Friday, April 17, 2009

More tips on lessening your income tax burden

This is the final of a three-part ACCA Easy Guide to Tax Filing for Employees, which looks at income tax threshold, child relief and penalties

FOR YA2008, employees need to make a minimum annual salary of RM26,804 before triggering income tax.

Married couples should ensure that the higher-earning spouse claims child relief to lessen the tax burden. Remember to abide by income tax regulations to avoid heavy penalties.

Income Tax Threshold

For YA 2008, an employee is required to file Form BE by or before April 30 through electronic filing or actual submission of the tax return form to the Pusat Pemprosesan at Pandan Indah, Cheras.

The employee is entitled to the following tax reliefs:

Employees must make a minimum salary of RM26,804 to be liable for income tax for YA 2008.

Example 1: An individual with only EPF contributions as relief

An employee may not be required to pay tax on employment income exceeding RM26,804 if said individual employee incurred other tax reliefs on books, medical check-ups or life insurance premiums.

Example 2: Assuming an individual with a salary of RM30,062 has tax reliefs other than EPF contributions, he may not be liable for income tax. His tax payable is:

An employee earning annual salary exceeding RM30,062 may also not be liable to pay income tax if he incurred the following expenses:

(a) Medical expenses for parents RM5,000

(b) Medical or educational insurance for taxpayer, spouse, child RM 3,000

(c) Basic supporting equipment for taxpayer, spouse, child, parents RM3,000

An employee with an existing SG income tax reference number may need to file in a nil return on Form BE even though his annual salary for YA 2008 is below RM30,062.

Child Relief

Married couples can claim child relief for maintaining any child during the calendar year 2008 whether the child is their own, a stepchild, or a legally adopted child.

The amount of child relief is:

18-years-old or less (RM1,000); above 18 and studying in university or college (RM4,000).

Child relief is given for any number of children who are not married.

Child relief for disabled children is RM5,000.

An additional RM4,000 is granted if the disabled child is studying in university or college.

To minimise tax payable, child relief should be claimed by either spouse who has the highest taxable income.

Example: Li and Choo have three children below 18 years. Li’s total income is RM90,000 and Choo’s RM60,000 for YA 2008. The child relief entitlement is RM1,000 x 3 = RM3,000. (see charts above)

Penalties

The Income Tax Act 1967 imposes various penalties for non-compliance. These include:

(a) Non-submission of return

Return Form BE for YA 2008 needs to be submitted by or before Apr 30, failing which taxpayers incur a:

(i) Penalty that is 3 times of tax

(ii) Fine between RM300 to RM2,000

In practice, the tax authorities impose 2%-20% on the tax payable as the penalty instead of the statutory formula of 300%.

(b) Non-payment of final tax

The employer deducts the employee’s monthly tax which is paid to IRB on the 10th of every month. The difference between the actual tax and the total tax deducted by the employer must be paid to IRB on / before Apr 30. Failure to pay the final tax on Apr 30 will result in a late payment penalty of 10% being imposed.

An additional 5% will be imposed if the final tax or penalty is still not paid by June 30 (60 days after Apr 30)

(c) Not keeping sufficient records

Under the self assessment system, an employee is required to keep sufficient records on his tax affairs for seven years. Only the tax return Form BE is submitted to IRB by or before Apr 30.

These records comprise a copy of Form BE, salary slips, Form EA (Statement of Employment Income), and credit card statements in relation to petrol claims, travelling, parking, and toll charges incurred in relation to official duties.

Failure to maintain sufficient records is an offence and the penalty will be:

(i) A fine between RM300 to RM10,000 or

(ii) Imprisonment ≤ 1 year.

  • Dr Choong Kwai Fatt is a tax consultant and associate professor, Faculty of Business and Accountancy, Universiti Malaya. For further enquiries or feedback please email to
    info@my.accaglobal.com
  • Tips for filling your income tax returns

    This first of a three-part ACCA’s Easy Guide to Tax Filing for Employees looks at additional goodies for taxpayers

    IT’S tax season again! Employees are required to submit their tax return Form BE for year of assessment (YA) 2008 on or before April 30, where the income assessed is in relation to the basis period of Jan 1 to Dec 31, 2008.

    This time around, taxpayers get to enjoy additional tax goodies as part of the Government’s effort to cushion the impact of the economic downturn and higher cost of living on Malaysians.

    Specifically, the Government announced via the Budget 2009 proposal and the second stimulus package on March 10, 2009, the following tax benefits for employees, which will take effect in YA2008. These benefits will help reduce taxable income and, consequently, the amount of tax payable.

    Compensation for loss of employment

    The tax burden is eased for retrenched employees as well as those who opt for voluntary separation schemes.

    Employees who are retrenched on or after July 1, 2008 will be granted an income tax exemption of RM10,000 for each completed year of service with the employer or companies in the same group. This also applies to payments for employees who opted for voluntary separation schemes.

    Example:

    A is a salesperson working in Star New Enterprise from April 1, 2006. Due to the economic downturn in 2009, A was retrenched on Nov 1, 2008 and was paid compensation of RM25,000 for loss of employment. The amount to be taxed in YA2008 will be:

    Compensation RM25,000

    (Less) Exemption

    1.4.2006 – 31.3.2007

    1.4.2007 – 31.3.2008

    (2 completed years of service)

    X RM10,000 RM20,000

    RM5,000

    If the retrenchment was before July 1, 2008, then the amount exempted for each year of service will be RM6,000.

    Tax-exempt employee benefits — allowances

    The following tax benefits provided to employees from Jan 1, 2008 to Dec 31, 2008 will be tax deductible against business income for employers AND exempted from tax on employees. These benefits are also available for YA2009.

    (a) Petrol card/petrol allowance/travel allowance

    An employer providing petrol cards, petrol allowance or travelling allowance to employees to travel from home to workplace or office will be allowed up to RM2,400 a year.

    (b) Meal allowance for working overtime, travelling outstation.

    (c) Parking allowance.

    (For (b) and (c), the allowance must be reasonable and justifiable depending on the nature of work and position of employee.)

    (d) Medical treatment for employees, spouses and children to include traditional medicine such as ayurvedic treatment and acupuncture.

    (e) Interest subsidies on housing, car and education. The total loan amount is restricted to RM300,000.

    (f) Childcare allowance up to RM2,400 a year.

    (g) Employers’ products or services which can be provided free or at a discount which must not exceed RM1,000 a year.

    Employers involved in the manufacture of food and car accessories may consider providing the products to employees to reduce their cost of living in the current economic slowdown.

    These allowances need to be disclosed in the Form EA as tax-exempt benefits although they are not taxable on employees.

    Official duties – travelling allowance

    When employers provide petrol cards, petrol allowance or travelling allowance to salaried personnel, such as reporters and other employees, to carry out official duties, this form of allowance is taxable on the employee and must be reflected in their respective EA Forms.

    Employees must keep a record of the actual expenses incurred in relation to official duties and set off the amount incurred against the allowance received. This is an added burden and responsibility on the employee. The records have to be kept for a period of seven years.

    Employees may end up paying additional tax under the self-assessment system if they report the employment income as per the EA Form without deducting the actual travelling expenses incurred while on official duty to carry out the employers’ business.

    In the Budget 2009 announcement, the Government said petrol cards, petrol allowance, travelling allowance and toll cards for official duties up to RM6,000 a year will be tax-exempt.

    This means that the employer will exclude RM6,000 a year from the taxable income of employees as reported in the EA Form. However, the employer needs to disclose this RM6,000 as a tax-exempt benefit in the EA Form.

    Employees receiving travelling allowances not exceeding RM6,000 a year will no longer be required to keep the required receipts to substantiate their claims.

    This incentive applies from YA2008.

    However, if the employer provides, for official duties, petrol card, petrol allowance, travelling allowance and toll card exceeding RM6,000 a year, the employer is required to report in Form EA in two sections:

    (a) Tax exempt benefits: RM6,000

    (b) Part of taxable employment income – salary, bonus, entertainment allowance – and the petrol/travelling/toll amount in excess of RM6,000

    In this case, the employee is now required to keep all receipts to substantiate her claims.

    Example:

    Ming Hui has marketed agricultural products for Duck Rich Sdn Bhd since 2007. She receives a travelling allowance of RM14,000 per year.

    For the year ended Dec 31, 2008, the company will provide Ming Hui with Form EA disclosing taxable income of RM8,000 as part of employment income and a tax-exempt benefit of RM6,000.

    Ming Hui incurred RM9,000 for travelling expenses to carry out official duties for YA2008. She is required to set off these travelling expenses against the amount received from her employer of RM14,000 (and not RM8,000). The amount taxable on her is RM5,000 (RM14,000 – RM9,000).

    Ming Hui is required to maintain the receipts of RM9,000 for a period of seven years.

  • Dr Choong Kwai Fatt is a tax consultant and associate professor, Faculty of Business and Accountancy, Universiti Malaya. For further enquiries or feedback please email to info@my.accaglobal.com
  • Monday, April 13, 2009

    阅读 减压效果最好

    英国一项研究说明,所有放松活动中,阅读舒缓心情效果最佳。

      英国“银河巧克力读书俱乐部”委托萨塞克斯大学的“心智实验室”国际咨询公司进行这项研究,以支持俱乐部举办的“不可抗拒的阅读”活动。

      受调查对象先通过测试提高压力水平和心率,随后参与各种活动缓解压力。

      研究结果说明,阅读放松效果最佳,6分钟内就能够降低压力水平68%。听音乐能够降低61%的压力,喝茶或咖啡降低54%,散步降低42%。

      英国《每日邮报》引述认知神经学家戴维·刘易斯的话说:“书上的文字能够激发人们的创造力,从而带人们进入另一种状态。”

      心理学家认为,阅读时人们的思绪会集中在文字上,进入文学世界,紧张的身体和大脑可以因此得到放松。

    心理学家认为,阅读时人们思绪集中在文字上,紧张的身体和大脑可因此放松。(路透社)

      英国3月进行的一项类似调查也显示,阅读有益身体健康。

      国家精神健康中心主任路易斯·阿普尔比说:“当人们听到阅读‘有好处’时,也许认为这是因为它能够增长知识。但是轻松的阅读同样能够使人精神焕发,帮人逃离每天的压力,放缓大脑工作节奏。”

      调查显示,4000多名受访者中,63%的人表示读书是为了放松身心,50%的人享受阅读过程中逃离现实的感觉,仅有29%的人是为了增长知识而读书。

      另外,82%的人认为阅读能让他们心情放松,超过33%的人说睡前阅读有助睡眠。

      调查也显示,人们喜爱的阅读形式多种多样。

      超过半数的被调查对象选择书籍作为他们最喜爱的读物,超过三分之一的人喜欢看杂志和报纸,9%偏爱网上阅读,4%的人选择电子书。

      在各种阅读题材中,谋杀悬疑类最受欢迎,其次是爱情类。

    《联合早报》

    Understanding bond funds

    The days for highly leveraged risky hedge fund investments are over! As further turmoil in financial markets unfolds, money seems to be flowing out of risky asset classes into safer ones. Bond funds seem to meet this requirement. This article is aimed at providing insights into bonds and bond funds.


    WHAT is a bond?

    A bond is a debt security issued by an issuer (otherwise known as the borrower) to raise funds as an alternative to borrowing directly from banks. By "lending" money to bond issuers, buyers of bonds (or bondholders) are paid periodic interest returns called coupon payments.

    Similar to loans, which carry fixed tenures, bonds too have fixed maturity dates for bondholders to ge back their principal.

    Bond issuers could be domestic or foreign corporations, domestic or foreign state/federal governments and even central banks

    What are bond funds?

    Bond funds are portfolios which "pool" money from different investors to invest in bond instruments. These funds are established and managed by fund management companies. They invest mainly in government bonds as well as corporate bonds, depending on an established investment guideline.

    It would be difficult for individual investors to access the bond market directly as there is a need for minimum standard trading lots.

    In Malaysia, this standard trading lot is RM5 million. By "pooling" money from a wide spectrum of investors, bond funds provide avenues for individual investors to invest in such instruments, in smaller amounts.

    As at February 28 this year, there were 75 bond funds in Malaysia with a total net asset value (NAV) of RM10 billion. This asset class made up 15.65 per cent of the total unit trust industry with a NAV of RM64 billion.

    The different types of bond funds in the market include local currency bond funds, global bond funds, emerging markets bond funds and Asia-Pacific bond funds. Among the different categories of bond funds, local currency bond funds constitute the largest share with 59 funds at a total fund size of RM9 billion as at February 28 2009.

    Why invest in bond funds?

    Some of the key advantages of investing in bond funds are:

    * Professionally managed

    Bond funds are managed by professional fund managers who are well-trained and have a proven track record in analysing the interest rate outlook and creditworthiness of bonds. Large bond fund managers usually have in-house economics and credit teams to assess macro outlook and credit standings of the various bonds in the market.

    * No fixed maturity date

    While individual bonds have fixed maturity dates, open-ended bond funds do not have fixed maturity dates as fund managers constantly rebalance the portfolios. Thus, unlike placements in fixed deposits with fixed maturities, investors need not worry about reinvesting their money.

    * Regular income

    Most bond funds offer investors regular income distributions derived from the coupon income generated by the underlying bonds in the portfolio. Thus, bond funds give investors a stable, regular income.

    * Automatic income reinvestment

    Investors who are not in need of regular income could opt for automatic income reinvestment. This option allows income distribution from the bond funds to be reinvested automatically in the fund which gives the investor more units.

    * Liquidity

    In terms of liquidity, investors are free to redeem units of a bond fund at the current net asset value (NAV) of fund. Bond funds provide liquidity and convenience as investors could buy or sell their units every day. The investors could redeem their units without having to wait for each bond to mature.

    * Diversification

    Bond funds provide diversification to investors as they invest in a wide spectrum of bonds. For example, AmBond invests in Malaysian Government Securities, corporate bonds, Cagamas bonds/notes and money-market instruments. This reduces the risk of over-exposure to any single bond.

    Conclusion: Investors are strongly encouraged to consider bond funds as a feasible investment option due to many advantageous features. As bond funds are generally less volatile compared to funds linked to equities, currencies or hedge funds, this category of funds appeals to those with lower risk tolerance and prefer regular income distribution.

    This article is contributed by the Funds Management Division of AmInvestment Bank Group