Many taxpayers are still in doubt over deductible claims. Here are more advice from the Inland Revenue Board to ease taxpayers' worries.
IRB team answered to the question in The StarOne difficulty when filing one's taxes is the differing interpretations of the Income Tax Act provisions. Then there are the amendments or new reliefs introduced every year.
Last week, capital gains tax became a point of contention. According to the IRB, the net profit gained from the share market is taxable if the transaction is done repeatedly.
However, as one reader wrote in, most people are of the view that capital gains from stock investing in Malaysia are not taxable, a perception that is propagated on the Internet.
This is the IRB's further clarification on the perplexing issue. Profits derived from dabbling in the share market is an adventure in the nature of trade and is taxable as a business income if some characteristics of the badges of trade as follows exist: profit-making motive such as engaging the service of a portfolio manager; assets were purchased with the intention of selling for profit; and the period of ownership.
For example, a short period of ownership can denote trading of shares when trading of shares is the main source of income for the stock broker/remisier. Another is the frequency of transactions where transactions are found to be one of the series, that is repeated or similar, arising from a pattern of activity.
From the facts given, IRB is of the opinion that the income derived from dabbling of shares in the shares market is not in the nature of trade and not taxable as a business income under section 4(a), Income Tax Act 1967. However, it might be taxed under other gain or profit under section 4(f) of the Income Tax Act 1967 if such activity is carried out frequently.
For further confirmation, please contact the nearest IRB office with your supporting documents. Currently, there is no threshold amount for exemption.
> My employer has allocated a Medical Benefit Treatment Expenses entitlement of RM400 per calendar year for every employee, covering outpatient treatment, specialist treatment, dental treatment and also prescription spectacles/contact lenses. The claim for the benefit is made on a reimbursement basis (supported by bills).
My employer informs that if I make a claim for reimbursement for cost of prescription spectacles/contact lenses, this benefit is considered as taxable income and will be stated in the employer EA Form. Is this correct since the benefit is categorised as Medical Benefit entitlement for employees?
Under Par 46 (1) (d) of the Income Tax Act, the purchase of any supporting equipment for use by a disabled individual, husband, wife, child or parent, may be claimed up to a maximum of RM5,000. Basic supporting equipment includes haemodialysis machine, wheel chair, artificial leg and hearing aids. However, it excludes optical lenses and spectacles. Therefore, the reimbursement for cost of prescription spectacles/contact lenses is considered a taxable income.
> I understand that parents can claim medical insurance for their children to a maximum amount of RM3,000 per year.
Do the children qualify if they are working or married?
Parents are not entitled to an education and medical insurance tax relief if:
i. The children already earn their own income whether from an employment or self-employment.
ii. The children are already married.
> What are the tests we need to do to be considered for tax relief under “full medical check-up”?
A complete medical examination or full medical check-up is defined by the Malaysian Medical Council (MMC) as:
1. Physical examination: checking weight, blood pressure, eyes, ears, nose and throat, examining your neck for the size of the thyroid gland and any enlarged lymph nodes, listening to your chest and heart as well as breast and abdominal examination;
2. Laboratory tests: blood tests, urine analysis and pap smear. Blood test checking on your cholesterol level, thyroid hormones, complete blood count; and/or
3. Consultation by attending doctor
> Does the tax deduction on petrol allowance cover mileage claim for work done? Do I need a letter from my company?
Yes. You can only get deductions if the petrol card, petrol allowance, travelling allowance or toll payment or any of its combination are for official duties.
If the amount received exceeds RM6,000 a year, the employee can make a further deduction in respect of the amount spent for official duties.
Records pertaining to the claim for official duties and the exempted amount must be kept for a period of seven years for audit purpose.
> Sunday Star's report “Make use of goodies” (March 25, 2012) gave this example: if you get a RM1,000 petrol allowance and spend more than that, it is possible to claim. Where in the BE form can I enter this expenditure?
Provided that your petrol allowance was wholly and exclusively incurred for your official duties, you can deduct that RM1,000 from your gross salary.
This way, your net employment income for an income tax computation will be less.
> I received my EA Form from my employer with the following figures: gross pay, wage or paid holiday (including overtime pay), Fi (including director's Fi) commission or bonus (for Jan 1-Dec 31, 2011) equals RM31,484.94, including travelling allowance (petrol) at RM5,040 and the upkeep of vehicle at RM2,400 (stated in rubber stamp on the EA form).
When I fill up the Penggajian column (Bahagian C1) in the BE Form, do I need to deduct RM5,040 and RM2,400 from RM31,484.94?
As announced in the 2009 Budget, the tax exempt allowances/perquisites/gifts/benefits received by employee from employer for petrol card, petrol allowance, travelling allowance or toll payment or any of its combination is only given if they are for official duties. If the amount received exceeds RM6,000 a year, the employee can make a further deduction in respect of the amount spent for official duties.
Records pertaining to the claim for official duties and the exempted amount must be kept for a period of seven years for audit purpose. If all of your travelling (petrol) allowance is used for official duties, you can enjoy that entire amount (restricted to RM6,000).
For computation, you can deduct RM5,040 from your gross employment salary.
Meanwhile, for upkeep on vehicle, it is not allowable for any deduction in computing personal income tax (for a resident who does not carry on business).
> I am using Streamyx broadband. Can I claim for deductions?
You can enjoy the relief if you use Streamyx broadband but not Streamyx dial-up. You can claim under item Payment of Broadband Subscription.
It is limited to a maximum of RM500, deductible in respect of expenses expended by the individual for the payment of broadband subscription under the individual's name.
This deduction is only allowed for Years of Assessment 2010, 2011 and 2012.
> I subscribe to Streamyx broadband but the Telekom billing does not indicate subscription. Do I still use it as proof of subscription?
You may enjoy tax relief under payment of broadband subscription (limited to a maximum of RM500). Please keep the Telekom billing as proof of subscription.
> I was told that the Islamic Financial Planning (IFP) yearly membership fees can be used for tax deduction. What about CFP (Certified Financial Planner) membership fees? I work in a Unit Trust Management Company.
We will need to look at the nature of the taxpayer's work first. Is his or her membership as a Certified Financial Planner or in the Islamic Financial Planning really necessary or relevant to the taxpayer's current profession? Will the taxpayer not be able to do his or her job without the certification?
If the answer is “Yes” to both questions, then the membership fees can be included for tax deduction.
If the membership is only to upgrade the taxpayer's qualifications, and the certification is not necessary for the taxpayer to carry out his or her work, then the membership fees cannot be included in the tax deduction.
> An ROB registered partnership business was sold and its operations completely taken over by a new set of partners on Dec 1, 2011. The filing of Tax Borang P will require the incorporated trading accounts for January to November 2011 by the former partners and December 2011 accounts by the new partners.
For some unknown reasons, the new partners have repeatedly failed to furnish the December 2011 accounts to the appointed secretary to complete the requisite form P. Will the former partners be discharged of their responsibilities to IRB by just providing the January to November 2011 accounts and submitting it to the tax authorities by end of June 2012? Alternatively, what should be done?
As Sect 56 of the Income Tax Act 1967 provides, where there is a change in a business partnership due to retirement or death, the old partnership is considered as void. Each partner will be considered as having quit from the partnership and ceased all operations and work under the partnership.
If the “old” partnership continues its operation and work after the change, then it will be considered as a new partnership. If the business is shut down after the partnership change, the assets in the company account will need to be realised.
Referring to your specific problem, the partnership here is considered as void on Nov 30, 2011 while the new business is to have started from Dec 1, 2011 even though the operation continued after the takeover. The main partners are responsible for submitting their respective Borang P before or on June 30, 2012.
Under Sect 86 of the Income Tax Act 1967 which was amended in 2004, partnerships are required to file the income statements (Borang P) every year to the IRB no later than June 30 for the year's assessment.
The responsibility to report the company income lies with the main partners. Each member of the partnership is required to submit his/her individual income tax assessment (Borang B), the income or profit obtained from the partnership, before or on June 30, 2012.
Example: Old partnership A & B
New partnership C & D
Accounting period from Jan 1, 2011 to Dec 31, 2011
Date of partnership takeover Dec 1, 2011
The income that needs to be reported:
Partnership A & B income accumulated from Jan 1 to Dec 31, 2011
Partnership C & D income accumulated from Dec 1 to 31, 2011
The old partnership is not responsible for the new partnership's business.
> I sold a shoplot in a shopping complex last year at a loss (the sale price is lower than the purchase price). The shoplot was bought more than 15 years ago. I appointed my own lawyer for this sale. Is the lawyer obliged to submit the details of the sale to the IRB or does this duty rest with the taxpayer?
Do I need to fill up the RPGT in the income tax return even if it is a loss? What other documents besides the copy of the S&P of this sale are required for future audit by the IRB?
Yes, you still have to fill in the RPGT form and declare your real property disposal (Form CKHT 1A and CKHT 3).
You still need to submit all the documents stated in the checklist of Form CKHT 1A.
> I have a full-time job but I also do some overseas stock option investment and I was wondering if the gain is taxable. If the gain is taxable, how about the losses?
With effect from the year of assessment 2004, income received in Malaysia from outside Malaysia is exempted from tax.
Hence, an individual is taxable only on income accruing in or derived from Malay- sia.
> My company contributes to the Human Resource Development Fund (HRDF) from my salary deduction.
If I attend a course or a conference and the expenses are reimbursed by HRDF, can I claim tax exemption for the course fee and the other expenses incurred for attending the course?
Under the Income Tax Act 1967 (46-1), it is stated that a maximum of RM5,000 is deductible in respect of fees expended on any course of study up to tertiary level in any institution in Malaysia that is recognised by the Malaysian Government or approved by the Minister for the purpose of acquiring any skills or qualifications:
(i) up to tertiary level (other than a degree at Masters or Doctorate level), for the purpose of acquiring Law, Accounting, Islamic Financing, Technical, Vocational, Industrial, Scientific or Technological skills, or qualifications; or
(ii) any course of study for a degree at Masters or Doctorate level.
Other courses are not eligible for tax relief.
> Is the purchase of fitness equipment such as dumbbell or treadmill deductible under the deduction for purchase of sports equipment?
Yes, but it is limited to a maximum of RM300.
> I am a widower and receive my wife's pension of RM1,100 monthly. I get a director's fee of RM32,000 per annum. Is my pension taxable?
The pension of your late wife is non-taxable. Your director's fee of RM32,000 is, however, taxable.
> How do I declare the income received from unit trust and REIT (Real Estate Investment Trust)? Can I claim back the Malaysian Tax deducted under Section 110 (others)?
When you make reference to the distribution of REIT income to its unit holders, IRB would prefer to use the term income distributed rather than dividend.
For REIT, the tax deducted at 10% is a final tax. So the taxpayer is not required to declare the REIT income in his/her Income Tax Return Form and, thus, not entitled to claim for deducted tax.
> I am a civil servant working as a professional surveyor. We have a Land Surveyors Board established under Ordinance to collect survey fees before any commencement of survey works to protect the interests of the land owners and to regulate the survey practices in our State, Sarawak.
Some government surveyors are appointed as Board Members and are paid a fixed monthly allowance of RM500. For each Board Meeting, the members are paid RM400. The allowances are to compensate us for our time and services (part-time) rendered to the Board. Are these allowances taxable?
All allowances mentioned are taxable. As stated in the ITA 1967, tax is chargeable for the following: gains or profits from business, for whatever period of time; gains or profits from an employment; dividends, interest or discounts; rents, royalties or premiums; pensions, annuities or other periodical payments not falling under any of the foregoing paragraphs; and gains or profits not falling under any of the foregoing paragraphs.