Your guide to Malaysian taxes 2014
March 26, 2014
By Diana Chai
Tax season is upon is and hiding under the covers won’t help. It’s the only other thing in life that is certain; as the saying goes. As much as filing can be a pain; the advent of e-filing is now making it so much easier. Instead of filling in lengthy forms, heading to the post office and praying it doesn’t get lost in the mail; you can simply turn on your computer and get it done there – without having to leave your home or put on pants.
If you are a working adult earning approximately RM3,058 per month and above, you will have to pay tax: And if this is your first time filing; you may have quite a few questions before you get started.
Before you get in a tizzy over all the information out there, let us walk you through taxes: the basics; the number crunching; and finally, getting some of your most asked questions out of the way.
Basic tax 101
Although you are still perfectly welcome to do your filing the old-fashioned way on printed forms and via the postal service; the online filing option is really convenient and you won’t have to worry about your cakar ayam (chicken clawing) writing may confuse the LHDN officers.
For first timers, you’ll need to register for e-filing. Head to LHDN’s website where you will see a myriad of buttons leading you into the wide world of taxes. Click on the e-daftar button to get started; fill the form and you will be instantaneously given a Pin and reference number. With this; you can login for the first time. If you’re already registered and have done this before; you’ll want to skip this section!
Once logging in; you’ll be taken straight to the appropriate form: Borang B(e) for salaried workers and B for those with their own businesses. Here’s how the tax system works:
Filling in the online form
The online form may look intimidating at first glance but it is actually quite straightforward. Just follow the prompts and if you need to go back to change anything you can do it at any point before you submit the final form. Each section will be divided into pages so you don’t feel overwhelmed. The form automatically calculates for you but it’s important to know which areas to fill (namely reliefs and rebates!) to save money.
Save money on your taxes
You can save money on taxes by knowing the reliefs and rebates which you can claim. But do remember that you’ll need to keep your receipts handy.
Though it’s not something that happens to everyone, every year, tax officers are known to suddenly ‘pop by’ your home to check if you have the receipts for the items you’ve claimed reliefs on.
It’s advised that you save these receipts for at least 3 years to be safe.
It’s also important to know the difference between reliefs and rebates.
Reliefs are deducted from your chargeable income where else rebates are deducted from your tax payable. This makes a big difference.
Reliefs essentially only reduce the amount of income which tax is applied to but rebates actually reduce the amount of tax you are required to pay.
As such, there aren’t that many rebates and much more reliefs. Although the two aren’t made equal; making the most of both will save you money.
These are just some of the common reliefs you can use to write-off the taxable amount:
*Example is for illustration purposes only and does not reflect an actual case study.
This isn’t the whole list – but some of the more common reliefs. The rebate list is shorter:
Counting your taxes
Now that you know what reliefs you can claim and how much you’ve earned; it’s time to calculate your tax payable.
Following the formula above, this is how it might look like:
Example: RM46,000 (taxable income) – RM15,500 (tax reliefs and exemptions) = RM30,500 (chargeable income)
RM930 (tax amount) – RM400 (tax rebate) = RM530 (tax payable)
But if calculating is not your thing; let us do it for you.
We at SaveMoney created an app to help you with the calculations.
All you have to do is key in the required fields and you’re done.
This way you’ll know how much tax you’re liable to pay.
Your questions answered
For first timers, the world of tax can seem like a vast unknown.
Many questions may be running through your mind: Do I have to pay tax with my level of income?
Why isn’t my employer handing this? We tackle some of your queries here but for more; you can always head over to our site.
Q1: What is the minimum income required to be taxable?
You are taxable if you earned an annual income of RM36,704 (or about RM3,058 per month) or more in 2013.
Q2: My new income has pushed me into the next tax tier. Does this mean I am worst off despite my raise?
Although a raise does mean you pay more tax – it will hardly ever leave you worst off than if you were without it! Malaysia uses a progressive tax system which means that only the portion of your salary exceeding the tier will be charged the new rate and not your whole salary. This can make a big difference. However, there are some downsides. A higher salary may mean you are no longer eligible for the additional rebate offered to those with a chargeable income of below RM35,000.
Q3: Why can’t my employer file for me since they are already doing monthly deductions?
Your employer may know how much you are earning from them and some reliefs which can be assumed from your marital status and number of children but they wouldn’t know of other incomes you receive nor all of the reliefs you could be eligible for which could reduce your tax payable. Why pay more tax than you need?
Q4: Will I be penalised if I do not file and pay my taxes on time?
Yes, you will be charged an additional 10% as a late penalty if you do not pay by 30th April 2014. If you continue to wait past 60 days; an additional 5% will be charged on top of the tax owed and the penalty!
Get filing!
Paying out more money for taxes is nobody’s idea of fun so best to get it out of the way!
But who knows; if you play your cards right, you could actually receive returns instead.
This guide is just a snippet. If you want more info on reliefs or just anything tax related; check out our ultimate guide to tax season 2014.
Let’s get cracking!
Diana Chai is Editor of SaveMoney.my, an online consumer advice portal which aims to help Malaysians save money through smart (and most of the time painless) savings in their daily banking, technology, and lifestyle spending habits.
March 26, 2014
Here’s how the tax system works.
By Diana Chai
Tax season is upon is and hiding under the covers won’t help. It’s the only other thing in life that is certain; as the saying goes. As much as filing can be a pain; the advent of e-filing is now making it so much easier. Instead of filling in lengthy forms, heading to the post office and praying it doesn’t get lost in the mail; you can simply turn on your computer and get it done there – without having to leave your home or put on pants.
If you are a working adult earning approximately RM3,058 per month and above, you will have to pay tax: And if this is your first time filing; you may have quite a few questions before you get started.
Before you get in a tizzy over all the information out there, let us walk you through taxes: the basics; the number crunching; and finally, getting some of your most asked questions out of the way.
Basic tax 101
Although you are still perfectly welcome to do your filing the old-fashioned way on printed forms and via the postal service; the online filing option is really convenient and you won’t have to worry about your cakar ayam (chicken clawing) writing may confuse the LHDN officers.
For first timers, you’ll need to register for e-filing. Head to LHDN’s website where you will see a myriad of buttons leading you into the wide world of taxes. Click on the e-daftar button to get started; fill the form and you will be instantaneously given a Pin and reference number. With this; you can login for the first time. If you’re already registered and have done this before; you’ll want to skip this section!
Once logging in; you’ll be taken straight to the appropriate form: Borang B(e) for salaried workers and B for those with their own businesses. Here’s how the tax system works:
- Taxable income (income that is taxable and not exempted) – reliefs = chargeable income.
- Chargeable income x applicable tax rate = calculated tax
- Calculated tax – rebates (zakat, personal rebate, etc) = tax payable.
Filling in the online form
The online form may look intimidating at first glance but it is actually quite straightforward. Just follow the prompts and if you need to go back to change anything you can do it at any point before you submit the final form. Each section will be divided into pages so you don’t feel overwhelmed. The form automatically calculates for you but it’s important to know which areas to fill (namely reliefs and rebates!) to save money.
Save money on your taxes
You can save money on taxes by knowing the reliefs and rebates which you can claim. But do remember that you’ll need to keep your receipts handy.
Though it’s not something that happens to everyone, every year, tax officers are known to suddenly ‘pop by’ your home to check if you have the receipts for the items you’ve claimed reliefs on.
It’s advised that you save these receipts for at least 3 years to be safe.
It’s also important to know the difference between reliefs and rebates.
Reliefs are deducted from your chargeable income where else rebates are deducted from your tax payable. This makes a big difference.
Reliefs essentially only reduce the amount of income which tax is applied to but rebates actually reduce the amount of tax you are required to pay.
As such, there aren’t that many rebates and much more reliefs. Although the two aren’t made equal; making the most of both will save you money.
These are just some of the common reliefs you can use to write-off the taxable amount:
| Self and Dependent | 9,000 |
| Life insurance and EPF | 6,000 |
| Husband/Wife/Alimony Payments | 3,000 |
| Ordinary Child relief (per child) | 1,000 |
| Interest expended in 2013 to finance purchase of residential property dated 2010 (but interest payments starting in 2011 only) | 10,000 |
| Net saving in SSPN’s scheme | 6,000 |
| Education Fees (Individual) | 5,000 |
| Updated: PRS Voluntary Contribution | 3,000 |
| Purchase of personal computer (every 3 years) | 3,000 |
| Insurance premium for education or medical benefit | 3,000 |
| Special relief for tax payers earning an income of up to RM8,000 a month (RM96,000 anually). Only applicable for the 2013 year of assessment. | 2,000 |
| Purchase of books, journals, magazines and publications | 1,000 |
| Complete medical examination | 500 |
| Purchase of sport equipment for sport activities | 300 |
This isn’t the whole list – but some of the more common reliefs. The rebate list is shorter:
- RM400 rebate if your chargeable income is below RM35,000;
- Rebate for zakat and fitrah;
- RM400 rebate for couples with a combined chargeable income of below RM35,000 (in addition to the first RM400).
Counting your taxes
Now that you know what reliefs you can claim and how much you’ve earned; it’s time to calculate your tax payable.
Following the formula above, this is how it might look like:
Example: RM46,000 (taxable income) – RM15,500 (tax reliefs and exemptions) = RM30,500 (chargeable income)
| Chargeable income tier | % of tax | amount |
| On the first RM20,000 | 2% | RM300 |
| On the next RM10,500 | 6% | RM630 |
| Total tax amount | RM930 |
RM930 (tax amount) – RM400 (tax rebate) = RM530 (tax payable)
But if calculating is not your thing; let us do it for you.
We at SaveMoney created an app to help you with the calculations.
All you have to do is key in the required fields and you’re done.
This way you’ll know how much tax you’re liable to pay.
Your questions answered
For first timers, the world of tax can seem like a vast unknown.
Many questions may be running through your mind: Do I have to pay tax with my level of income?
Why isn’t my employer handing this? We tackle some of your queries here but for more; you can always head over to our site.
Q1: What is the minimum income required to be taxable?
You are taxable if you earned an annual income of RM36,704 (or about RM3,058 per month) or more in 2013.
Q2: My new income has pushed me into the next tax tier. Does this mean I am worst off despite my raise?
Although a raise does mean you pay more tax – it will hardly ever leave you worst off than if you were without it! Malaysia uses a progressive tax system which means that only the portion of your salary exceeding the tier will be charged the new rate and not your whole salary. This can make a big difference. However, there are some downsides. A higher salary may mean you are no longer eligible for the additional rebate offered to those with a chargeable income of below RM35,000.
Q3: Why can’t my employer file for me since they are already doing monthly deductions?
Your employer may know how much you are earning from them and some reliefs which can be assumed from your marital status and number of children but they wouldn’t know of other incomes you receive nor all of the reliefs you could be eligible for which could reduce your tax payable. Why pay more tax than you need?
Q4: Will I be penalised if I do not file and pay my taxes on time?
Yes, you will be charged an additional 10% as a late penalty if you do not pay by 30th April 2014. If you continue to wait past 60 days; an additional 5% will be charged on top of the tax owed and the penalty!
Get filing!
Paying out more money for taxes is nobody’s idea of fun so best to get it out of the way!
But who knows; if you play your cards right, you could actually receive returns instead.
This guide is just a snippet. If you want more info on reliefs or just anything tax related; check out our ultimate guide to tax season 2014.
Let’s get cracking!
Diana Chai is Editor of SaveMoney.my, an online consumer advice portal which aims to help Malaysians save money through smart (and most of the time painless) savings in their daily banking, technology, and lifestyle spending habits.
No comments:
Post a Comment