26 SIX WAYS TO SAVE TAX IN MALAYSIA

26 Tax-Saving Moves
They are legal and permitted by Inland Revenue Board ( IRB )

1) Save for your Childs Education

Sin e 2!!" # any amount that is deposited into a savings a ount $or your hild under national %du ation Savinds S heme ( S&im Simpanan 'endidi&an (asional ) allo)s you to laim tax dedu tions* Thers is a limit o$ RM +!!! $or this dedu tion but spouse )ho $ile separate tax returns an ea h laim this amount * Tax ,edu tion - RM +!!! per individual .or Mr / - /s he $alls in the 201 tax bra &et # this dedu tion translates to a tax saving o$ RM "2! ( RM +!!!2201)

2 ) File Separate tax returns

/ separate assessment allo) ea h spouse to laim personal tax relie$ o$ RM 3!!! )hile a 4oint tax return allo)s one spouse to laim a )i$e or husband relie$ o$ RM +!!! Tax ,edu tion - %a h spouse earning Taxable in ome an laim personal tax relie$ o$ RM 3!!! by $illing separate tax returns*

3) Ask your employer to increase your EPF contributions

5ontributions to the employees 'rovident .und (%'.) by employers are taxexempt $or the employees* To redu e your taxable in ome # as& your employer to redu e your %'. monthly salary but in rease your %'. ontributions by the same amount* Tax ,edu tion - The dedu tible amount $rom your taxable in ome is dependent on the arrangement bet)een you and your employer* .or Mr / - Mr / agrees to ta&le monthly pay ut o$ RM 6!!! $or an e7uivalent in rease in his %'. ontributions by his employer*/t the end o$ the year # he re eives an additional RM 62!!! in his pension $und but his taxable in ome is redu ed by the same amount* The tax saving that he ma&es is RM 233! ( RM62!!!2201)

4) Change your cash remuneration to cash reimbursement

.ixed allo)an es given by your employer ea h month $or entertainment and housing or par&ing $ees are taxable at your tax bra &et* 5hange this to a 8 reimbursement 8 based on re eipt and you are not taxed on the amount re eived*

Tax ,edu tion - The dedu tible amount $rom your taxable in ome is dependent on the arrangement bet)een you and your employer .or Mr / - By 5hanging a yearly $ixed allo)an e o$ RM 6!!! to a reimbursement o$ the same amount and supported by re eipts # Mr / ma&es a tax saving o$ RM600! ( RM 6!!!2201)

5) Ask or a company car

/ ar given by your employer is regarded as a bene$it-in &ind ( BI9 ) and taxable* :o)ever # a ompany ar is advantageous $or taxpayers be ause the preset tax s ale $or ars is mu h lo)er than the a tual ost o$ buying and maintaining a ar* / ording to the 'ubli ruling $or BI9s # the tax payer must pay RM +6!! in taxes every year# $or a ar )orth RM ";!!! I$ the employer pays $or $uel # the tax payer is taxed an additional RM 62!! $or this BI9 Tax dedu tion - <hether you bene$it $rom a ompany ar depends on the value o$ the ar and your urrent tax bra &et* ,o the al ulations to as ertain your tax dedu tion*

!) "ake charitable contributions

/ gi$t o$ money to an approved haritable organisation entitles you to a tax dedu tion $or the amount given* .rom 2!!3 on)ard # this amount annot ex eed "1 o$ your aggregate in ome* :o)ever 5haritable donations that )ere made in 2!!" are not sub4e t to this limit* Tax dedu tion - =p to "1 o$ your aggregate taxable in ome an be redu ed )ith this dedu tion* .or Mr / - <ith his taxable in ome o$ RM >!!!! # Mr / an ma&e a donation o$ RM 6+!! *This dedu tion results in a saving o$ RM 6;62 ( RM 6+!!2201)

#) $ake %p postgra&uate stu&ies

/ relie$ o$ RM ;!!! per year $or any ourse o$ study at the Master?s or do torate level # the government announ ed in 2!!" Budget the )idening o$ the s ope to all postgraduate studies* The ourse does not have to be done $ull time # but 8 must be in an institution or pro$essional body in Malaysia re ognised by the government or approved by Minister o$ .inan e Tax ,edu tion - RM ;!!! per individual

.or Mr / - /s he ompletes his master?s degree * Mr / an en4oy tax saving RM 62!! $rom his taxable in ome ( RM ;!!!2201)

') (ea& ) (ea& ) (ea&

Starting $rom @/ 2!!" # taxpayers an laim a personal tax dedu tion to RM 6!!! $or pur hase o$ boo&s# 4ournals # magaAines and other publi ations* To maximise this generous dedu tion # onsider giving boo&s as gi$ts* Tax ,edu tion - RM 6!!! per individual .or Mr / - <ith boo& pur hases o$ RM 6!!! Mr / saves RM 20! ( RM 6!!!2201)

*) +et Sporty

@ou )ill get a dedu tion o$ RM +!! $or ea h year o$ assessment $or the pur hase o$ sports and exer ise e7uipment $or any sports a tivities de$ined under the Sport ,evelopment / t 6>>" 8 Tax ,edu tion - RM +!! per individual .or Mr / - By buying RM +!! )orth o$ sports e7uipment # Mr / ma&es a saving o$ RM "6 ( RM +!!2201)

,-) .uy /i e 0nsurance

The maximum tax relie$ is RM 6!!! a year $or premiums paid to an insuran e ompany $or li$e Insuran e or de$erred annuity plans* This Bimit is shared )ith your ontributions to the %'.# other employer s hemes and ontributions under any )ritten la) relating to )ido)s or orphan pensions Tax dedu tion - RM 6!!! per individual ( shared )ith your %'. ontributions )

11) Take out a Medical or Education policy

@ou an laim dedu tions o$ up to RM +!!! a year $or edu ation and medi al insuran e ( ombined limit $or both ) This in ludes medi al overage that is part o$ li$e insuran e poli y( the limit $or li$e insuran e is in move 6! ) / poli y o$ this &ind an be )ritten $or you # your spouse or your hild* Tax dedu tion - RM +!!! per individual .or Mr / -/$ter a 7uiring an edu ation poli y $or his hildren # Mr / ma&es a saving o$ RM "2! ( RM +!!!2 201)

,2) Pay your parents1 me&ical bills

@ou are able to laim up to RM ;!!! $or payments to)ards your parents? medi al bills*

Tax dedu tion - RM ;!!! per individual .or Mr / - By paying his parents? medi al bills # Mr / ma&es a saving o$ RM 62!! ( RM;!!!2 201)

,3) "e&ical

5laim a dedu tion o$ up to RM ;!! per tax year $or a $ull medi al examination and RM ;!!! $or medi al expenses $or yoursel$# spouse or hild $or serious disease* I$ you have also spent money on $ull medi al in the same year# your laim )ill be redu e the RM;!!! available $or serious disease* / separate tax redu tion o$ up to RM;!!! a year is given $or ne essary basi supporting e7uipment $or disabilities su$$ered by yoursel$ #spouse# hildren or parent Tax ,edu tion - RM ;!! per individual $or $ull medi al he &-up* RM;!!! $or serious diseases or basi supporting e7uipment .or Mr / - :e laimed $or a $ull medi al he &-up *The dedu tion give him o$ RM 62! ( RM ;!!2201)

,4) Pay 2akat

I$ you are a muslim #paying any amount in Aa&at # $itrah or other obligation Islami dues )ill entitle you to a tax rebate* Tax dedu tion - The /mount o$ Aa&at that you pay

,5) .uy a Computer

/ dedu tion o$ up to RM +!!! an be laimed on e every three years $or the pur hase o$ omputers # printers and bundled so$t)are * The similar i>n entive given previously in the $orm o$ a tax rebate )as )ithdra)n )ith e$$e t $rom 2!!" Tax dedu tion - RM +!!! on e every three years* .or Mr / - Cetting a omputer $or RM+!!! gives him a saving o$ RM "2! ( RM +!!!2201)

,!) 3ire a $ax Consultant

5onsider hiring a tax onsultant to explore )ays your remuneration pa &age an be stru tured to maximise your tax savings* Those )ho are earning at least RM;!!! every month should be able to 4usti$y the ost o$ hiring a tax adviser )ith their tax savings Tax saving - this is dependent on your personal ir umstan es and the deal that you negotiate )ith your employer*

$ax 4 Sa55y 0n5estments

@ou may be loo&ing at some investment this year* There are savings to be made $rom ertain investments # $rom a tax point o$ vie)* :o)ever # some moves may be advantageous i$ you $all into a higher tax bra &et* Besides loo&ing $or tax-exempt investment # here are $our investment moves to explore

,#) .uy property 5alue& belo6 or at ("25---

Stamp duty must be paid on all property transa tions that involve a hange o$ legal o)nership* Bast year?s budget ( 2!!3 ) announ ed a ;!1 stamp duty exemption $or the pur hase o$ houses that do not ex eed RM2;!!!! The maximum tax savings that an be $ound here is RM2!!! ( $or a house )orth RM2;!!!! ) This exemption is only given $or one house per individual and applies to sale and pur hase agreement signed bet)een September 2!!" and ,e ember 2!6!

,') .uy Similar property

Similar property an be grouped together $or in ome tax purposes* The IRB has indenti$ied ategories su h as residential # ommer ial and va ant land* I$ you o)n t)o property in the same ategory # you an redu e the taxable pro$it made $rom one property )ith the loss# i$ any in urred $rom the other* 'roperty investors are also exempt $rom real property gains tax $or all disposals on on or a$ter 6st /pril 2!!"*
:o)ever # taxpayers )ho are trading property D buying and selling in order to generate in ome D are liable to in ome tax* 8 This exemption is meant $or taxpayers )ho invest in property $or a passive in omeE Tax dedu tion - Taxable in ome re eived $rom renting out a property in a parti ular grouping su h as residential an be redu ed i$ a loss )as in urred by another property in the same group*

,*) .uy shares 7 page, )

Invest in dividend-yielding shares i$ your tax bra &et is above 261* / ne) single-tier system )as established under the national Budget $or dividends re eived by shareholders* 5ompanies pay tax o$ 261 (@/2!!3) and shareholders re eive a net dividend that is exempt $rom tax and does not need to be $iled )ith the IRB

8Shareholders )ho $all into higher tax bra &ets Fhigher than 261G are essentially Fgetting aG saving on the di$$eren e*

8The single-tier dividends is intended to simpli$y the tax $iling pro ess $or individuals#E says 5hua Tia Cuan# exe utive dire tor and head o$ tax and $inan ial planning at Creat Hision <ealth Management Sdn Bhd* 8In the past# re$unds had been slo)* .rom no) on# there is no need to de lare or apply $or a re$und* /nd as orporate taxes are $alling# ompanies )ill be able to pass on more pro$its to their shareholders Fin the $orm o$ dividendsG#E he says* :o)ever# not all ompanies )ill go under the single-tier system immediately as some o$ them might have imputation tax redits le$t# )hi h they an use till 2!6+* Shareholders )ho re eive dividends $rom ompanies using the imputation system )ill have to report the amount re eived and laim a tax re$und i$ his personal tax rate is lo)er than the ompany?s tax rate (2"1 in @/2!!"# 261 in @/2!!6)* Shareholders an identi$y the system used by the ompany as it is stated in the dividend vou hers* Tax Deduction : @our tax saving is the di$$eren e bet)een your tax bra &et and 261 (the orporate tax rate)* This is only appli able to dividends given out by ompanies using the single-tier system*

20) Invest in REITs

@ou an go into real estate investment trusts ( R%ITS )i$ your tax bra &et above 6;1* There are 66 R%ITs listed on the Main Board* The tax on dividends given out by these property-related investments are taxed at 6;1 as ompared to tax on dividend at 261 ( under the ne) single D tier dividend system ) Inly tax bra &ets ex eeding 6;1 )ould en4oy some tax savings by investing in R%ITs Sin e the distributions re eived by individual taxpayers have been sub4e t to that 6;1 # the taxpayers are not re7uired to de lare the amount in their tax return* Tax dedu tion- @our tax saving is the di$$eren e bet)een your personal tax bra &et and 6;1

Moves $or Business I)ners The $irst rule that small-business o)ners should implement )ith regards to their taxes is to ta&e it seriously* Spend some time strategising $or your business a tivities to save hundreds or thousands ringgit*

:ere are six

2,) "aintain books an& recor&s rom 8ay ,

9eep separate ban& a ounts $or personal and business transa tions and establish a basi a ounting system* The inland Revenue Board re ognises business in ome on an a rual basis * This means that as long as a transa tion is ompleted# either a sale o$ goods or a provision o$ servi e # its value is immediately treated as business in ome and is taxable* :o)ever # unpaid transa tion an be redu ed your taxable in ome* /ny expenses made $ro the business an be dedu ted $rom the business in ome* The Ceneral rule is that expenses an be dedu ted i$ it is )holly and ex lusively in urred in earning your business in ome* So 9eep the re eipts $or all supplies that you buy $or your business :o)ever there is no dedu tion $or apital expenditure although some assets )ill 7uali$y $or tax relie$ by )ay o$ apital allo)an es

22) $ime the purchase an& use o your ixe& assets

5apital allo)an es are permitted $or ertain business assets su h as e7uipment # ma hinery # vehi les omputers and so$t)are* The amount o$ allo)an es permitted ea h year depends on the ategory that asset $alls into *( re$er to 'ubli Ruling (o 2J2!!6 $or the dedu tible rate o$ your assets* The $irst apital allo)an e is given $or the a ounting year in )hi h the asset )as pur hased and used by the business* I$ you are ontemplating a pur hase # try to do it be$ore the end o$ the a ounting year# instead o$ 4ust a$ter # to laim the apital allo)an e against your business in ome* I$ you are buying the asset )ith a hire-pur hase loan# allo)an e an only be laimed as and )hen repayments are made to the lender*

23) .uys a company car

I$ you are a sole trader or a partner in a business# any ar or vehi le that is used $or business purposes an bring about tax dedu tions* 8The business in ome is redu ed by the ar?s $inan ing ost i$ you buy the ar on hire-pur hase* @ou are also dedu t a ertain amount $or apital allo)an es every year#

Be$ore implementing this tax-saving te hni7ue# business o)ners must identi$y a per entage o$ the ar?s use that is $or private a tivities* /s there is no de$inite ruling on ho) to determine this proportion $or private use# business o)ners must apply a $air and reasonable $igure that an )ithstand s rutiny* 8%stimating private mileage is an exer ise that must be underta&en in a ordan e to the $a ts on your a tual usage* /nd remember to re ord all running expenses to ma&e these dedu tions#E says Thornton*

24) 3ire your spouse or amily member

/n e$$e tive tax-saving strategy is to hire a spouse or $amily member* 8.or example# a husband )ho is a business o)ner an hire his )i$e* The )i$e?s salary is tax dedu tible but you must be able to sho) that she is doing something to earn it# In this situation# you )ould have to ontribute to your )i$e?s %mployees 'rovident .und (%'.) savings and that amount entitles her to tax relie$* /nother option is to ma&e your spouse or $amily member a partner in your business* This allo)s you to divide the in ome made by the business bet)een the both o$ you* /s a partnership has no tax liability# both partners are liable $or tax $or the respe tive portion o$ business in ome that ea h earns* 8By opting $or separate tax assessments# a husband and )i$e )ho are partners in a business an ea h laim individual tax relie$*

25) 0mplement a process to 9chase a ter1 unpai& &ebts

=n$ortunately# small business o)ners an omplete a sale or servi e but might not re eive payment# in $ull or in part* /t the end o$ an a ounting year# a debt# )hi h is estimated to be )holly or partly irre overable# an be dedu ted $rom your business in ome and this lo)ers your tax bill* 8Tax authorities tend to loo& losely at bad-debt )rite-o$$s and provisions ($or debts that are expe ted to be partly re overable)* So put in some e$$ort to re over the debt be$ore deeming it irre overable and you must evaluate ea h debt separately* The pro ess that you put in pla e to re over your unpaid debts should be do umented and any on lusion that you ma&e should be supported )ith do umentation as )ell*

.or example# you must sho) )hy it it not ost e$$e tive to ta&e legal a tion against a ustomer* :o)ever# i$ you eventually re over bad debts that have been )ritten o$$ or partially )ritten o$$# you must in lude this amount in your taxable in ome $or the year that you re eived payment*

2!) 8e&icate a space in your home o ice

<or&ing in your o)n house an result in tax dedu tions $or the osts related to your 8home o$$i eE* This in ludes ele tri ity# telephone bills# 7uit rent and servi e harges o$ apartments* The best )ay to laim $or these dedu tions is to dedi ate a room or pla e as the )or&ing environment* 8/ dedi ated area helps to identi$y expenses that are spe i$i ally $or business purposes and an be laimed in $ull* Items that are used by the business as )ell as personal use# su h as ele tri ity# must be apportioned* Ine )ay to do so is on the basis o$ $loor area* I$ the business o)ner pays rent $or the )or&ing area# this expense an be dedu ted $rom the business in ome* This applies to rent that is paid to a spouse )ho o)ns the home but is not involved in the business* :o)ever# this is strategy is only e$$e tive i$ the spouse )ho is not involved in the business is taxed at a lo) tax rate as rental re eived must be de lared as taxable in ome* I$ this is an appropriate strategy $or the business o)ner# / tenan y agreement that spe i$ies rental $or a spe i$i part o$ the house at the prevailing mar&et rate*