CHAPTER 2:
TAX PLANNING
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:
 Indirect:
deduction from income
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
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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:
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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:
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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
DEDUCTION
NO.
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
Max. RM20,000
facilities which are accessible to the public and
contributions to public libraries/schools/higher
education institutions.
ROSELIZA HAMID/UITM KELANTAN/2009
RELIEF & REBATE
 Personal tax relief
 http://www.hasil.gov.my/lhdnv3e/individuIndex.jsp?process=210
00&menu=34&expandable=1&pg_title=Tax%20Relief
 Tax rebate
 http://www.hasil.gov.my/lhdnv3e/individuIndex.jsp?process=210
00&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&ex
pandable=1
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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
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Calculating on tax payable
1. Compute total aggregate income
2. Compute assessable income
3. Compute chargeable income
4. Compute gross tax payable
5. 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.
ROSELIZA HAMID/UITM KELANTAN/2009