Malaysian income tax can be challenging and complicated, we get it. Be it as a seasoned tax filer or a first-timer, you will still run a quick Google search on ‘How to calculate income tax’ to get a better understanding on how to file your taxes efficiently or even add 'income tax calculator’ or ‘tax calculator 2017’ to your mix for an estimation of the amount of refund you can receive or need to pay.
Fret not as we have compiled our frequently asked questions for all things related to income tax in Malaysia so do check it out to get a clearer idea on what you can do prior to getting your income tax return.
Question 1 : How Do I Verify The Monthly Tax Deduction Made By Employer Is Accurate And Correct?
You can check this with the monthly tax deduction table/schedule to verify the calculation. Another easier way of doing this is to use an income tax calculator to verify the monthly tax deduction calculation.
If the taxable amount as per return form is different from the monthly tax deduction deducted by the employer, you may choose to provide a return form before 30th of April. To make your tax filing easier, we recommend using a tax calculator for the year assessment 2017.
Question 2 : How Do I Pay My Monthly Tax Deductions To LHDN?
If you are a salaried employee, this is usually done by your employer on your behalf. Your employers will make these payments through the submission of Form CP39 or CP39A. These payments can be done manually by visiting a physical counter, postal services or through e-PCB online.
Question 3 : How Do I Know If I Need To File My Tax Return Even If I Do Not Fulfill The Criteria Of Monthly Tax Deduction As Final Tax?
You will need to file your taxes if:
• You have worked with more than one employer or change employers during the year;
• You have worked less than twelve months during the year;
• Your tax is borne by employer;
• You have opted for joint assessment;
• You have non-employment income such as business income, rental income, and more during the year of assessment
• You wish to claim a refund or deduction/rebate.
Question 4 : Will There Be Any Repercussions For My Employers If My Monthly Tax Deduction Is Calculated Wrongly?
Yes, your employer will be issued a compound under the Under the Income Tax (Deduction From Remuneration) (Amendment) Rules. The compound is issued under the grounds of employers who does not comply with using the correct method to determine the monthly tax deduction. To find out if your tax has been deducted properly, a tax return calculator can help you to do just that.
Question 5 : Can I Claim My Car Insurance On My Taxes?
No , car insurance does not count for tax relief. However, you can make claims for premiums paid for education or medical insurance as well as life insurance.
Question 6 : Can I Claim Medical Expenses On My Taxes ?
Yes, if you have your very own medical insurance policy, you can claim medical expenses when you file for your income tax. For this, you get an income tax relief of RM3,000 for medical insurance so make full use of it and get yourself and your children insured if you haven’t. To find out how much you can claim, you can use our free income tax calculator.
Question 7 : What Happens If I Am Penalised By LHDN Even Though My Tax Filings Are Based On The Advice Of Tax Consultants?
According to LHDN, if the taxpayer and the tax consultant are suspected of evading tax, they can be charged in court. It is noted that the Income Tax Act provides that any tax consultant that gives advice or assistance that results in an understatement of tax liability by the taxpayer can be charged with an offence and penalised. So with that said, it is important to know any any error made by a tax consultant is not a factor to be considered in imposing a penalty on the taxpayer.
Question 8 : What Will Happen If I Default In Tax Payments?
You will receive a notification of late payment penalty, and if you fail to act on this notice, you will receive a notice of tax arrears from LHDN. LHDN will proceed to send you reminders as well as a notification of court proceedings. A travel restriction may be imposed on you as well if LHDN fails in their attempts to arrange for payment of taxes from you.
Question 9 : What Are The Expenses That Can Be Claimed Against The Rental Income?
Here are some of the things that can be claimed against rental income :
• Assessment and Quit rent
• Insurance premium – fire /burglary
• Bank loan interest
• Cost of repairs & replacement
• Cost of obtaining tenant to replace the old tenant
• Cost of renewal rental agreement
• Service charges & maintenance (condominiums & apartments)
• Industrial Building Allowance can be claimed if the property qualifies as an industrial building.
• Rental collection
Question 10 : What Is The Difference Between Income Tax Exemption, Income Tax Relief And Income Tax Rebate?
Income tax exemption refers to items which are allowed to be claimed from a specific source of income and not from gross total income.
Income tax relief refers to items which are allowed to be claimed under chargeable income. This usually refers to program or incentive that helps reduce tax.
Income tax rebates refer to items which are allowed to be claimed under tax payable. In general, claim on income tax rebate are made on Tax payable.
Question 11: I Don't Understand How Tax Exemption Works, What Are The Things I Can Claim For?
Tax exemptions are "a personal allowance or specific monetary exemption which may be claimed by an individual to reduce taxable income". Tax exemption are items which are completely removed from your taxable income, unlike tax reliefs which are deductions upon your taxable income.
The following items are qualified for tax exemption:
Leave passage: Leave passage refers to vacation time paid for by your employer. The following leave passages are exempted from tax:
- A maximum of 3 local leave passages including meals,
- A maximum of one overseas leave passage up to a maximum RM3,000 for fares only.
Medical and dental benefit: Medical benefits (including traditional medicine and maternity expenses) by your employer is tax exempted.
Retirement gratuity: Gratuity is a lump sum payment made to the employee in recognition of his/ her service in the company. This payment is given to him/ her upon her resignation or (in this case) retirement. Retirement gratuity is fully tax exempted if:
- The retirement is due to ill health; or
- The employee reached the age of 55 or any other compulsory age of retirement; or
- The employee reached the compulsory age of retirement according to the employment contract etc.
Gratuity paid out of public funds: Gratuity paid out of public funds upon retirement is tax exempted.
Gratuity paid to a contract officer: Gratuity paid out of public funds to a contract worker upon the termination of his/ her contract of retirement is tax exempted regardless of renewal.
Compensation for Loss of Employment: Compensation for the loss of employment is exempted accordingly:
- Full exemption if the loss of employment is due to ill health;
- Exemption of RM10,000 for every completed year of service for the same employer/ company
Pensions: Retirement fund for retired government servants. Pension paid to a person is tax exempted if:
- The recipient reached the age of 55 or any compulsory age of retirement; or
- The retirement is due to ill health
Death gratuities: Sum received in the form of gratuity or consolidation compensation for death or injuries.
Scholarships: Any sum of money received by an individual in the form of a scholarship or similar grant whether it is in connection with that individual's employment or not.
Income of an individual resident in Malaysia in respect of his appearances in cultural performances approved by the Minister
Income Remitted from Outside Malaysia: Income generated from sources outside of Malaysia and received in Malaysia.
Fees or Honorarium for Expert Services: Any fees or honorarium received by an individual for validating, moderating or accrediting franchised education programmes in higher educational institutions.
However, the service of these individuals must be verified by The Malaysian Qualifications Agency. These services should not be part of the individuals' official duty.
Income Derived from Research Findings: Any income that an individual gained from the commercialisation of a scientific research is eligible for a tax exemption of 50%. This tax exemption applies to an assessment of five year period, starting from the date of the first payment received.
However, the individual must be a Malaysian resident and approved by the Ministry of Science, Technology and Environment.
While the following items are included under taxable income, they are tax exempted if they fall under certain criteria.
- From deposits placed in licensed institutions
- Paid to unit trusts and listed closed-end funds in respect of specific conditions.
- In respect of the Merdeka Bonds issued by the Central Bank of Malaysia.
- Received from co-operative societies.
- Publication of, or the use of, or the right to use, any artistic work (RM10, 000)
- Recording discs or tapes (RM10, 000)
- Publication of, or the use of or the right to use, any literary work or, any original painting (RM20, 000)
Final Word of Advice
If you haven't done your taxes yet, just bear in mind that the 2017 tax assessment year follows the calendar year (effective 1st January 2017 to 31st December 2017).
Make sure you list down the tax reliefs, deductions, and rebates that you can submit claims for before submitting your income tax return form for the year of 2017. And as always, if you are not sure if your calculations are on the right track, you can always fall back on our free income tax calculator. If you have any uncertainties, you can always contact LHDN for more information.
Here are the due dates for the submission of return forms are as follows:
1) Employers (Form E)- 31 March 2018
2) Residents and non-residents with non-business income (Form BE and M) is 30 April 2018
3) Residents and non-residents with business income (Form B and M) is 30 June 2018
4) Partnerships (Form P ) is 30 June 2018
All the best with your tax filing endeavours!