This article was published on The Sun paper on 8th April 2019.
APRIL 30 deadline to file your tax return is fast approaching. The current push by the Inland Revenue Board (IRB) to use the special voluntary disclosure programme to encourage taxpayers to clean up their past tax affairs has catapulted taxes to the forefront of taxpayers’ minds. Filing your tax returns correctly should be your priority now.
Completeness is the key: Taxable income
All forms of income, whether in cash or in kind, should be brought to tax subject to certain exemptions.
This will include income from employment, rental, interest, dividends, pensions, royalties, gifts/tips/gratuities received connected to the employment and casual income.
In the case of employment income, all benefits and perquisites, unless it is exempted or excluded by law, should also be brought to tax.
Benefits and perquisites are normally provided by the employer and, in exceptional circumstances, by third parties such as customers or suppliers. These are connected to the employment of the individual. An example should be a good given to the employee by a supplier.
It is the responsibility of employers to provide a Form EA containing all the particulars of the income, benefits and perquisites provided to the employee.
In the event the employer has omitted any income paid to the employee, the employee is still responsible for ensuring that the omitted income/benefits/perquisites should be included in the tax returns. Otherwise, the taxpayer will be regarded to have underdeclared his or her income.
In the case of self-employed individuals acting as agents/dealers/distributers, all income received in the form of commissions, gifts, incentives in cash or kind should be brought to tax.
There is no escape route from this declaration as the companies making such payments are obligated to declare this information annually to the tax authorities through a separate return.
Interest received from banks, dividends, pensions and income received from overseas properties or overseas investments are not taxable and need not be reported in your tax returns.
Maximise your relief and deductions: Tax relief and rebates
The tax relief and rebates are clearly listed in your tax returns. The important reliefs are self-relief (RM9,000), lifestyle relief (RM2,500), child relief (RM2,000 for unmarried child below 18, RM2,000 for unmarried child above 18 pursuing foundation courses, and RM8,000 for unmarried child above 18 pursuing tertiary education), contribution to life insurance and EPF deduction (RM6,000), and contribution to Deferred Annuity and Private Retirement Schemes (RM3,000). Read them carefully and make the correct claims.
Tax incentive for 2018
You should take advantage of the new incentive introduced – 50% exemption on rental income for Malaysian resident individuals renting out residential homes for a monthly rental not exceeding RM2,000.
Tax deductions against income sources
If you have incurred any expenses in the production of any income sources (employment/rental/commissions), it can be deducted against these income sources.
However, if such expenses exceed the income earned (loss-making), you cannot carry forward the losses nor set off the losses from one source against other income sources.
Other points to bear in mind
File your tax return online and receive extra 15 days leeway (up to May 15, 2019).
Keep any proper supporting documentation up to seven years
If you do not file a tax return, the monthly tax deduction made by your employer will be deemed as your final tax. This is not advisable if you have other sources of income.
It is important to declare and pay the right amount of taxes as the penalty rates for understating your taxes will increase to 80%-300% from July 1. Even a tiny mistake could be a costly one. Start now, do not wait until the last minute!