Whether you are a veteran or just a novice at filing your taxes, here’s a checklist to make the task less stressful.
IT’S upon us again - the deadline for filing the 2013 income tax returns for employees is April 30, 2014.
At this time every year, I tend to reminisce about the time of cherry blossoms in Japan when I had my secondment stint with our Tokyo office. Just like how we busied through the audit season then, I see the same scurry in collating income information from our clients here to prepare their income tax returns, chasing them for responses to our reminders just to meet the deadline.
Why? We fear the penalties for late submission of the tax return and/or late payment of taxes.
So, before filing your returns, go through this checklist to avoid those costly errors.
1. Are you taxable for the 2013 income?
If an individual earns an annual employment income of RM26,501 (after EPF deduction), he would have to register a file.
Registration for an income tax reference number can be made at any IRB branch or you can enquire at the Customer Service Centre at 1800-88-5436. A penalty equal to three times the amount of the tax (which is before any set-off, repayment or relief under the Income Tax Act) is payable if a person defaults in furnishing a tax return.
2. Are all of my allowances taxable?
See graphic below.
3. Will all my income be taxed in Malaysia, even those that I earned overseas?
All income accrued in or derived from Malaysia will be subject to Malaysian income tax. Income which you have received in Malaysia from outside Malaysia is exempted from Malaysian income tax if it is not income in connection with your employment in Malaysia.
4. What should I refer to when declaring my income?
You should have received your 2013 EA Form from your employer by now. The EA Form summarises your annual remuneration received in 2013. If you have other income from overseas companies, for example share incentive benefit received in connection with your employment in Malaysia, you would also need to declare the income. A letter from the overseas company confirming the said income is required.
5. How do I declare my income?
The IRB encourages all taxpayers to submit the income declaration via e-filing of the income tax return. More details on e-filing can be obtained from https://e.hasil.gov.my. You do not need to submit the EA Form, receipts or letter of confirmation but you need to keep these records for a period of seven (7) years in case of a tax audit.
6. Can I deduct my donations from my income?
Yes, as long as the donations are made to charitable organisations approved by the Inland Revenue. However, the amount is limited to 7% of your aggregate income.
To check if the charitable organisation you are donating to is approved by the IRB, visit www.hasil.gov.my and search for “List of Institutions under Section 44(6) ITA 1967 “.
7. Are there any other tax reliefs to note?
While much of the income tax relief types remain unchanged for the 2013 tax return filing, here are a few notable reliefs which have been added, removed, altered or have new conditions attached to them. Visit www.hasil.gov.my to see the comprehensive list of tax reliefs one can enjoy.
a) Special tax relief
For those earning an aggregate income of up to RM96,000, they will be able to enjoy a special tax relief of RM2,000. This relief is only applicable for Year Assessment 2013.
b) Personal computer
Tax relief for personal computers will not cover tablets and handphones effective from Year of Assessment 2013. You can still enjoy a tax relief of up to RM3,000 for purchase of personal computers made once every three years.
c) Broadband Internet
Tax relief for broadband Internet will no longer be available.
d) Interest on home financing
Home owners who purchased their property with the sales and purchase agreement signed between March 10, 2009 and December 31, 2010 will have the last chance to enjoy tax relief on interest expended to finance the said property for the first three consecutive years.
A tax relief of up to RM10,000 can be enjoyed by two or more individuals who are eligible to claim relief for the same property subject to the following conditions:
> The taxpayer is a Malaysian citizen and a resident;
> The taxpayer is limited to one residential unit; and
> The residential property is not rented out.
8. What form should I use?
Since the April 30 deadline applies only to employees, you choose one of the following forms:
(a) Form BE (e-BE) – a resident employee who does not carry on business
(b) Form M (e-M) – a non-resident employed with no business income. If you are a knowledge worker, you would use the form affixed with “T” in either of the Form B or M. More details of the form can be obtained from www.hasil.gov.my
9. What is important to note when I claim the tax reliefs?
a) You must be a tax resident. In order to qualify as one, you must be present in Malaysia for at least 183 days in the year 2013.
Full details on the definition of tax residence can be found on www.hasil.gov.my/pdf/pdfam/PR6_2011.pdf.
b) Reliefs apply to expenses you have incurred in 2013 only.
c) Ensure that you keep the receipts of purchases or proofs of payments. Make copies especially for thermal receipts as the prints will not last.
d) All receipts and proof of purchases need not be submitted at the time of filing the income tax return. However, you have to maintain these records for at least seven (7) years following the end of the year of assessment.
10. Is my monthly tax deduction (MTD) a final tax?
Not necessarily so. You would still need to determine your total tax liability after taking into account the income, reliefs and rebates and compare it against the total tax which has been withheld and remitted to the IRB.
Any shortfall will have to be paid to the IRB no later than April 30, 2014. E-bayaran facility (https://epayment.hasil.gov.my/fpx/one.php) is available. Where there is excess tax withheld, a tax refund will be made to you.
The IRB is encouraging employers to implement a “Monthly Tax Deduction (MTD) as final tax” system from 2014. The employee will still be ultimately responsible to ensure that all income is not under-declared and deductions over-claimed so that a penalty (up to as high as double the amount of tax undercharged arising from an incorrect return submitted) can be avoided.
Here are two bonus takeaways for 2013 tax return filing:
> The tax rates will be reduced by 1% for the chargeable income bands from RM2,501 to RM50,000.
> The IRB has also committed to refund within:
(i) 30 days from the date of submission if the submission is done within the due date through e-filing
(ii) Three months from the date of submission if the submission is done manually, within the due date.
A compensation of 2% where the amount refunded is made after:
(a) 90 days from the due date for electronic filing; or
(b) 120 days from the due date for manual filing
The above 10 questions should guide you to avoid costly mistakes in this tax season. By April 30, 2014, you should have e-filed your tax return and settled your final taxes (if any). Remember also to keep the acknowledgment receipt of e-filing and payment of taxes. As proof, nothing’s better than something in black and white.
> Ang Weina is a Tax Partner at Deloitte Malaysia’s tax practice. She has more than 20 years experience with Deloitte in Singapore, Japan and Malaysia dealing in mobility, rewards and talent issues ranging from tax compliance and immigration matters of employees and employers to advisory on mobility policy, equity incentive design and payroll compliance review.
The comments and opinions here are personal viewpoints of the author and are not reflective of Deloitte’s perspective on the subject matter.
■ If you have any query on your tax filing, email your question(s) to email@example.com. We’ll run a Q&A for two weeks only.