An independent member of UHY International

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Time: 9:00am – 12:00pm

Date: 3rd March 2019

Venue: Starbucks, Maritime, Karpal Singh Drive

TAX PLANNING 2019

About the Speaker

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Mr. Loh Chye Teik is the Partner of UHY, Chartered Accountants. He graduated from University of Malaya, Kuala Lumpur with a Bachelor (Honours) of Accounting in 1984. He is a member of both the Malaysia Institute of Accountants (MIA) and Chartered Tax Institute of Malaysia (CTIM) since 1988. He is a business value creation accountant who focuses on conceptualizing and implementing corporate and business rescue schemes. He leverages his 20 years of extensive in corporate strategy, business development, financial and tax planning spanning from MNC, manufacturing companies, property development, construction and trading companies.

He is also a versatile and dynamic business consultant and facilitator in all aspects of business improvement consultancy, strategy visioning, business process innovation, Paradigm Shift Programmes that impact organizations long term profitability and longevity. He is a regular panelist and speaker of various economic & taxation seminar.

TAX RESIDENCE STATUS OF INDIVIDUALS

Residence status is one of the main criteria to determine the tax treatment and tax rate of a person.

An individual is regarded as tax resident if he meets any of the following conditions, i.e. if he is: • in Malaysia for at least 182 days in a calendar year; • in Malaysia for a period of less than 182 days during the year (“shorter period”)

but that period is linked to a period of physical presence of 182 days or more “consecutive” days in the following or preceding year (“longer period”). Temporary absence from Malaysia due to following reasons are counted as part of the consecutive days, provided that the individuals is in Malaysia before and after each temporary absence: – business trips – treatment for ill-health – social visits not exceeding 14 days

• in Malaysia for 90 days or more during the year and, in any 3 or 4 immediately preceding years, he was in Malaysia for at least 90 days or was resident in Malaysia; OR

• resident for the year immediately following that year and for each of the 3 immediately preceding years.

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RATE OF TAX FOR RESIDENT INDIVIDUALS

Chargeable income (RM) YA 2018 / 2019

Tax (RM) % on excess

5,000 0 1

20,000 150 3

35,000 600 8

50,000 1,800 14

70,000 4,600 21

100,000 10,900 24

250,000 46,900 24.5

400,000 83,650 25

600,000 133,650 26

1,000,000 237,650 28 4

RATE OF TAX FOR NON-RESIDENT INDIVIDUALS

Types of income Rate (%)

Employment income, business, discounts, rents, premiums, pensions annuities, other periodical payments and other gains or profits (includes payments received for part-time/occasional broadcasting, lecturing, writing etc.)

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Special classes of income: • rental of moveable property • technical or management services fees • payment for services rendered in connection with use of property or

installation or operation of any plant , machinery or other apparatus purchased from a non-resident person

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Interest 15

Royalty 10

Dividends (single tier) Exempt

Public entertainer’s professional income 15

Income other than the above 10 5

EMPLOYMENT INCOME

Derivation Employment income is regarded as derived from Malaysia and subject to Malaysian tax where the employee:

– exercises an employment in Malaysia; – is on paid leave which is attributable to the exercise of an employment in Malaysia; – performs duties outside Malaysia which are incidental to the exercise of an employment in

Malaysia; – is a director of a company resident in Malaysia; OR – is employed to work on board an aircraft or ship operated by a person who is resident in

Malaysia.

Exemption (short-term employees) Income of a non-resident from an employment in Malaysia is exempt:

– if the aggregate of the period or periods of employment in Malaysia does not exceed 60 days in a calendar year: OR

– where the total period of employment which overlaps 2 calendar years does not exceed 60 days.

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EMPLOYMENT INCOME (Cont…)

Women returning to work after career break

The employment income for women returning to work after a career break of at least 2 years is exempted for up to a maximum of 12 consecutive months (application to Talent Corporation Malaysia Berhad from 01 Jan 2018 to 31 Dec 2019) and the exemption period is from YA2018 to YA2020.

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TYPES OF EMPLOYMENT INCOME

Type of employment income Taxable Value

Cash remuneration (salary, bonus, allowances, perquisites)

Total amount paid by employer. Certain allowances / perquisites are exempted from tax.

Benefit in kind (“BIK”) (motorcar & petrol, driver, gardener, etc)

Based on formula or prescribed value method. Certain BIK are exempted from tax.

Housing accommodation • employee or service director • directors of controlled companies

• Lower of 30% of cash remuneration or

defined value of accommodation • Defined value of accommodation

Hotel / hostel accommodation for employee or service director

3% of cash remuneration

Compensation for loss of employment Total amount paid by employer. Exemption is available under specified conditions

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TYPE OF PERQUISITES

Type of Perquisites Taxable Value

Petrol card / petrol or travel allowances and toll rates

Total amount paid by employer. Exemption: up to RM6,000 p.a. if the allowances/perquisites are for official duties

Childcare subsidies / allowances Total amount paid by employer. Exemption: up to RM2,400 p.a.

Parking fees / allowances Fully exempted

Meal allowances Fully exempted

Interest on loan subsidies Loans totaling RM300,000 for housing / passenger motor vehicles and education

Income tax borne by employer Total amount paid by employer.

Award Total amount paid by employer. Exemption: up to RM2,000 p.a. for the following award: • long service (>10 years service) • past achievement • service excellence, innovation, or productivity award

PTPTN loan repayment borne by employer (see next slide for details)

Total amount paid by employer.

Exemptions are NOT extended to directors of controlled companies, sole proprietors and partnerships 9

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TYPE OF PERQUISITES

Employer can claim tax deduction.

Provided – employee does not have to repay the employer.

Employer pays the outstanding PTPTN loans for the employee

Loans pay directly to PTPTN accounts

Payment made between 01/01/2019 to 31/12/2019

The value of BIK provided for an employee may be determined by either of the following methods:

• Formula method; or

• Prescribed value method

Under the formula method, annual value of BIK provided to an employee is computed using the following formula:

Cost of the asset provided as a benefit

Prescribed life spanof the asset

= Annual value

BENEFIT IN KIND (BIK)

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• Under the formula method, the prescribed life span for various benefits are follows:

BENEFIT IN KIND (BIK)

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Benefits in kind Prescribed life span (Years)

Motorcar 8

Furnishings: • Curtains & carpets • Air-conditioner • Refrigerator • Furniture, sewing machine

5 8

10 15

Kitchen utensils / equipment 6

Entertainment & recreation: • Stereo set, TV, video recorder, CD/DVD player • Organ • Swimming pool (detachable), sauna • Piano

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10 15 20

Miscellaneous 5

• Under the prescribed value method, standard rates for motorcar and fuel provided:

TYPE OF BENEFIT IN KIND (BIK)

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Cost of car (when new) (RM) Annual prescribed benefit

Motorcar (RM) Fuel (RM)

Up to 50,000 1,200 600

50,001 – 75,000 2,400 900

75,001 – 100,000 3,600 1,200

100,001 – 150,000 5,000 1,500

150,001 – 200,000 7,000 1,800

200,001 – 250,000 9,000 2,100

250,001 – 350,000 15,000 2,400

350,001 – 500,000 21,250 2,700

500,001 and above 25,000 3,000

TYPE OF BENEFIT IN KIND (BIK)

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• Under the prescribed value method the following are some values of BIK prescribed in the Ruling:

Benefits in kind Value per year

Household furnishings, apparatus & appliances: • Semi-furnished with furniture in the lounge, dining room

/ bedroom • Semi-furnished as above with air-conditioners / carpets

/ curtains • Fully furnished • Service charges and other bills (eg: water & electricity)

RM840

RM1,680

RM3,360

As per amount paid

Prescribed value of other benefits: • Driver • Domestic servants • Gardeners • Corporate recreational club membership

RM7,200/driver

RM4,800/servant RM3,600/gardeners As per amount paid

• The following are some exemptions for certain BIK:

TYPE OF BENEFIT IN KIND (BIK)

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Benefits in kind Exemption

Leave passages i. One oversea leave passage up to RM3,000 for fares only: or

ii. 3 local leave passages including fares, meals and accommodation

FOC / discounted goods Exemption is available up to RM1,000.

FOC / discounted services Fully exempted

Maternity expenses & traditional medicines

Fully exempted

Telephone (including handphone), telephone bill, pager, PDA & broadband subscription

Fully exempted, limited to one (1) unit for each asset

Exemptions are NOT extended to directors of controlled companies, sole proprietors and partnerships

IMPORTANT DATE FOR FILING INDIVIDUAL INCOME TAX RETURN FORM

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No. Individual Relief Types YA2018 YA2019

1. Self 9,000 9,000

2. Spouse - if he/she has no source of income / elects for combined assessment

4,000 4,000

3. Disable person (further deduction) - Self - Spouse

6,000 3,500

6,000 3,500

4. Child (claimed by either husband / wife) - Below 18 years old - Disable child (unmarried) - Above 18 years old (unmarried & receiving full-time

education): o "A-Level", certificate, matriculation or preparatory courses o ~ Recognised local university / colleges / similar

establishments o Oversea university / colleges / similar establishments

recognised by Government of Malaysia o Disabled child pursuing diplomas or above qualification in

Malaysia @ bachelor degree or above outside Malaysia

2,000 6,000

2,000 8,000

8,000

8,000

2,000 6,000

2,000 8,000

8,000

8,000

LIST OF PERSONAL RELIEFS

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No. Individual Relief Types YA2018 YA2019

5. Medical expenses for parents; OR Parental care:- - Limited 1,500 for only one mother - Limited 1,500 for only one father

5,000

3,000

5,000

3,000

6. Medical expenses for serious diseases (self / spouse / child) included Complete medical examination (Limited RM500)

6,000 6,000

7. Supporting equipment for disable self, spouse, child, and parent

6,000 6,000

8. Education Fees (Individual) 7,000 7,000

9. Net saving in SSPN's scheme 6,000 8,000

10. Deferred Annuity and Private Retirement Scheme (PRS) - with effect from YA2012 until YA2021

3,000 3,000

11. KWSP / Approved provident fund contributions 6,000

4,000

12. Life insurance 3,000

LIST OF PERSONAL RELIEFS

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Share among siblings

No. Individual Relief Types YA2018 YA2019

13. Education / Medical insurance 3,000 3,000

14. Lifestyle: ~ Purchase of books / printed daily newspaper (excluding banned publications) ~ Purchase of sport equipment for sports activities as defined under the Sport Development Act 1997 ~ Purchase of computer / smartphone / tablet ~ Subscription of broadband internet ~ Gymnasium membership fee

2,500 2,500

15. Contribution to the Social Security Organization (SOCSO) 250 250

16. Breastfeeding equipment 1,000 1,000

17. Fees paid to childcare centres & kindergartens 1,000 1,000

LIST OF PERSONAL RELIEFS

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TAX REBATES FOR RESIDENT INDIVIDUALS

Types of rebates Rebate (RM)

Individual’s chargeable income does not exceed RM35,000.00 400

For husband & wife elect for joint assessment, and the joint chargeable income does not exceed RM35,000

800

Rebate for Zakat, Fitrah or other Islamic religious dues paid Actual amount expended

The above rebate granted is deducted from tax charged and any excess is not refundable.

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• In year 2018, Steven is working with Rich Co. Sdn Bhd as a supervisor and received monthly salary of RM5,000.

• He is married and his wife as full-time housewife. They have 3 children, where elder daughter is pursuing degree at Sydney, Australia; the second daughter is studying primary school in Malaysia and a 3 years old son. Steven is very active in sport activities and his wife is a books lover.

• Steven family is well protected with sufficient insurance plan and he make a deposit of RM6,000 in SSPN-i as his second daughter education fund.

• Steven is the only child and his parents is aged 60 and have annual income below RM24,000 per annum.

PERSONAL TAX EXAMPLE

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Description RM RM

INCOME (RM5,000 x 12 months) 60,000

(-) Personal Reliefs:

Self 9,000

Wife 4,000

Child (RM8,000 x 1 person + RM2,000 x 2 persons) 12,000

Parental care 3,000

Complete medical examination 500

Lifestyle 2,500

SSPN-i 6,000

KWSP & Life insurance 6,000

Medical insurance 3,000

SOCSO contribution 250

Breastfeeding equipment 1,000

Fees paid to kindergartens 1,000

TOTAL RELIEFS CLAIMED (48,250)

CHARGEABLE INCOME 11,750

TAX COMPUTATION:

First RM10,000 50

Subsequent RM1,750 tax at 1% 175

Total Tax 225

(-) Personal Rebate RM400 + Wife Rebate (800)

TAX PAYABLE 0

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Special Voluntary Disclosure Program (SVDP)

• SVDP is part of the government's efforts in tax reformation. It is to encourage

taxpayers to make voluntary disclosure in reporting their income to increase tax

collection for the country's development. The ongoing SVDP is a window of

opportunity for affected taxpayers to avoid future scrutiny from the taxman.

• Information provided and received by the tax authorities during the SVDP will be

treated as confidential in accordance to tax laws.

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Special Voluntary Disclosure Program (SVDP) (Cont…)

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SVDP – PROS & CONS

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The pros and cons of responding to the SVDP

Common Reporting Standards (CRS)

With the Automatic Exchange of Information (AEoI), the IRB will have the financial account information from other foreign tax authorities. This will be scrutinized in any event.

Profiling With its intelligence and analytical tools, IRB will have access to broad information, including taxpayers’ spending patterns. This will be scrutinized in any event.

Unexplained extra ordinary wealth

When tabling Budget 2019, the finance minister indicated that the government may consider adopting the Unexplained Wealth Order, similar to that in the UK. This allow the issuance of a court order to compel a person to explain his sources of wealth, failing which that assets may be seized. If implemented, this will be an additional source of financial information.

Criminal prosecution under Income Tax Act 1967 (ITA)

If a taxpayer participates in the SVDP, wherein tax and penalty have been paid, the taxpayer will not be subject to criminal prosecution (imprisonment of six months to three years) under ITA on the same facts.

Promises & assurance The IRB will take the declarations accepted in good faith. The IRB also gave the assurance that no further review will be made on information disclosed under the SVDP, and audit action will not be taken on the year of assessment in which the SVDP is made.

Lower penalty rate Under SVDP, the penalty is reduced to 10% (Nov 3, 2018 to March 31,2019 ) and 15% (April 1, 2019 to June 31, 2019). After June 30, 2019, the penalty will range from 80% to 300%.

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2nd Floor, Silver Square 309-J Perak Road 10150 Penang, Malaysia (604)2814 628 (604)2820 200 chyeteik8@gmail.com UHY LOH

Contact Us

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Disclaimer

1. These presentation materials contain general information only based on our understanding of the tax

position under current tax legislation and the related practice thereof, all of which are subject to

change, possibly on a retrospective basis. We are not obliged to update the presentation slides for any

future changes.

2. The views expressed in this course (written and verbal) are of the speaker which does not necessarily

be the official view of the accounting standard setters in Malaysia or the LHDN, RMCD, OECD etc.

3. Independent professional advise should be obtained on any tax matters as the consequences /

implications may differ depending on the facts and circumstances of each case.

4. Neither the speaker nor the organizer is liable for any loss (financial, psychological or otherwise)

suffered as a result of relying of the information presented without prior expert consultation.

5. No part of the presentation materials may be disclosed to third parties or copied, reproduced or

transmitted by any means, extracted, quoted or included in any other document or communication

without prior consent.