Tax matters to look out for in 2009

12-01-2009: Tax matters to look out for in 2009
by Yong Min Wei

WHILE we ushered in 2009 afresh, taxpayers should not leave behind their receipts from their insurance, medical health, reading materials, sports equipment and a host of other items that will be eligible for relief and deductions in their tax returns.

The Inland Revenue Board (IRB) will expect individual taxpayers to file their returns for year of assessment (YA) 2008 by April 30, 2009 under the self-assessment system (SAS) while those with business income are required to do so by June 30, 2009.

With the onset of the global financial crisis and the possibility of Malaysia facing a recession or a technical one this year, taxpayers should realise the IRB would have the gumption to make every sen of taxable income counted with little compromise.

In 2009, individual taxpayers would nonetheless enjoy a one percentage point reduction to 27% for the top bracket from 28% so that individual income tax rates remain competitive and the rakyat’s disposable income is increased. Similarly, the tax rebate for the chargeable income group of up to RM35,000 would be increased from RM350 to RM400. The middle income group with an annual chargeable income between RM35,000 and RM50,000 will also benefit as the tax rate for this income bracket has been reduced from 13% to 12%.

Those who depend on income from bank savings will now have a bit more to nibble on as the tax on interest income received from monies deposited in all approved financial institutions are exempted from tax.

Although this exemption was effective Aug 30, 2008, individual taxpayers will have the full calendar year of tax exemption on such interest income.

Perhaps, one of the best entitlements for those with employment income in 2009 are the tax exemption on perquisites provided under Budget 2009 in relation to benefits-in-kind which they receive from their employers.

A host of items are now tax exempted and they include petrol card or petrol allowance for travel between home and work place for up to RM2,400 a year, petrol allowance and toll card for official duties up to RM6,000 a year, allowance or fees for parking, meal allowance and subsidies for childcare of up to RM2,400 a year.

In addition, employees can now enjoy tax exemption on telephone and mobile phone bills as well as personal digital assistant (PDA) and internet subscriptions. As such, while bonuses including contractual bonuses are taxable, benefits-in-kind are tax exempted and should be enjoyed to the fullest.

As many employers might be a little cautious in dispensing year-end bonuses in 2008, they could through prudent tax planning maximise such tax exempt benefits to help their employees with perquisites that are cash equivalent of more than RM10,000 a year.

For the low- to middle-income earners, they should make good use of the 50% stamp duty exemption on loan agreements for residential properties. To encourage home ownership, loan agreements executed for the purchase of residential properties not exceeding RM250,000 are given 50% stamp duty exemption till Dec 31, 2010.

While 2009 is expected to be a tough year, the general public should be relieved from the tax perspective as the government has no plans to implement goods and services tax (GST) for the moment.

It is learnt that the government would maintain the sales threshold for service tax collection for food outlets at RM3 million as a measure to ease the burden to the public.

The sales threshold for the collection of the 5% service tax for food outlets was raised from RM500,000 to RM3 million annually effective July 1, 2008.

It is hoped that the government would not reintroduce the real property gains tax (RPGT) this year as a means to generate revenue. The RPGT Act 1976 has not been abolished but RPGT exemption took effect from April 1, 2007 and there is little indication that such exemption would be lifted anytime soon.

While much could be enjoyed by individuals, the tax structure and proposals granted to companies in 2009 are not far off either. Beginning with a one percentage point cut for the corporate tax rate to 25% in 2009, paying less tax no matter how little means opportunities in reinvestment and expansion for any business.

Some items would now be eligible for tax exemptions or further deductions and would come in handy in particular for large companies that aim to enhance the corporate social responsibility (CSR) culture.

One such item is on contribution for charitable purposes and sport activities whereby from 2009, the limit for tax deduction for purpose of tax computation be increased to 10% of a company’s aggregate income compared with 7% previously.

Another item that would be valuable is the deduction on expenses for recruitment of workers from 2009 onwards, a move that would increase a company’s competitiveness by endeavouring to recruit the best.

In this aspect of human capital, the government would allow the recruitment cost incurred by participants in job fairs, payment to employment agencies and head-hunters to be allowed deduction for the purpose of tax computation.

In addition, a tax incentive to allow businesses to beef up security at their premises will help curb crime. As such, accelerated capital allowance on security control would be extended to equipment such as anti-theft alarms system, security camera, access control system and siren at all business premises irrespective of size or industry.

A particular area of concern is that of private limited companies controlled by public-listed companies. Such private companies are no longer eligible for preferential tax of 20% for their first RM500,000 chargeable income which is enjoyed by those under small and medium enterprises (SMEs).

Following reclassification of the SMEs by the government under Budget 2009, a private limited company with a paid-up capital not exceeding RM2.5 million but has more than 50% of its ordinary shares controlled by a public-listed company would have to pay full corporate tax of 25% from 2009 onwards.

However, the reclassification would enable a level playing field among “genuine” SMEs and propel them to have better access to incentives and loans as well as participation in awards for the SME category.

On tax and investment incentives, 2009 will also see the further development of the capital market which needs to attract foreign companies and product listings.

The government would now grant tax exemption on fees received by corporate advisers for primary listing, dual listing or cross listings of foreign listed securities and foreign financial instruments. As such, corporate advisers would not be deterred by high marketing cost but will be motivated to bring in foreign companies and product listings.

Similarly, tax exemption will be granted on fees earned by qualified institutions in undertaking activities relating to underwriting and distribution of non-ringgit sukuk issued in Malaysia but distributed outside Malaysia. In addition, tax exemption is also given on profits received by qualified institutions from the trading on non-ringgit sukuk issued in Malaysia.

Despite a host of tax incentives for 2009, the government expects direct tax collection to increase by 20% to RM88.4 billion from the RM73.8 billion revised estimate of 2008.

Of the RM88.4 billion in 2009, it is projected that RM35.8 billion and RM15.4 billion would come from the collection of corporates and individuals, respectively. The balance would come from petroleum revenue and other less significant sources such as cooperatives.

Theedgedaily