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ROSELIZA HAMID/UITM KELANTAN/2009
TAX TAX PLANNINGPLANNING
ROSELIZA HAMID/UITM KELANTAN/2009
CHAPTER OUTLINE
Definition of income tax Objectives of income tax planning Malaysian tax system Tax strategy Tax calculations
ROSELIZA HAMID/UITM KELANTAN/2009
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: deduction from income Indirect: tax on consumption
ROSELIZA HAMID/UITM KELANTAN/2009
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/2009
INCOME TAX
Definition of income tax: A tax on income received
Definition of income: any receipt of money or money’s 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/2009
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/2009
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/2009
MALAYSIAN TAX SYSTEM
Incomes of individuals ate 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/2009
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/2009
SCOPE OF TAXATION
Resident individual Non-resident individual Resident company Non-resident company
Resident status (Page 31)
ROSELIZA HAMID/UITM KELANTAN/2009
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/2009
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/2009
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/2009
DEDUCTIONNO.
GIFT NOTES
1 Gift/money to government or approved institution
Deductible donation
2 Gift of artifact/manuscript/ painting made to the government /state government
Amount determined by Dept of Museum/Archives
3 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
4 Gift of medical equipment for health care facility
Max. RM20,000
5 Gift of painting to the National Art Gallery or any State Art Gallery
Amount determined by the Gallery
6 Gift of money for the provision of library facilities which are accessible to the public and contributions to public libraries/schools/higher education institutions.
Max. RM20,000
ROSELIZA HAMID/UITM KELANTAN/2009
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/2009
TYPE OF ASSESSMENT Separate assessment
All income of a married women is automatically assessed separately from that of her husband and no election is required
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.
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/2009
DECEASED INDIVIDUAL
Tax treatment on 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/2009
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 person’s estate, associate
& club: same as individual No-resident association: 25%
ROSELIZA HAMID/UITM KELANTAN/2009
TAX PLANNING STRATEGY
Calculating on tax payable1. Compute total aggregate income2. Compute assessable income3. Compute chargeable income4. Compute gross tax payable5. Compute net tax payable
ROSELIZA HAMID/UITM KELANTAN/2009
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.
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