pengangkutan perdagangan barangan atau penumpang bagi tujuan komersial.

Answer
Tax exemptions are given for subsidies on loans for motor vehicles other than those licensed by the relevant authorities which are related to transportation of commercial goods or passengers for commercial purposes.

28. Does traditional medicine extend to treatments by bomoh & sinseh?

Jawapan
Perubatan tradisional berhubung dengan pengecualian yang diberikan, bermaksud perubatan yang diberi oleh pengamal perubatan yang berdaftar dengan badan berikut:
a. Rawatan Tradisional Melayu
Persatuan Perubatan Tradisional Melayu Malaysia (PUTRAMAS)
b. Rawatan Tradisional India
Pertubuhan Perubatan Tradisional India Malaysia (PEPTIM)
c. Rawatan Tradisional Cina
- Federation of Chinese Physicians and Chinese-Dealers Associations of Malaysia (FCPMDM)
- Federation of Chinese Physicians & Acupuncturist Associations of Malaysia (FCPAAM)
- Chinese Physician’s Associations of Malaysia (MCPA)

Answer
Traditional medication in respect of exemptions given means medications provided by practitioners registered with the following bodies :-
a. Malay Traditional Medications
Persatuan Perubatan Tradisional Melayu Malaysia (PUTRAMAS)
b. Indian Traditional Medications
Pertubuhan Perubatan Tradisional India Malaysia (PEPTIM)
c. Chinese Traditional Medications
- Federation of Chinese Physicians and Chinese-Dealers Associations of Malaysia (FCPMDM)
- Federation of Chinese Physicians & Acupuncturist Associations of Malaysia (FCPAAM)
- Chinese Physician’s Associations of Malaysia (MCPA)

29. Pekerja menerima anugerah Pekerja Contoh bagi bulan Oktober dan juga menerima anugerah bagi Kehadiran Penuh bulan November. Adakah penerimaan anugerah secara bulanan ini boleh dikecualinan cukai sehingga RM2,000 mulai tahun 2008?

An employee receives award for “Employee of the Month” in October and also receives award for “Full Attendance” in November. Are such monthly receipts exempted from tax up to RM2,000 from 2008 ?

Jawapan
- Anugerah Pekerja Contoh, Anugerah Kehadiran Penuh (tiada cuti sakit) boleh dikategorikan sebagai Anugerah Khidmat Cemerlang bagi tujuan pengecualian di bawah perenggan 25C, Jadual 6 ACP 1967
- Pekerja layak dikecualinan cukai sehingga RM2,000 mulai tahun 2008 atas jumlah (RM) anugerah-anugerah yang diterimanya.

Answer
- Awards for “Employee of the Month” and awards for “Full Attendance” can be categorised as Service Excellence Awards for the purpose of exemption under para 25C, Schedule 6, ITA 1967
- The employee is entitled to tax exemption of up to RM2,000 with effect from 2008 on total (RM) awards received by him/her.