Lesson 101 on tax filing for the employed individual
It’s that time of the year again. Time to go online to file and pay your annual taxes. By the way, we are hoping that by now, you are well versed on the e-filing system, implemented 10 years ago.
So what has changed between Year of Assessment 2014 and 2015?
Here is your answer:
Tax rate
Your scale tax rates came down between 1%-3%, which means your tax savings will range from RM50 to RM7,200 depending on the category of income you fall in.
Tax Relief
Medical expenses incurred for serious disease have been increased from RM5,000 to RM6,000. This is one relief that we all hope to avoid, for obvious reasons.
Relief for disabled children has been increased to RM6,000 from RM5,000 whereas purchases of basic supporting equipment for the disabled is now given a relief of RM6,000. This is much needed help and support to help alleviate the cost of lIving for the disabled.
Special relief
Taxpayers who earn RM8,000 and below will get an additional tax relief of RM2,000 for the year of assessment 2015 only. The Prime Minister of Malaysia in his revised budget speech announced this on February 28, 2016.
Filing of Form BE
From the Year of Assessment 2015, you are no longer required to file your Form BE if your final tax is equivalent to the monthly tax deduction (‘MTD’) for the year. This is however applicable to:
- employees working for the same employer for the last 12 months
- employees who receive employment income as defined by the Income Tax Act 1967 and monthly tax duly deducted.
- employees whose taxes are not borne by the employer
- employees who have not opted for joint assessment
If you fulfil one of the conditions above, you can safely opt for the non-filing option as long as your MTD is equivalent to your final tax payable.
The other tax relief that you can maximise on are referred below:
You will be able to get a further deduction up to 7% of your aggregate income if you had made a donation to approved organisations.
All claims must be substantiated by original receipts, to be retained for seven (7) years.
Chargeable Income
Now let’s get to the type of income that you need to declare. One word, ALL. Yes, you need to declare all your income irrelevant of whether it is taxable or otherwise.
The types of income would be as follows:
- Business income
- Salary
- Interests
- Dividends
- Rent
- Pension (conditional exemption)
- Perquisites
- Royalties
- Annuities
- Premiums
- Discounts
Employees’ Benefits
The Inland Revenue Board of Malaysia (IRBM) usually uses two terms to describe the above i.e. perquisites and benefits in kind.
Perquisites are benefits in cash or kind, which can be converted into money, which are given to the employee by the employer or a third party.
Whereas benefits in kind are benefits, which are not convertible into money, provided to the employee by or on behalf of the employer.
Let’s look at the types of perquisites and the tax treatment
Benefits in Kind (BIK)
All BIK are taxable in general except those, which are specifically exempted under the Act.
Calculation of final tax
Final tax will be based on net incomes after claiming all deductions and relief. The tax amount is further reduced by the monthly tax deduction, bi monthly installments (for business income) and zakat payments.
You will then need to pay the balance of tax to the Inland Revenue Board of Malaysia (‘IRBM’). As part of the IRBM’s Standard Operating Procedure, any refunds will be remitted to you within 60 days (a) and 120 days (b) from the due date for electronic and manual filing respectively.
If the refund is late, the taxpayer is entitled to receive a compensation of 2% per annum on the amount.
The compensation is calculated as below:
The A x B/C x 2%
where:
A = the amount refunded under Section 111 of the Income Tax Act 1967 for a year of assessment
B = the number of days beginning from the deadline (a) or (b) above until the day that the amount is made to the person
C = the number of days in a year
The “amount refunded” refers to tax paid under monthly tax installments for bi-monthly tax installments for individuals having business income and Monthly Tax Deductions for individuals with employment income.
So there you go, Lesson 101 on tax filing for the employed individual. Do remember to file your return by 30 April and 15 May 2016 for manual and electronic filing respectively.
Poovarni Rajagopal is a chartered accountant and runs a tax consultancy in Kuala Lumpur.
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