It’s that time of the year again! As the dreaded tax filing deadline grows close, you know you just have to stop procrastinating and finally dive into some dedicated number crunching sessions. However, unless you have been filing your personal income tax in Malaysia for a few years, the many exemptions, tax reliefs, rebates, and deductibles can be more than a little confusing. So, before you get started here is a look at some of the crucial things to keep in mind –
Some basics – Personal Income Taxation
If you are new to filing taxes, then step one is to find your Chargeable Income. This is your annual Income minus all tax relief and exemptions.
Your annual income is your salary plus any other income from sources such as part-time jobs, rentals, dividends, royalties, business income, annuities and benefits from your employer.
However, for tax resident, there are some income exempt from tax e.g. dividends income where you are a shareholder in a Sdn Bhd, interest income received from banks, pensions income for taxpayer reached retirement age, income of women returning to the workforce (application submitted to Talent Corp) etc.
In order to pay the personal income tax correctly in Malaysia, you have to get all your information together and calculate the correct chargeable income.
What are the deductibles or tax relief?
A taxpayer in Malaysia can access a whole raft of tax exemptions on their total income making the final chargeable income amount much less.
Some of these tax relieves are –
EPF contributions plus life insurance – maximum RM6,000
Medical or education insurance – maximum RM3,000
Parents’ medical fee – maximum RM5,000
Life style relief covers a blanket of items e.g. computers, laptop, smartphone, fitness club subscription, books etc. – maximum RM2,500 (total amount)
What is different compared with 2017?
During the 2018 national budget, certain changes were introduced in the tax structure for individual taxpayers. These will be relevant for filing Personal income tax 2018 in Malaysia.
- Personal income tax in Malaysia is charged at a progressive rate between 0% – 28%. In 2018, some individual tax rates have been slashed 2% for three slabs – Chargeable Income Bands 20,001-35000, 35001 – 50,000 & 50,001 -70,000 will now be taxed 3%, 8% & 14% respectively.
- 50% income tax exemption on rental income of residential homes (subject to certain conditions).
- Women returning to work after 2 or more years will be able to claim tax exemption on their salaries for 12 months (Application must be submitted to Talent Corp between 1 Jan 2018 to 31 Dec 2019).
What about P2P investments? What should investors know about filing taxes?
If you are a P2P investor on our platform (or somewhere similar), then you need to know that your interest will also be taxed. Malaysian tax residents need to include their interest in their annual income while filing their personal income tax 2018 in Malaysia. Whereas for foreign investors, the P2P platform deducts 15% at source.
Migrate to e-Filing!
It might seem daunting the first time around, but it has clear advantages over manual filing or paying someone to file your returns – it is almost automatic, the form calculates your IT liability for you, AND it gives you an extended deadline to file your returns.
How to set up your e-Filing
- Register as a first time user at http://edaftar.hasil.gov.my/indexBI.php. You will be required to reconfirm all your information and upload the required documents. After that, it will take around a week for the PIN from LHDN.
- Go to the e-Filing website ezHASIL (https://ez.hasil.gov.my) once you have your PIN (or if you are an existing user) and log in.
- Choose the correct IT form from the list given there. For example, if you are employed with a company, you have to choose Income Tax Form BE (e-BE).
- Fill the relevant details in the form. This is the slightly tricky part for first-timers.
In the first section, you will have to check all your automatically uploaded details, fill details of any incentives you are entitled to, add information regarding disposal of property and your bank details.
The second section is about your income details, and details of any gifts and donations.
The third section deals with tax reliefs, rebates, and exemptions.
- The taxes will be calculated automatically, and you will be given the exact amount that you will get as your IT return or the excess amount that you may have to deposit.
- Lastly, you have to electronically sign and send the form along.
Filing personal income tax (2018) in Malaysia is quite straightforward for most salaried employees, small business owners, and investors and we highly recommend you try out the e-Filing system.
Not only is it simple and quite straightforward to use, but it will also give you a deeper understanding and control of your finances – which is a habit that everyone must inculcate!
This article is co-authored with Cheng & Co
Cheng & Co was founded in 1993 by Prof. Dr. Paul Cheng & Prof. Dato’ Dr. Chua Hock Hoo and, in the same year, acquired an established member firm. As the services and clientele of the firm increased over the years, Cheng & Co expanded progressively through mergers & acquisitions.
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