NEWCOMERS to the workforce should not despair that they have to start paying income tax. They only need to register and file an income tax return if they have earned an annual employment income of at least RM30,667 (after EPF deduction) in year 2014. Registering an Income Tax reference number is easy via e-Daftar, ekl.hasil.gov.my

Therefore, let us do our part by submitting our tax return and settling our taxes on time. 

Deadlines
The deadline for submitting the hard copy tax return form (manual filing) is April 30, 2015. To encourage more to e-file, the Inland Revenue Board (IRB) has extended the deadline to May 15, 2015. The portal for filing the tax return electronically via e.hasil.gov.my has been open since March 1, 2015. We can get our refunds, if any, before the filing due date. The lRB now has to pay interest to taxpayers if they do not process their refund within 90 days from the due date (electronic filing) or 120 days from the due date (manual filing). 

The number of tax returns filed electronically is on the rise. E-filing works on very minimal system requirements, which the majority of computers, notebooks or even smartphones are equipped nowadays - Microsoft Windows 2000, XP, Linus or Macintosh; Internet Explorer 8.0, Mozilla Firefox 4.0 or Google Chrome 8.0. Filing your tax electronically also means you can get your refund faster. 

The following are some tips to help taxpayers to get their tax return filing right.  

1.    Use the correct tax return form 

There are various return forms, for example, Form e-BE , e-B, e-BT, e-M, e-MT. The Form e-BE is used by working adults in general. 

2.    Taxable and non-taxable income

Many of us may perceive that all forms of income earned are subject to income tax. You may be surprised, but certain incomes are, in fact, tax-free. 

If you have any of the following tax-free incomes (some of which have an exemption limit), these (or partially tax-free income) need not be declared in the income tax return form. Do note that the exemptions below do not apply if the employee has control over his employer. Generally, control is through the holding of shares or the possession of voting power or affairs of the company are conducted in accordance with the wishes of the employee. 

3.    Foreign earned income (non-taxable)

Those who have overseas investments may have doubts as to whether they need to declare the income earned in the tax return if they remit the income back to Malaysia. Fear not, as there is a tax exemption on foreign earned income. Income earned outside Malaysia will not be subject to income tax in Malaysia, even if it is remitted to Malaysia. If you have earned rental income from overseas properties, it will not be subject to Malaysian income tax. You can remit the rental income back to your Malaysian bank account free of Malaysian income tax. 

4.    Claim deduction for donations 

Charity begins at home. Charity will also help you reduce your income tax. Donations made to approved institutions listed under Section 44(6) of the Income Tax Act 1967 - refer to hasil.gov.my - can be claimed as deductions. However, do take note that this is restricted to 7% of aggregate income.  

5.    Computers

For claims on purchases of computers, it is important to note that this will be restricted to desktop computers, laptop computers, notebooks and ultrabooks that are not used for business purposes. The deduction excludes other gadgets that are able to perform functions similar to a computer, such as tablets, iPads and handphones.

6.    Personal relief

Maximise your deductions whenever possible. These must be actual expenses made in the year 2014 and supported by receipts. Receipts must also be kept for at least 7 years. 

7.    Rebates 

After maximising the claims for deductions, if the taxpayer’s chargeable income is less than RM35,000, a further rebate of RM400 is available to reduce the tax liability due. Zakat/Fitrah is another form of rebate based on the actual amount expended that will help further reduce the tax amount. 

8.    Penalties 

Finally, getting it right means avoiding hefty penalties or, even worse, imprisonment. For late or non-submission of tax returns, the IRB has a directive to impose 20% to 35% penalty on taxpayers. 

For late payment of tax liability, there will be a penalty of 10% increment from the tax payable. Another 5% increment on the balance if the taxpayer fails to pay within 60 days of the due date of the relevant year of assessment. 

Apart from penalties and imprisonment, tax defaulters can be barred from leaving the country. In the IRB’s efforts to target taxpayers who fail to pay their outstanding tax debt, a stoppage order can be invoked only after various attempts to collect tax arrears have failed.  

So, getting it right from the start will definitely have a happy ending. Let’s just get our tax returns filed. 

About the author:

Ang Weina is a tax partner at Deloitte Malaysia’s tax practice. She leads the Global Employer Services (GES) division and 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.

Weina graduated from the National University of Singapore with a Bachelor of Accountancy. She is a Fellow of the CPA (Singapore) (Australia), Associate member of CTIM and member of CA(M) and also sits on the Advisory Board of the School of Business at Monash University (Sunway Campus) in Malaysia. Weina has spoken at employee conferences in Europe, the US and Asia.

Comments and opinions in this article are personal viewpoints of the author and do not reflect Deloitte’s perspective on the subject matter.