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.
Showing posts with label income tax questions. Show all posts
Showing posts with label income tax questions. Show all posts
The Star Q&As - 22/03/09
The following article was published in The Star newspaper on 22 Mar 2009. It is reproduced here for your reading.
Your tax queries answered
Yes to golf balls and shuttlecocks but no to swimsuits and sports shoes. These are among many specifications related to tax exemption. What makes the cut and what doesn’t, who qualifies and who doesn’t are among the many questions from our readers in response to Sunday Star’s stories last week on how to maximise one’s claims when filing tax returns.
THANKS to the assistance of tax consultant company PremierOne, our readers’ questions have been answered. Below are some of the e-mailed questions. Due to space constraints, the rest will be answered next week.
Q. I AM really confused as to what type of insurance premiums are deductible for life insurance and medical insurance reliefs. I noticed that insurance policies nowadays have both life insurance and medical rolled into one. What is the Inland Revenue Board’s (IRB) new guidelines dated June 6, 2005, on this matter? Where can I get these guidelines? – JOHN LIM
A. THE total tax deduction for life insurance premiums and contribution to an approved pension/employees provident fund is up to a maximum of RM6,000. The total tax deduction for insurance premium for education and medical benefits is up to a maximum of RM3,000.
If you are holding a policy that provides both life insurance and medical coverage, you can request from your insurance company (through the agent that services you) a statement that will show a breakdown of the premium paid in respect of each of the coverage. From these breakdown amount, you may claim a tax deduction for the life insurance premium (together with your EPF contribution) up to a maximum of RM6,000. The medical premium may be claimed (together with the education policy premium, if any) as a tax deduction up to a maximum of RM3,000.
The IRB has issued two Public Rulings and two addenda on the computation of income tax for individuals, including the one you mentioned dated June 6, 2005 (Public Ruling no. 2/2005). The public rulings set out the IRB director-general’s interpretation on the particular tax matters and are issued to provide guidance for the public and IRB officers. All the public rulings can be found and downloaded from the IRB website at www.hasil.org.my under Law and Regulations/Public Rulings.
Q. MY wife and I each bought a personal computer last year and would like to claim the RM3,000 rebate for each computer under our individual names. However, we were told that we are only allowed to claim one personal computer as the rebate is based on family usage and not individual usage.
Can you please clarify this point? Are my wife and I allowed to claim the rebate totalling RM6,000 for both of us as we each bought a new personal computer last year? Our taxes are filed separately. – FAN TEN YAU
A. 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.
It is important to note that the RM3,000 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). Prior to year of assessment 2007, the relief given was a RM500 rebate given on a household basis once every five years.
In your case, where you and your wife elect for a separate assessment, each of you are eligible to claim a maximum deduction of RM3,000 for your respective purchase to be evidenced by a receipt for the respective claim.
Q. DUE to the increase in petrol/diesel price, other things also increase in price. In order to lighten our expenses, our company pays a monthly allowance, called child transport allowance, for those who have school-going children. This allowance varies depending on the number of children going to school. Can we claim tax exemption on this allowance? – JENNY
A. PURSUANT to the Budget 2009 announcement last year, allowance or subsidies received by employees from their employer for childcare in respect of children will be exempted from income tax with effect from year of assessment 2008. The exemption is restricted to RM2,400 per annum.
Although the relevant statutory order on the allowance is yet to be gazetted to date, the IRB has issued a second addendum to Public Ruling no. 1/2006 (dealing with perquisites from employment) which states that the child must be 12 years of age and below and must be a legitimate child, stepchild or legally adopted child.
The examples given in the ruling sets out situations where the allowance was given to employees for childcare centre, hiring a helper and employing a household domestic maid. Whilst the examples given may not be exhaustive, it is uncertain whether an allowance for child transportation would qualify, until further clarifications from the IRB.
Q. EFFECTIVE from year of assessment 2008, taxpayers are given a relief of up to RM300 yearly for the purchase of sports equipment.
Equipment that are entitled to this relief are those used for sporting activities as defined under the Sports Development Act 1997. I would be pleased if you could provide some examples of the sports equipment that will be entitled to this relief.
It is interesting to note that in the guidebook for the year of assessment 2008 (Buku Panduan Borang B 2008 – pdf version), it is mentioned that sports shoes are excluded.
This may seem as an anomaly as a pair of running shoes may be a major “equipment” used in athletics, a sport defined under the Sports Development Act 1997. – FOOK
A. A TAX deduction is allowed for an amount limited to a maximum of RM300 in respect of expenses expended for the purchase of sports equipment for any sports activity as defined under the Sports Development Act 1997, as evidenced by receipts issued.
The term sports activity is listed in the First Schedule of the Sports Development Act 1997 and ranges from athletics, badminton, canoeing, fencing, golf, recreational, sepak takraw, table tennis to watersport, etc.
You are correct to point out that whilst equipment with short lifespan e.g. golf balls and shuttlecocks have been accepted by the IRB in the Buku Panduan, certain sports attire have specifically been excluded e.g. swimsuits and sports shoes.
Q. MY company, X Sdn Bhd, was formed some time in mid-2006. There are only two directors in the company with equal sharing of the company shares. No profit was made in 2006. However, there was profit at the end of financial year 2007 and dividend was declared and distributed to the shareholders in July 2008.
I would like to know if I am eligible to claim for the difference in the taxed amount as my personal marginal tax is lower than the company tax, which is 20%. Or is it that the dividend distributed is under single-tier tax system of which I don’t even need to declare in the EA and BE form?
My accountant informed me that since the company is new, it should directly be under the new tax system. Is this true? – DARREN
A. IT is not correct to say that since the company is “new”, it would automatically be under the single-tier system.
The single-tier system took effect from year of assessment 2008 onwards. 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 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 (subject to certain conditions e.g. dividends must be paid in cash and in respect of ordinary shares.) For small and medium companies, the tax on dividends paid to the shareholders is deducted from the section 108 credit balance based on the highest tax rate for the year of assessment (e.g. 27% for year of assessment 2007).
Alternatively, the company may at any time make an irrevocable election to forgo the right to distribute franked dividends by filing a Form R50 to the IRB and pay dividends under the single-tier system.
Since your personal marginal tax bracket rate is lower than the company tax rate, provided you have sufficient tax credits in the company section 108 accounts, it is more beneficial for the company to declare and pay franked dividends under the transitional provisions, instead of paying single-tier exempt dividend.
Please note that the company, upon paying the dividend, is required to furnish the shareholders with a certificate stating the gross dividend, tax deducted from the dividend and net dividend paid out.
Q. I SEEK further clarification on my following concerns:
i) Travel allowance from home to work place of up to RM2,400: Does this apply to all employees who drive to work daily or only to those provided with such an allowance by the company? If I drive a company car, am I entitled to this exemption?
ii) Telephone and mobile usage: Does this again apply to all who use their mobile phone for company business? Totally or partly?
iii) I drive a company car and use company registered mobile phone. These are translated into income of RM3,000 and RM600 respectively as taxable income. Am I entitled to these extra exemptions? – C.C. YAP
A. THE tax exemption for travel allowance of up to RM2,400 a year is only applicable if you receive such travel allowance from your employer i.e. if your employer provides you such travel allowance, the allowance is not taxable to you. It does not apply to employees where no travel allowance is provided by their employers, though they drive to work.
Similarly, the tax exemption applies where your employer provides you the telephone and mobile phone or pays the bills for the telephone or mobile phone registered in the name of the employee or employer.
You are entitled to the tax exemption on the RM600 mobile phone benefits provided by your employer.
In relation to the company car, we understand that the IRB is currently considering whether to include the benefit value of motor vehicle (in your case the RM3,000) as part of the exempt allowance of up to a maximum of RM2,400 per annum. We anticipate the IRB to issue further guidelines on this.
Q. I WOULD like to know which column in E-filing to fill in details of parking allowance, purchase of own company goods at discounted price and handphone/Internet/phone bills. Are those exempted from tax in YA2008? If so, where do I fill them in as I can’t seem to find an appropriate column to put those in? – ERIC
A. WITH effect from year of assessment 2008 parking allowance, telephone and mobile phone bills, and Internet subscription paid by employers are exempted from income tax.
The purchase of the company’s own goods at discounted price is also an exempted benefit-in-kind, up to a maximum of RM1,000 per year.
Such exempted allowances and benefits-in-kind are not required to be reported in your Form BE or under e- Filing.
Please note that Part G of the Form EA for year ended Dec 31, 2008 provided by your employer would specify the total amount of such exempted allowances/benefits-in-kind/ perquisites.
Q. HOW could we in the private sector cut on our taxes as we fall in the maximum taxable bracket as compared to our peers in the government sector who earn the same and pay less tax as lots of the allowances are non taxable?
A. PURSUANT to the 2009 Budget announcement, with effect from year of assessment 2008, the Government has allowed tax exemptions on various allowances and benefits provided by employers to their employees.
Some examples include subsidised interest given by employers for housing, education or car loan up to RM300,000; travel and petrol allowance for travelling from work to home of up to RM2,400 per year; travel and petrol allowance and toll rate for official duties of up to RM6,000 per year; and allowance for meal, parking and childcare, etc.
Q. I WISH to know whether I can claim on the following:
i) I spent a total of RM7,820.50 for both check-ups and delivery at a hospital for the birth of my son under Section D7 up to maximum RM5,000; and
ii) Cukai Seksyen 110 (lain-lain) dividend received from public listed shares. – CHONG SAU CHAN
A. THE deduction claim under Part D7 is in relation to expenses expended for a complete medical examination which is up to a maximum of RM500. The total deduction for medical expenses on serious diseases under Part D6 is limited to a maximum of RM5,000 and this includes the RM500 for complete medical examination (under Part D7).
The expenses you incurred for check-ups relating to your pregnancy and delivery of your son is not claimable since it does not fall within the two categories of expenses.
If the dividend warrant that you received from the public listed shares shows a gross dividend amount, tax deducted from the dividend and net dividend paid out, it means that the company has to opt to continue using its section 108 tax credits balance to pay franked dividends under the transitional provisions instead of electing to pay exempt dividends under the single-tier system.
Therefore, you should declare the dividend at gross in your tax return: for example, if in 2008 you received net dividend of RM74, you should declare RM100 (and not RM74) as dividend income in your return. However, you can deduct the section 110 tax credits of RM26 against your total tax. Any excess credit will be refunded to you.
Q. I RETIRED in 2007. I have no employment income for YA 2008. My wife is still working. I have a child currently receiving college education. My questions are:
i) Since I have no income for YA 2008, can I elect for combined assessment so that my spouse can claim additional RM3,000 personal relief? Do I have to file separate forms officially to inform the IRB?
ii) Can my spouse claim the child relief as well as all the insurance premiums paid for life and medical policies?
iii) I understand that retirement gratuities received due to medical reason is exempted from income tax. Where do we disclose the amount received as there is no mention in the Borang BE?
iv) Will the retirement gratuities received due to medical reason be taxed if the person later decides to take up a new employment or start a business? – FRANCIS
A. SINCE you have retired and have no income for year of assessment 2008 and if you have received your tax return Form BE from the IRB, you should complete and file a “Nil” return to the IRB, together with a cover letter stating that you have no income for 2008. Your wife should fill code 4 = “Diri sendiri, suami tiada punca pendapatan” under Part A5 – “Jenis Taksiran” in her tax return. Your wife can claim the additional RM3,000 relief for you (as husband).
ii) Yes, your wife can elect to claim the child relief. Your wife is also entitled to a claim up to a maximum of RM3,000 for insurance premium paid for her and/or your medical policies as well as a claim up to a maximum of RM6,000 (together with her EPF contributions) for insurance premium paid for her and/ or your life policies.
iii) Sum received by way of gratuities on retirement from an employment, if the director-general of the IRB is satisfied that the retirement is due to ill-health, is exempted from income tax. In practice, your employer would have issued you a Form CP22A (notification of cessation of employment) and you should have obtained a tax clearance from the IRB before your employer released the gratuity sum to you.
There is no requirement to declare the exempted gratuity amount in your Form BE.
iv) There is no specific provision in the tax legislation to cover this position. However, the legislation clearly provides that the director-general of the IRB must be satisfied that the retirement is due to ill-health. Where this criterion has been met, the gratuity would not be taxable. Whether the subsequent taking up of another employment or starting a business may lead to a review by the IRB will depend on the prevailing facts and circumstances.
Q. MY company is giving fuel card worth RM300 per month and mobile phone benefit of RM120 per month. This will not be included in the salary slip, so how do I fill up the EA form?
Also, how do I fill up for goods that I buy at discounted value for RM1,000?
And what is the tax relief for EPF Annuities scheme? – ANG
i) The fuel card of RM300 per month and mobile phone of RM120 per month provided by your company is exempted from income tax with effect from year of assessment 2008. There is no requirement to declare the exempt income in the Form EA or the Form BE.
ii) The purchase of company goods at discounted value up to a maximum of RM1,000 is exempted and not required to be disclosed in the Form EA or Form BE.
iii) The tax relief for EPF Annuities scheme is up to a maximum of RM1,000 per annum.
Q. I HAVE two questions. Can I claim maternity expenses in 2008 if the expenses were borne by myself and not by my company?
I have a parent in a nursing home. Can I claim the nursing home expenses borne by myself? It is the monthly sum paid to the nursing home for the care of my parent – LINDA
A. TAX deduction for medical expenses expended on own self, spouse or child of up to a maximum of RM5,000 is available only if it is in respect of treatment of serious diseases (see box for definition).
Since maternity expenses do not fall within this definition, it is not claimable as a tax deduction.
For your second question, tax deduction for medical expenses expended for own parents is up to a maximum of RM5,000.
Medical expenses that qualify for deduction would include medical care and treatment provided by a nursing home for your parents. You must keep the receipt(s) from the nursing home certifying that nursing home care was provided to your parents as evidence for your claim.
Q. ONE of the points you highlighted in your article “How to pay Less Tax” (Sunday Star, March 15) was that medical benefits exempted from tax include expenses on traditional medicines such as ayurvedic and accupunture. And you mentioned that it is for the year of assesment 2008.
I would appreciate it if you could elaborate on this a little more. As I am taking my son for ayurvedic treatment, can I put it in?
My husband and I are paying for the treatment from our own savings and we are not asking our employer to cover it as a benefit. So, can we put it in our income tax form? What is the maximum amount we can claim and where do we put it? – TAX QUERY CITIZEN
A. MEDICAL benefits which include expenses on traditional medicines such as ayurvedic and acupuncture that are exempted from tax for employees applies only where such benefits are provided by employers.
In your case, since you (and not your employer) are paying for your son’s ayurvedic treatment, this exemption is not applicable to you.
In order to claim the tax relief for medical expenses for your son of up to a maximum of RM5,000, the expenses have to be expended on “serious diseases” (see definition in box). In addition, you are required to obtain a receipt or certificate from a medical practitioner who is registered with the Malaysian Medical Council.
Unless your son’s ayurvedic treatment is for a serious disease and the ayurvedic practitioner is registered with the Malaysian Medical Council, the expenses will not be deductible.
What is serious disease?
Serious diseases is defined to include AIDS, Parkinson’s disease, 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.
Your tax queries answered
Yes to golf balls and shuttlecocks but no to swimsuits and sports shoes. These are among many specifications related to tax exemption. What makes the cut and what doesn’t, who qualifies and who doesn’t are among the many questions from our readers in response to Sunday Star’s stories last week on how to maximise one’s claims when filing tax returns.
THANKS to the assistance of tax consultant company PremierOne, our readers’ questions have been answered. Below are some of the e-mailed questions. Due to space constraints, the rest will be answered next week.
Q. I AM really confused as to what type of insurance premiums are deductible for life insurance and medical insurance reliefs. I noticed that insurance policies nowadays have both life insurance and medical rolled into one. What is the Inland Revenue Board’s (IRB) new guidelines dated June 6, 2005, on this matter? Where can I get these guidelines? – JOHN LIM
A. THE total tax deduction for life insurance premiums and contribution to an approved pension/employees provident fund is up to a maximum of RM6,000. The total tax deduction for insurance premium for education and medical benefits is up to a maximum of RM3,000.
If you are holding a policy that provides both life insurance and medical coverage, you can request from your insurance company (through the agent that services you) a statement that will show a breakdown of the premium paid in respect of each of the coverage. From these breakdown amount, you may claim a tax deduction for the life insurance premium (together with your EPF contribution) up to a maximum of RM6,000. The medical premium may be claimed (together with the education policy premium, if any) as a tax deduction up to a maximum of RM3,000.
The IRB has issued two Public Rulings and two addenda on the computation of income tax for individuals, including the one you mentioned dated June 6, 2005 (Public Ruling no. 2/2005). The public rulings set out the IRB director-general’s interpretation on the particular tax matters and are issued to provide guidance for the public and IRB officers. All the public rulings can be found and downloaded from the IRB website at www.hasil.org.my under Law and Regulations/Public Rulings.
Q. MY wife and I each bought a personal computer last year and would like to claim the RM3,000 rebate for each computer under our individual names. However, we were told that we are only allowed to claim one personal computer as the rebate is based on family usage and not individual usage.
Can you please clarify this point? Are my wife and I allowed to claim the rebate totalling RM6,000 for both of us as we each bought a new personal computer last year? Our taxes are filed separately. – FAN TEN YAU
A. 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.
It is important to note that the RM3,000 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). Prior to year of assessment 2007, the relief given was a RM500 rebate given on a household basis once every five years.
In your case, where you and your wife elect for a separate assessment, each of you are eligible to claim a maximum deduction of RM3,000 for your respective purchase to be evidenced by a receipt for the respective claim.
Q. DUE to the increase in petrol/diesel price, other things also increase in price. In order to lighten our expenses, our company pays a monthly allowance, called child transport allowance, for those who have school-going children. This allowance varies depending on the number of children going to school. Can we claim tax exemption on this allowance? – JENNY
A. PURSUANT to the Budget 2009 announcement last year, allowance or subsidies received by employees from their employer for childcare in respect of children will be exempted from income tax with effect from year of assessment 2008. The exemption is restricted to RM2,400 per annum.
Although the relevant statutory order on the allowance is yet to be gazetted to date, the IRB has issued a second addendum to Public Ruling no. 1/2006 (dealing with perquisites from employment) which states that the child must be 12 years of age and below and must be a legitimate child, stepchild or legally adopted child.
The examples given in the ruling sets out situations where the allowance was given to employees for childcare centre, hiring a helper and employing a household domestic maid. Whilst the examples given may not be exhaustive, it is uncertain whether an allowance for child transportation would qualify, until further clarifications from the IRB.
Q. EFFECTIVE from year of assessment 2008, taxpayers are given a relief of up to RM300 yearly for the purchase of sports equipment.
Equipment that are entitled to this relief are those used for sporting activities as defined under the Sports Development Act 1997. I would be pleased if you could provide some examples of the sports equipment that will be entitled to this relief.
It is interesting to note that in the guidebook for the year of assessment 2008 (Buku Panduan Borang B 2008 – pdf version), it is mentioned that sports shoes are excluded.
This may seem as an anomaly as a pair of running shoes may be a major “equipment” used in athletics, a sport defined under the Sports Development Act 1997. – FOOK
A. A TAX deduction is allowed for an amount limited to a maximum of RM300 in respect of expenses expended for the purchase of sports equipment for any sports activity as defined under the Sports Development Act 1997, as evidenced by receipts issued.
The term sports activity is listed in the First Schedule of the Sports Development Act 1997 and ranges from athletics, badminton, canoeing, fencing, golf, recreational, sepak takraw, table tennis to watersport, etc.
You are correct to point out that whilst equipment with short lifespan e.g. golf balls and shuttlecocks have been accepted by the IRB in the Buku Panduan, certain sports attire have specifically been excluded e.g. swimsuits and sports shoes.
Q. MY company, X Sdn Bhd, was formed some time in mid-2006. There are only two directors in the company with equal sharing of the company shares. No profit was made in 2006. However, there was profit at the end of financial year 2007 and dividend was declared and distributed to the shareholders in July 2008.
I would like to know if I am eligible to claim for the difference in the taxed amount as my personal marginal tax is lower than the company tax, which is 20%. Or is it that the dividend distributed is under single-tier tax system of which I don’t even need to declare in the EA and BE form?
My accountant informed me that since the company is new, it should directly be under the new tax system. Is this true? – DARREN
A. IT is not correct to say that since the company is “new”, it would automatically be under the single-tier system.
The single-tier system took effect from year of assessment 2008 onwards. 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 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 (subject to certain conditions e.g. dividends must be paid in cash and in respect of ordinary shares.) For small and medium companies, the tax on dividends paid to the shareholders is deducted from the section 108 credit balance based on the highest tax rate for the year of assessment (e.g. 27% for year of assessment 2007).
Alternatively, the company may at any time make an irrevocable election to forgo the right to distribute franked dividends by filing a Form R50 to the IRB and pay dividends under the single-tier system.
Since your personal marginal tax bracket rate is lower than the company tax rate, provided you have sufficient tax credits in the company section 108 accounts, it is more beneficial for the company to declare and pay franked dividends under the transitional provisions, instead of paying single-tier exempt dividend.
Please note that the company, upon paying the dividend, is required to furnish the shareholders with a certificate stating the gross dividend, tax deducted from the dividend and net dividend paid out.
Q. I SEEK further clarification on my following concerns:
i) Travel allowance from home to work place of up to RM2,400: Does this apply to all employees who drive to work daily or only to those provided with such an allowance by the company? If I drive a company car, am I entitled to this exemption?
ii) Telephone and mobile usage: Does this again apply to all who use their mobile phone for company business? Totally or partly?
iii) I drive a company car and use company registered mobile phone. These are translated into income of RM3,000 and RM600 respectively as taxable income. Am I entitled to these extra exemptions? – C.C. YAP
A. THE tax exemption for travel allowance of up to RM2,400 a year is only applicable if you receive such travel allowance from your employer i.e. if your employer provides you such travel allowance, the allowance is not taxable to you. It does not apply to employees where no travel allowance is provided by their employers, though they drive to work.
Similarly, the tax exemption applies where your employer provides you the telephone and mobile phone or pays the bills for the telephone or mobile phone registered in the name of the employee or employer.
You are entitled to the tax exemption on the RM600 mobile phone benefits provided by your employer.
In relation to the company car, we understand that the IRB is currently considering whether to include the benefit value of motor vehicle (in your case the RM3,000) as part of the exempt allowance of up to a maximum of RM2,400 per annum. We anticipate the IRB to issue further guidelines on this.
Q. I WOULD like to know which column in E-filing to fill in details of parking allowance, purchase of own company goods at discounted price and handphone/Internet/phone bills. Are those exempted from tax in YA2008? If so, where do I fill them in as I can’t seem to find an appropriate column to put those in? – ERIC
A. WITH effect from year of assessment 2008 parking allowance, telephone and mobile phone bills, and Internet subscription paid by employers are exempted from income tax.
The purchase of the company’s own goods at discounted price is also an exempted benefit-in-kind, up to a maximum of RM1,000 per year.
Such exempted allowances and benefits-in-kind are not required to be reported in your Form BE or under e- Filing.
Please note that Part G of the Form EA for year ended Dec 31, 2008 provided by your employer would specify the total amount of such exempted allowances/benefits-in-kind/ perquisites.
Q. HOW could we in the private sector cut on our taxes as we fall in the maximum taxable bracket as compared to our peers in the government sector who earn the same and pay less tax as lots of the allowances are non taxable?
A. PURSUANT to the 2009 Budget announcement, with effect from year of assessment 2008, the Government has allowed tax exemptions on various allowances and benefits provided by employers to their employees.
Some examples include subsidised interest given by employers for housing, education or car loan up to RM300,000; travel and petrol allowance for travelling from work to home of up to RM2,400 per year; travel and petrol allowance and toll rate for official duties of up to RM6,000 per year; and allowance for meal, parking and childcare, etc.
Q. I WISH to know whether I can claim on the following:
i) I spent a total of RM7,820.50 for both check-ups and delivery at a hospital for the birth of my son under Section D7 up to maximum RM5,000; and
ii) Cukai Seksyen 110 (lain-lain) dividend received from public listed shares. – CHONG SAU CHAN
A. THE deduction claim under Part D7 is in relation to expenses expended for a complete medical examination which is up to a maximum of RM500. The total deduction for medical expenses on serious diseases under Part D6 is limited to a maximum of RM5,000 and this includes the RM500 for complete medical examination (under Part D7).
The expenses you incurred for check-ups relating to your pregnancy and delivery of your son is not claimable since it does not fall within the two categories of expenses.
If the dividend warrant that you received from the public listed shares shows a gross dividend amount, tax deducted from the dividend and net dividend paid out, it means that the company has to opt to continue using its section 108 tax credits balance to pay franked dividends under the transitional provisions instead of electing to pay exempt dividends under the single-tier system.
Therefore, you should declare the dividend at gross in your tax return: for example, if in 2008 you received net dividend of RM74, you should declare RM100 (and not RM74) as dividend income in your return. However, you can deduct the section 110 tax credits of RM26 against your total tax. Any excess credit will be refunded to you.
Q. I RETIRED in 2007. I have no employment income for YA 2008. My wife is still working. I have a child currently receiving college education. My questions are:
i) Since I have no income for YA 2008, can I elect for combined assessment so that my spouse can claim additional RM3,000 personal relief? Do I have to file separate forms officially to inform the IRB?
ii) Can my spouse claim the child relief as well as all the insurance premiums paid for life and medical policies?
iii) I understand that retirement gratuities received due to medical reason is exempted from income tax. Where do we disclose the amount received as there is no mention in the Borang BE?
iv) Will the retirement gratuities received due to medical reason be taxed if the person later decides to take up a new employment or start a business? – FRANCIS
A. SINCE you have retired and have no income for year of assessment 2008 and if you have received your tax return Form BE from the IRB, you should complete and file a “Nil” return to the IRB, together with a cover letter stating that you have no income for 2008. Your wife should fill code 4 = “Diri sendiri, suami tiada punca pendapatan” under Part A5 – “Jenis Taksiran” in her tax return. Your wife can claim the additional RM3,000 relief for you (as husband).
ii) Yes, your wife can elect to claim the child relief. Your wife is also entitled to a claim up to a maximum of RM3,000 for insurance premium paid for her and/or your medical policies as well as a claim up to a maximum of RM6,000 (together with her EPF contributions) for insurance premium paid for her and/ or your life policies.
iii) Sum received by way of gratuities on retirement from an employment, if the director-general of the IRB is satisfied that the retirement is due to ill-health, is exempted from income tax. In practice, your employer would have issued you a Form CP22A (notification of cessation of employment) and you should have obtained a tax clearance from the IRB before your employer released the gratuity sum to you.
There is no requirement to declare the exempted gratuity amount in your Form BE.
iv) There is no specific provision in the tax legislation to cover this position. However, the legislation clearly provides that the director-general of the IRB must be satisfied that the retirement is due to ill-health. Where this criterion has been met, the gratuity would not be taxable. Whether the subsequent taking up of another employment or starting a business may lead to a review by the IRB will depend on the prevailing facts and circumstances.
Q. MY company is giving fuel card worth RM300 per month and mobile phone benefit of RM120 per month. This will not be included in the salary slip, so how do I fill up the EA form?
Also, how do I fill up for goods that I buy at discounted value for RM1,000?
And what is the tax relief for EPF Annuities scheme? – ANG
i) The fuel card of RM300 per month and mobile phone of RM120 per month provided by your company is exempted from income tax with effect from year of assessment 2008. There is no requirement to declare the exempt income in the Form EA or the Form BE.
ii) The purchase of company goods at discounted value up to a maximum of RM1,000 is exempted and not required to be disclosed in the Form EA or Form BE.
iii) The tax relief for EPF Annuities scheme is up to a maximum of RM1,000 per annum.
Q. I HAVE two questions. Can I claim maternity expenses in 2008 if the expenses were borne by myself and not by my company?
I have a parent in a nursing home. Can I claim the nursing home expenses borne by myself? It is the monthly sum paid to the nursing home for the care of my parent – LINDA
A. TAX deduction for medical expenses expended on own self, spouse or child of up to a maximum of RM5,000 is available only if it is in respect of treatment of serious diseases (see box for definition).
Since maternity expenses do not fall within this definition, it is not claimable as a tax deduction.
For your second question, tax deduction for medical expenses expended for own parents is up to a maximum of RM5,000.
Medical expenses that qualify for deduction would include medical care and treatment provided by a nursing home for your parents. You must keep the receipt(s) from the nursing home certifying that nursing home care was provided to your parents as evidence for your claim.
Q. ONE of the points you highlighted in your article “How to pay Less Tax” (Sunday Star, March 15) was that medical benefits exempted from tax include expenses on traditional medicines such as ayurvedic and accupunture. And you mentioned that it is for the year of assesment 2008.
I would appreciate it if you could elaborate on this a little more. As I am taking my son for ayurvedic treatment, can I put it in?
My husband and I are paying for the treatment from our own savings and we are not asking our employer to cover it as a benefit. So, can we put it in our income tax form? What is the maximum amount we can claim and where do we put it? – TAX QUERY CITIZEN
A. MEDICAL benefits which include expenses on traditional medicines such as ayurvedic and acupuncture that are exempted from tax for employees applies only where such benefits are provided by employers.
In your case, since you (and not your employer) are paying for your son’s ayurvedic treatment, this exemption is not applicable to you.
In order to claim the tax relief for medical expenses for your son of up to a maximum of RM5,000, the expenses have to be expended on “serious diseases” (see definition in box). In addition, you are required to obtain a receipt or certificate from a medical practitioner who is registered with the Malaysian Medical Council.
Unless your son’s ayurvedic treatment is for a serious disease and the ayurvedic practitioner is registered with the Malaysian Medical Council, the expenses will not be deductible.
What is serious disease?
Serious diseases is defined to include AIDS, Parkinson’s disease, 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.
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