TAXATION

Taxation

• Personal taxation• Company taxation• Capital gains tax• Double taxation relief

Personal taxation

Typically levied on all the financial resources of an individualIncome

earned: wages and salariesunearned: investment income and rent

profits from operating as a sole trader or partnerinherited wealthinvestment gainsvalue of assets held

Often governments also require citizens to pay social security

contributions based on earnings

Practical considerations

• Taxing cash flows• Taxing in arrears• Taxing once

Calculating taxable income

• Tax-free income• Tax-free expenditure• Income in kind (`fringe' benefits)• Investment income deducted at source• Allowances

Tax rates

Banjaran Pendapatan Bercukai

Pengiraan (RM) Kadar % Cukai(RM)

0 - 2500 2,500 pertama 0 02,501 - 5,000 2,500 berikutnya 0 05,001 - 10,000 5,000 pertama

5,000 berikutnya 1050

10,001 - 20,000 10,000 pertama10,000 berikutnya 1

50100

20,001 - 35,000 20,000 pertama15,000 berikutnya 5

150750

35,001 - 50,000 35,000 pertama15,000 berikunya 10

9001,500

50,001 - 70,000 50,000 pertama20,000 berikutnya 16

2,4003,200

70,001 - 100,000 70,000 pertama30,000 berikutnya 21

5,6006,300

100,001 - 150,000 100,000 pertama50,000 berikutnya 24

11,90012,000

150,001 - 250,000 150,000 pertama100,000 berikutnya 24

23,90024,000

250,001 - 400,000 250,000 pertama150,000 berikutnya 24.5

47,90036,750

Lebih 400,000 400,000 pertamasetiap ringgit berikutnya 25

84,650..........

Tahun Taksiran 2015 

Calculating taxable profit

Usually these include both income (less expenses) and capital

gains.• Accounting profit

tax levied on `profit on ordinary activities before taxation'. Calculated as:

Sales revenue

less Expenses

[Operating profit]

plus Non-trading income (interest, dividends, capital gains)

[Profit before tax and interest]

less Interest paid

[Profit before tax]

Calculating taxable profit

Need to adjust the figure above as tax law's definition of taxable profits differs from definition of accounting profit

Main adjustments are: add back any business expenses or potential expenditure shown

in accounts which isn't allowable for taxAdd back any charge for depreciation and instead, subtract

allowable `capital allowance‘deduct any special reliefs, e.g., costs R&D costs may be able to be

deducted immediately

Corporate tax rate in Malaysia is 25%

Corporate tax considerations

Some nations provide relief to shareholders to ensure dividends are not subject to both personal and corporate income tax

this `imputed' tax system ensures no disadvantage to shareholder when company distributes profits.

The state may provide incentives to retain and reinvest earnings

-higher taxes on dividend or

-allowing tax relief for new investment

Capital gains tax

Individuals/companies usually subject to CGT on `chargeable gains'.

Capital gains on most assets are chargeable. Some exemptions are:private motor carsyour primary residenceforeign currency obtained for personal useBritish government securities and other qualifying fixed-interest

stocks

Which differ from country to country.

Capital gains tax

Chargeable gain defined as

sales price - purchase cost

Sales price can be reduced by amount of costs associated with the sale.

Purchase cost can be increased by costs associated with the purchase plus expenditure to enhance the value of the asset during the time the asset was held.

Capital gains tax

Some countries have allowances to remove the component reflecting inflation from any gain, or to encourage individuals to retain assets.

Capital losses can normally be offset against capital gains in the same year.

Many nations provide an allowance each year to individuals - CGT is only paid on chargeable gains over this sum.

In the UK, individuals are charge 18% tax on capital gains. Corporations are taxed at their corporate tax rate.

Capital gains tax in Malaysia• There is no capital gains tax for equities in Malaysia. Malaysia used

to have a capital gains tax on real estate but the tax was repealed in April 2007. However, a real property gains tax (RPGT) introduced in 2010 now applies to property sold less than six years from its purchase.

• Malaysia has imposed capital gain tax on share options and share purchase plan received by employee starting year 2007.

• For who does trading professionally (buying and selling securities frequently to obtain an income for living) as "traders", this will be considered income subject to personal income tax rates.

REAL PROPERTY GAINS TAX FOR 2014 Tax Rates

  Personal (citizen & PR) Company

Disposed within 3 years 30% 30%

Disposed in 4th year 20% 20%

Disposed in 5th year 15% 15%

Disposed after 5 years 0% 5%

Other taxes

Other types of tax levied on individuals and companies include:stamp duty (on contract documents)inheritance taxesproperty taxes

Taxes may also be levied on expenditure. These may be with respect to1. general expenditure, like a sales tax

2. specific types of expenditure, like customs duties and excise taxes

Certain taxes may be targeted at encouraging certain consumer behaviours or to raise revenue for certain categories of government expenditure

Double taxation relief

Most nations have double tax agreements with other countries.

DTR means domestic tax authorities permit companies and individuals with foreign income to offset the tax paid overseas against their liability for domestic corporation/income tax on that income.

DTR is only available on income received from overseas and not on revenue of a capital nature.