CHAPTER 2:

TAX PLANNING
ROSELIZA HAMID/UITM
KELANTAN/2010

CHAPTER OUTLINE

Definition of income tax

Objectives of income tax planning
Malaysian tax system
Tax strategy
Tax calculations

ROSELIZA HAMID/UITM
KELANTAN/2010

Taxation
Raising of money from individuals and
organizations by the state in order to pay for
the goods and services its provides.
Forms of tax:
Direct:
Indirect:

deduction from income

tax on consumption

ROSELIZA HAMID/UITM
KELANTAN/2010

TYPES OF TAX
Progressive
Increasing proportion of tax as income rises
E.g.: Malaysian tax

Proportional
Same proportion of income across all level

Regressive
Tax takes a decreasing proportion of income as
income rises
E.g.: indirect tax
ROSELIZA HAMID/UITM
KELANTAN/2010

MALAYSIAN TAX SYSTEM

Incomes of individuals are taxed once a year
The income earned in the previous calendar
year is assessed and taxed in the year of
assessment (YA) which is the following year.
All working Malaysian must submit annual tax
returns by 15th April every year.
Current tax scales: marginal tax rate range
from 1% - 28%.
ROSELIZA HAMID/UITM
KELANTAN/2010

MALAYSIAN TAX SYSTEM cont.

Self assessment
Taxpayer is required to complete and submit
Return form by the required dates but no notice
of assessment sent to the taxpayers.
Taxpayer have to compute their own tax and
make full amount at the time return form were
sent.
Taxpayers are allowed to make monthly payment
to IRB.
Scheduler Tax Deduction Sheme allow tax
payment deducted from the monthly salary and
remitted to the IRB by the employer.
ROSELIZA HAMID/UITM
KELANTAN/2010

MALAYSIAN TAX RATE

Income tax rates for resident individuals range
from 0% to 28%.
http://www.hasil.gov.my/lhdnv3e/individuIndex.jsp?process=21000&menu=13&expandable=
1

Non-resident individual rates: 28%

Companies rates: 26%
Trustee: 26%
Executor: 26%
Deceased persons estate, associate & club: same
as individual
No-resident association: 25%
ROSELIZA HAMID/UITM
KELANTAN/2010

TAX EVASION vs AVOIDANCE

Tax evasion
Tax evasion involves deliberately and willfully hiding income,
falsely claiming deduction.
It is illegal and will results in penalties, fines, interest
charges and a possible jail sentence.

Tax avoidance
Reducing tax liability through legal techniques.
Involves applying knowledge of the tax code and regulations
to personal income tax planning
Results in reducing tax liability hence more money for
spending, saving, investing and donating.
ROSELIZA HAMID/UITM
KELANTAN/2010

SCOPE OF TAXATION

Resident individual
Non-resident individual
Resident company
Non-resident company

Resident status (Page 31)

ROSELIZA HAMID/UITM
KELANTAN/2010

TYPE OF ASSESSMENT
1. Separate assessment
All income of a married women is automatically assessed separately
from that of her husband and no election is required

2. Combined assessment
The wife/husband can elect to have their total income to be
combined and assessed either in the name of husband or wife.

3. Separation/Divorced Cases
The husband continues filling his tax return under his own tax
reference number. Assessed as an individual.
The wife reverts to her former tax status prior to the marriage
.Previous tax file reopen/register new file if none.
The wife file her own separate tax return and report her own income
including alimony, if any.
ROSELIZA HAMID/UITM
KELANTAN/2010

TYPE OF ASSESSMENT
4. Deceased individual:
The income for the particular year up to date
of death will be assessed separately.
The notice of assessment will be issued in the
name of the legal representative.
The income accrued in the particular year after
the date of death constitute the income of the
estate of the deceased and is assessed in the
name of the executor or administrator of the
estate.
ROSELIZA HAMID/UITM
KELANTAN/2010

INCOME TAX PLANNING

Objectives:
To understand anything relates to personal
taxation
Be able o minimize the amount of taxes that
have to be paid
Be able to maximize disposable income

ROSELIZA HAMID/UITM
KELANTAN/2010

INCOME TAX
Definition of income tax:
A tax on income received

Definition of income:
any receipt of money or moneys worth for
services rendered, for sale of goods, for use of
amenities or facilities, for use of money and so
on.
ROSELIZA HAMID/UITM
KELANTAN/2010

SOURCES OF TAXABLE INCOME

Types of income chargeable under Sec 4 ACP 1967
Employment income:

Wages
Salaries
Remuneration (include virtually forms)
Leave pay
Fee
Commission
Bonus
Gratuity
Perquisite, or
Allowances (e.g.:housing,travelling,entertainment,etc.)
ROSELIZA HAMID/UITM
KELANTAN/2010

SOURCES OF INCOME
Gains or profits from a business for whatever period of
time carried on.
Gains or profits from an employment.
Dividends, Interests or Discounts.
Rents, Royalties or Premiums.
Pensions, annuities or other periodical payments not
falling under any of the foregoing paragraphs.
Gains or profits not falling under any of the foregoing
paragraphs.
Special classes of income
ROSELIZA HAMID/UITM
KELANTAN/2010

BENEFITS-IN-KIND (BIK)
The gains/profits from an employment
chargeable under Section 13 of the Income
Tax Act 1967 have been defined to include the
value of any BIK provided for the use or
enjoyment by the employee.
Motocars and related benefits
Household furnishings, apparatus & appliances
Others (HP,gardeners,domestic servants, etc.)
ROSELIZA HAMID/UITM
KELANTAN/2010

EXEMPTION

Tax exempted for individuals:

Leave passages
Medical and dental benefit
Retirement gratuity
Compensation for loss of employment
Pensions
Death gratuities
Scholarships
Income from cultural performances approved by Minister
Interest
Dividends
Royalties
Income remitted from outside Malaysia
Fees or honorarium for expert services
Income derived from research findings
ROSELIZA HAMID/UITM
KELANTAN/2010

DEDUCTION
NO.

GIFT

NOTES

Gift/money to government or approved

institution

Deductible donation

Gift of artifact/manuscript/ painting made to

the government /state government

Amount determined by
Dept of Museum/Archives

Gift in money/contribution in kind for the

provisions of facilities in public places for the
benefits of disable person

To be determined by local
authority

Gift of medical equipment for health care

facility

Max. RM20,000

Gift of painting to the National Art Gallery or

any State Art Gallery

Amount determined by the

Gallery

Gift of money for the provision of library

Max. RM20,000
facilities which are accessible to the public and
contributions to public libraries/schools/higher
education institutions.
ROSELIZA HAMID/UITM
KELANTAN/2010

RELIEF & REBATE

Personal tax relief
http://www.hasil.gov.my/lhdnv3e/individuIndex.jsp?process=21000&
menu=34&expandable=1&pg_title=Tax%20Relief

Tax rebate
http://www.hasil.gov.my/lhdnv3e/individuIndex.jsp?process=21000&
menu=42&expandable=1&pg_title=Tax%20Rebate

ROSELIZA HAMID/UITM
KELANTAN/2010

TAX PLANNING STRATEGY

Calculating on tax payable

1.
2.
3.
4.
5.

Compute total aggregate income

Compute assessable income
Compute chargeable income
Compute gross tax payable
Compute net tax payable

ROSELIZA HAMID/UITM
KELANTAN/2010