Final Report

BKAX4998 PRACTICUM REPORT
Tax Planning On Employment Income
1.0 Introduction
Wintrip Sdn Bhd (WSB) is a private limited company incorporated under Company Act, 1965 on
20th May 1992 and has been carrying out family business. The company originally commenced
operation as THE CONTRACTOR located at Sungai Nyalau Estate, Bintulu District in
September 1992. The WSB has expanded its business activities to Kuching Division since 1998.
The principal activity of WSB consists of logging and oil palm plantation contract
activities. These involve supplying all material, labour, vehicles, agricultural machinery, and
heavy equipment for the felling, clearing, pre-planting and maintenance works.
Presently, WSB employs a total workforce of 419 people consisting of 1 Chairman, 2
Directors, 8 accountancy & clerical, 8 management staff to control the operation of plantation
works and also 400 undirected staff with Work Permit Holder (Mechanic, Excavator Driver,
Tractor Driver and General & Skill Workers).
Due to its commitment and ability to fulfill the works specification as stated in agreement
of contract works by clients, WSB has acquired its reputation as a Trusted Contractor in oil palm
plantation.
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Managing Director
Tan Peng Nguang
Director
Tan Pheng Liang
General Manager
Senior Estate Manager
Estate Manager
Danny Lim Chung Teck
Tan Khee Wei
Tan Khee Nam
Tan Kim Seong
Project Manager
Yeap Seng Yong
Tay Joo Ho
Workshop Manager Field Manager

Tan Chow Seng
Tan Peng Aik
Director
Cheng Khar Tiang
Chief Account
Tan Poay See
Admin Manager
Tan Poay Chee
Head Office
Account Clerk
Head Office
Admin Clerk
SupervisorMechanic/Excavator/Tractor
General
Driver& Skill Workers
Estate Account ClerkEstate Admin Clerk
Yeap Eng Liang
Yeap Seng Hooi
Figure 1 : Organization Chart
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1.1 Activities Performed During Practical Training

The practical training lasted about six month. It gave me more exposure to the field of income
tax. During the practical period, most of my task was focused on tax planning for employment
income procedure including the preparation of the monthly payroll. After calculating the monthly
payroll, I had to give the information to the employees of the company who are liable to
contribute the monthly tax deduction. To prepare the monthly payroll, I required the information
of the employees name and the identity card. Moreover, I calculated the employee basic salary,
allowance and overtime pay. Furthermore, I also calculated the SOSCO and employees EPF.
For the individual tax, I calculated the individual employment income. I referred to the
working sheets in order to compute the statutory income from employment. Employment income
includes the salary, allowance, overtime, benefit, and bonus under the Section 13(1) (a). Section
13(1) (b) consists of benefit in kind provided by employer. Section 13(1) (c) is unfurnished
accommodation provided by the employer. The unfurnished accommodation amount is based on
the lot of 30% of Section 13(1) (a) or the defined value. Furthermore, the Section 13(1) (d) is
about the withdrawal from unapproved pension fund. Section 13(1) (e) is the compensation for
loss of employment.
After calculating the employment income, I calculated the monthly tax deduction (MTD)
for the employee based on the Monthly Tax Deduction Schedule issued by the IRB. The monthly
tax deduction must be paid every month due on 10 th day of the following month to IRB, together
with detailed particulars of the employees who fall under this scheme. The MTD can be
calculated by using the MTD table or e-calculation.
After submitting the MTD, the IRB will issue the income tax receipt. So, I used the
receipt to fill in the BE form. The BE form must be submitted by 30 th April every year. I used the
guidelines to fill in the Form BE for the individual employment income and calculated the relief
for the personal tax. I submitted their income tax returns through e-filing. Lastly, the employees
had paid the tax payable.
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For the taxpayers who are the first time to submit the BE Form, they have to apply a pin
number and the income tax number.
The government has entrusted its faith in them to assess and settle their income tax with
the introduction of the self-assessment system commencing from the year of assessment 2004 for
individual and non-corporate taxpayers. The e-filing service is convenient for taxpayers to save
time and cost. The self-assessment system must be filled by taxpayers. So in this company, I just
calculated the tax by using the working sheets.
The BE Form consists of eight parts:
-
Part A: particulars of individual
Part B: particulars of husband/wife
Part C: statutory income and total income
Part D: deductions
Part E: tax payable
Part F: status of tax for the year of assessment 2010
Part G: income of preceding years not declared
Part H: particulars of executor of the deceased persons estate
Declaration
Particulars of tax agent who completes this return form.
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2.0 Scope of Study

In this study, I focused my attention on the tax planning for employment income. I learnt about
the content of Malaysian taxation and the information on the tax planning. Here, I shall discuss
the income tax for the individual and the tax deduction. Moreover, I have studied the implication
of the tax related to the company. Besides that, I shall discuss the purpose and problems faced in
preparing the tax planning. I shall analyze whether the company has operated in accordance with
the Malaysian Act. Lastly, in this report I shall also elaborate the validity, completeness and
accuracy of tax planning. I choose the step by step method to complete my report.
2.1 Project Objective

Objectives identified are as follows:
To study the implication of Malaysian Taxation.
To clarify the impact of tax planning on employment income.
To understand the tax planning for the individual.
To identify the purpose and problems faced in preparing the tax planning.
To elaborate the validity, completeness and accuracy of tax planning.
3.0 Methodology
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Internet Search
The Internet provides a lot of information about the tax preparation and tax planning. There are
many websites that give useful information. These websites were searched by using Yahoo,
Google, and UUM Library Website. The information that I obtained from the internet was mainly
journal, articles, current news, and newsletter.
Inquiries
To inquire managers and colleagues will assist me in understanding the process of working
aspect of the company. Therefore, the response from the colleagues indirectly gave a lot of
knowledge and information about the scope of work and companys details to me in order to
complete my report.
Observations
I carried out some observations on the daily activities such as key in data for the companys tax;
calculate the tax payable or tax refund. Besides that, I also referred to the previous companys
information and data.
Textbook and Reference

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I referred to many textbook to get more information to complete my report. The textbook I
referred to was Malaysian Taxation written by Choong Kwai Fatt. The purpose is to get the
preliminary understanding regarding my study. The relevant information on in the textbook is
readily accessible to me. Apart from that, this method gives me a clear understanding of the
theory and examples because it elaborates most of the parts written in that particular book.
Because of the limitation of information, I had to refer to a few textbooks to gather more
information and examples.
4.0 Background of Inland Revenue Malaysia (IRB)

The Inland Revenue Malaysia is the revenue collecting agency of the Ministry of Finance. The
Department of Inland Revenue Malaysia has been officially known as THE INLAND
REVENUE BOARD OF MALAYSIA since 1 March 1996.
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The Inland Revenue Board was established in accordance with the Inland Revenue Board
of Malaysia Act 1995 to give it more autonomy especially in financial and personnel
management. Besides that The Inland Revenue Board has proposed to improve the quality and
effectiveness of tax administration.
The agency is responsible for the overall administration of direct taxes under the following acts
such as:
Income Tax Act 1967
Petroleum (Income Tax) Act 1967
Real Property Gains Tax Act 1976
Promotion of Investment Act 1986
Stamp Act 1949
Labuan Offshore Business Activity Tax Act 1990
4.1 Function of IRB

IRB plays an important role in acting as an agent of the Government and providing services in
administration, assessing, collecting and enforcing payment of income tax, petroleum income
tax, real property gains tax, estate duty, stamp duties and such other taxes as may be agreed
between the Government and the Board.
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Besides that, IRB has responsibility to advise the Government on matters relating to
taxation and to liaise with the appropriate Ministries and statutory bodies on such matters.
Moreover, IRB also has its main purpose in participating in or out of Malaysia with
respect of matters relating to taxation.
Furthermore, IRB is responsible for performing such other functions as are conferred on
the Board by any other written law.
The last function of IRB is to act as a collection agent for and or on behalf of any body
for the recovery of loans due for repayment to that body under any written law as well.
4.2 The Powers Provided by IRB
To enter into contracts ;
To utilize all property of the Board, movable and immovable, in such manner as the
Board may think expedient including the raising of loans by mortgaging such property;
To engage in any activity, either alone or in conjunction with other organizations or

international agencies, to promote better understanding of taxation ;
To provide technical advice or assistance, including training facilities, to tax authorities of

other countries ;
To impose fees or charges for services rendered by the Board ;
To grant loans to employees of the Board for any purpose specifically approved by the
Board ;
To provide recreational facilities and promote recreational activities for, and activities
conducive to, the welfare of employees of the Board;
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To provide training for employees of the Board and to award scholarships or otherwise
pay for such training ; and
To do anything incidental to any of its powers.
5.0 Discussion
5.1 Implication of Malaysian Taxation
In Malaysia, the law governing income taxation is the Income Tax Act 1967. Malaysian income
tax is territorial. That means all individuals are liable to pay tax on income accrued in or
derived from Malaysia is tax. Moreover, the foreign income remitted into Malaysia by both
resident and non-resident is exempted from tax.
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5.1.1 Scope of Charge

Under Section 3 of the Malaysian Income Tax Act 1967, it provides the two circumstances where
the income tax liability arises.
i.
The transaction that is the income in nature and such income is accrued in or derived
from Malaysia. For example the capital gain arise from the disposal of long-term
ii.
investment; or
The transaction that is the income such as income tax on Malaysia derived income and
foreign source income received in Malaysia.
5.1.2 Source of Income

There are generally 6 categories of income as delineated by Section 4 of the Income Tax Act,
1967:
a)
Gains or profits from business, for whatever period of time carried on;
b) Income from employment

c)
Dividend, interest and discounts
d)
Rents, royalties or premiums
e)
Pensions, annuities or other periodical payments
f) Gains or profits not falling under any of the above

All the expenses incurred wholly and exclusively for the production of gross income are adjusted
to arrive at taxable income.
The rate of the tax depends on the resident status of the individual which is determined by
the duration of the individuals stay in the country. A resident is taxed on his chargeable income
at scale rates from 0% to 26% after the deduction of tax relief.
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5.1.3 Resident Status

The residence status test is summarized as follows:
Section 7 (1) (a) individual must be physically present in his/her calendar year, at least 182
days in a calendar year. The 182 days can be made up of one period or multiple periods
during that particular calendar year.
For example:
a) Single period
Year 2010
xxxxxxxxxxxxxxxxxxxxxxxx
Jan 1
182 days
Dec 31
b) Multiple periods
Year 2010
Jan 1
xxxxxxx
xxxxxxxxxxx
xxxxxxxxxxxx
II
III
Dec 31
I + II + III 182 days
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Section 7 (1) (b) - a period of less than 182 days but that period is linked to another period
following or preceding where he was present in Malaysia for 182 or more consecutive days.
For Example:
The day
Link by
or
01.01.2010 and
Link to
31.12.2010 and
31.12.2009
01.01.2011
Temporary absence from part of the 182 consecutive days physical presence
Connecting with
Ill health
service matter
Social visit 14days

(in aggregate)
Attending conference
- himself
Study abroad
- immediate family
seminars
- Exclude holidays
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Section 7 (1) (c) - 90 days or more during the year and he was present in Malaysia for at least
90 days in any 3 of the 4 immediate preceding years.
Section 7 (1) (d) - he is a resident for a particular year if he is resident for the immediate
following year and for each of 3 immediate preceding year.
The tax resident status of an individual is important because it determines:
The individual rate of tax

If he entitled to personal reliefs and rebates
The income on which he is taxed
However, individual with chargeable income of less than RM2, 500 is not taxed. The
chargeable income of an individual resident is derived by deducting the personal relief from his
or her total income. Tax liability of a resident individual id reduced by rebates. Furthermore,
income tax matters in Malaysia are under the jurisdiction of Inland Revenue Board of Malaysia.
5.2 Responsible for Employee
Most of the responsibilities for the employees are:
a) To submit a prescribed form to the employer to notify information relating to the
individual employment with previous employer in the current year.
b) To submit a prescribed form to the employer if employee wishes to claim deductions
and rebates in the relevant month. The deductions and rebate will be effected subject to
approval by employer.
c) To submit a prescribed form if employee wishes to include benefits in kind (BIK) and
value of living accommodation (VOLA) as part of their own monthly remuneration in
ascertaining the MTD amount subject to approval by employer.
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d) To keep and retain in safe custody each and every receipt relating to claims of
deductions for a period of seven years from the end of that year of assessment under the
Act.
e) To furnish complete and accurate personal information and update any changes of their
own personal particulars to the employer.
f) To furnish correct information in a prescribed form relating to their own chargeability to
tax and failure by the employee to do so constitutes an offence under paragraph 113 (1)
(b) of the Act.
5.2.1 Calculation of the MTD

According to the previous 2009 rate, unmarried person earning monthly income of RM2, 401
and above will be taxable, and the MTD deduction is RM13.
With the new 2010 rate, unmarried person will be taxable only when their monthly
income exceeds RM2, 451, and the MTD deduction for them is RM10 but previously was RM16
under MTD 2009 compared to the latest year.
For this company, I calculated the employees income based on their salary, allowance,
bonus and the overtime allowance. After calculating the employees income, I deducted the
employees EPF. The employees EPF is 11% of the salary. After that, I used the Schedule
Monthly Tax Deduction to calculate the employees monthly deduction. The Schedule Monthly
Tax Deduction can be referred by www.hasil.gov.my.
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After calculating the monthly tax payable, the employees should pay the tax due on the
10th of every month commencing from the second month of the basis period. For the taxpayers
who fail to pay the tax installment on the 10th day of the following month will subject to 10%
penalty on the amount unpaid.
5.2.2 Method to Calculate MTD

There are two methods to calculate MTD. There is:
a. Schedule of Monthly Tax Deduction
b. Computerized Calculation Method
The Inland Revenue Board of Malaysia issued the Schedule of Monthly Tax Deduction for
employer who does not use the computerized payroll software. For those who use the
computerized Calculation can option to the IRB website.
5.2.3 Function of Calculate MTD

The function to Calculate MTD is:
To calculate the MTD based on monthly remuneration.

To calculate MTD based on normal remuneration and additional remuneration such as
bonuses, overdue income, and commission.

To calculated MTD for non-resident employee.
To ensure employer and employee are able to print and revise their MTDs calculation.
5.3 Personal Income Tax

Income accrued and derived from Malaysia or received in Malaysia from outside Malaysia for all
individual is liable for tax. Income remitted to Malaysia by resident individual is exempted from
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income tax under Pare 28 Schedule 6. A non-resident individual will be taxed only on income
earned in Malaysia.
Hence, for Malaysian individual who plans to work overseas or is working overseas
should structure the non-resident at the time of remittance of such foreign source income into
Malaysia to avoid the exposure of such foreign source income to Malaysian tax. As we know that
a non-resident is exempted from tax on his foreign source income received in Malaysia form
outside border of Malaysia.
On the other hand, expatriates working in Malaysia should strive their best to be
Malaysian tax resident because tax residents will enjoy the scale rates 0% - 26% and be eligible
to for tax reliefs and rebates.
Effective from year of assessment 2010, a non-resident individual is liable to tax at the
rate of 26% without any personal relief. However, the non-resident individual can claim rebated
with respect of to fees paid to the government for the issuance of an employment permit. Besides
that, a resident individual is taxed on his chargeable income after deducting personal reliefs at a
scale rate from 0% to 26% with effect from the year of assessment 2010.
5.3.1 Personal Relief

The chargeable income of resident individual is computed by deducting the personal relief from
the total income. The types of relief available are as follows:
Relief
RM
Self (with effect from year of assessment 2010)
9,000
Further self relief disabled
6,000
Wife/husband
3,000
Further wife/husband relief disabled
3,500
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Medical expenses for parents
5,000
Medical expenses for taxpayer, spouse or children on serious diseases 5,000

(include RM500 for medical examination)
Expenses on supporting equipment for disabled taxpayer, spouse, children or
parent
5,000
Expenses on supporting unmarried children:

i.
Below 18 years of age
1,000
ii.
Disabled child
5,000
iii.
Life
Over 18 years old (pursuing tertiary education at university or

college)
insurance
premiums
or
approved
fund
contributions
4,000
7,000
(with effect from year of assessment 2010)

Insurance premiums for education or medical benefit
3,000
Annuity premium on annuity purchased through EPF Annuity Scheme
1,000
Fee of acquiring law, accounting (extended to Islamic finance), technical, 5,000

vocational, industrial, scientific, technological skills or qualification.
Purchase of books, journals and magazines and other similar publication 1,000
(excluding newspapers).
Purchase of computer for once every three years
3,000
Broadband subscription fees applicable from the year of assessment 2010 until
2012
500
Table 1: Types of individual relief (source from www.hasil.gov.my)
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The following are the benefits provided to employees that are exempted from income tax or
accorded a lower tax treatment:
Medical and dental benefits under Section 13 (1) (b)

The medical and dental benefits provided by the employer for the employee and their
immediate family members are exempted. For example, the benefits to the employees
parents cover all forms of medical and dental treatment inclusive of the hospitalization
costs.
Child care benefit under Section 13 (1) (b)

Child care benefits or amenities provided by the employer to the employee are exempted
from tax. Employers are encouraged to provide child care centers for their employees so
as to avoid incurring additional costs on child maintenance. This will certainly create a
friendly relationship between employer and employee.
Leave passage for travel under Section 13 (1) (b)

Moreover, the provision of leave passage for travel is not taxable on employees. The
leave passage is only confined to the employee and members of their immediate family. It
is restricted to 3 local trips and 1 overseas trip in any calendar year. The amount of leave
passage is restricted to cost of airfare tickets. In relation to an overseas leave passage, the
amount is further restricted RM3, 000 for each employee or immediate family.
i.
ii.
Living accommodation under Section 13 (1) (c)

The living accommodation provided to an employee or services director of a controlled
company is assessed at a comparative value, for example the lower or either:
The defined value in the rental paid by the employer or market value as the case may be
of the unfurnished accommodation; or
30% of the employee gross income under Section 13 (1) (a).
For more information, it is more beneficial for an employee to provide with the living
accommodation rather than to be paid a housing allowance. A housing allowance is be
taxed at full value under Section 13 (1) (a) while the provision of accommodation is
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assessed at comparative value under Section 13(1) (c) accordingly. The following is the
table provided by IRB of the value of household furnishings.
Types of Benefit in-kind
Annual Value (RM)
a.
Semi-furnished with furniture in the
840.00
lounge, dining room and bedroom

Semi-furnished with furniture as in (a)
1,680.00
and one/more of the following:

- Air cond
- Curtain
- Carpet
c. Fully-furnished as in (a) and (b) plus
one/more of the following:
- Kitchen equipment
- Crockery
- Utensils and Appliances
d
Service charges and other bills such as
.
water, electricity and telephone.
Table 2: Household Furnishings
3,360.00
The value of service charges

and bills paid for by employer.
Low/interest free loan

The employees gain from the benefits is the provision of low interest rate loans or
interest free loans to employees will not be taxable under Section 13 (1) (a) if the loan is
from employers internal source of funds such as profit or capital contributions. If a
specified is borrowed for the sole purpose of proving a loan to employees, then the
interest expense paid by the employer will be taxable income on the employee under
Section 13 (1) (a) accordingly.
Payment of allowances
Allowances given by employers, such as travelling allowances, entertainment allowances
and housing allowances are assessed as tax on full value by virtue of Section 13 (1) (a).
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However, the employee is allowed a deduction against the gross employment income if
the employee can demonstrate that such travelling or entertainment expenses are incurred
wholly and exclusively for the production of employment income. The tax authorities are
very strict on the claim and require the employee to keep a proper record showing the
date, the amount of expenditure incurred, and the relevant receipts. In order to avoid tax
administration disputes, it is advisable for employees to claim such expenses on a
reimbursement basis rather than being paid a fixed allowance because 'reimbursement'
expenditure is conducted without any private benefit so it is not viewed as income to
employee and thus it is not subject to income tax. Therefore, claiming the expenses on
reimbursement reduce the amount assessed in Section 13 (1) (a) and may possibly reduce
the section13 (1) (c) amount if accommodation is provided by the employer.
Provision of car
The employers may provide company car with fuel to employees for official duties and
private use after work. Employees is regarded as having received a benefit from using the
company car and thus assessed as tax. The value of car benefit is dependent on the age
and cost of the car. This is based on the Income Tax Ruling issued by the tax authorities
on 25 August 1997. Therefore, the employer is able to claim a tax deduction on the
expenses incurred on the company car and at the same time, eligible to claim a capital
allowance or lease rental payment on the car, depending on the mode of financing. The
following is the value of motorcar and fuel provided by IRB.
Cost of Car
Annual Value of
Fuel per Annum
(When New)
Private Usage of Car
(RM)
Up to 50,000
50,001 75,000
75,001 100,000
100,001 150,000
150,001 200,000
200,001 250,000
250,001 350,000
350,001 500,000
(RM)
1,200
2,400
3,600
5,000
7,000
9,000
15,000
21,250
600
900
1,200
1,500
1,800
2,100
2,400
2,700
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Above 500,000
25,000
Table 3: Value of car and fuel
3,000
Goods and services supplied at a discount

In the manufacturing sector, it is normal practice that employees are given the privilege
of purchasing the companys product at a substantial discount. The differential price
between the market price and the discounted price is a taxable benefit. However, the
Income Tax Ruling (ITR 1997/2) on the valuation of benefits in kind has specifically
designated that goods and services offered at a lower price or at a discount are tax exempt
benefits. This not only improves the tax position of employees but also improve the life
style of employees as well if the employer is a food manufacturer.
Share incentive or share option schemes

A share incentive scheme allows employees to share the wealth of the company by
allowing them to subscribe to shares free of charge or at par value. The taxable income
under Section 13 (1) (a) is the difference between the market price and the allotment
price.
A share option is a scheme that allows the employee an option to acquire shares in
a company at a fixed price and with a right to exercise the option at some future date. The
value of the option constitutes taxable income at the time it was granted and not at the
time it was exercised. However, such taxable income can only be crystallized when the
employee exercises the share option to acquire the shares. The gains from share options
then relate back to the year when the share option was granted. A notice of additional
assessment will be issued by the tax authorities, in relation to that previous year of
assessment.
The taxable income is based on the differential price between the market value of
the shares at the time of granting the option and the option price. When the shares are
subsequently disposed of by the employee, the surplus constitutes a capital gain and thus
not taxable.
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Retirement gratuities under paragraph 25, Schedule 6

A gratuity is paid to employee upon resignation or retirement to appreciate the previous
goods service performed by such employee. Gratuity is exempted from tax if:
a. The employee has served the company or companies in the same group for at least
10 years and the retirement takes place on or after reaching the retirement age of
55 years; or
b. The retirement is due to ill health.
Other than above two circumstances, the retirement gratuity pays is taxed on the
employee but the period would be pro-rated to a maximum of 6 years or the period of
employment, whichever is the shorter period.
Compensation for loss of employment under paragraph 15, Schedule 6

Compensation for loss of employment is paid to employee for depriving his services to
the age of retirement. It is exempted from tax if it is due to ill health. If the ill health
condition is not satisfied, then a RM10, 000 exemptions will be granted for each
completed year of service with that employer or those companies in the same group.
The compensation for loss of employment includes a restrictive covenant whereby
the employee is restricted in his rights to take up other employment of the same or similar
kind.
The exemption is not available if the compensation payment is made by a
controlled company to a director of the company who is not a full-time services director.
Services directors of a controlled company and employees are eligible for this exemption.
5.3.2 Budget 2011

Prime Minister/ Finance Minister Datuk Seri Najib Tun Razak mentioned the Summary and
Highlights Tax Changes and Proposals in the article on Oct 15, 2010. Under the budget 2011,
the existing relief has been extended to include expenses to care for parents, who suffer from
diseases or with physical or mental disabilities and who need regular treatment certified by a
qualified medical practitioner. Such treatment and care provided include treatment and care at
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home, day care centers or home care centers. Currently the tax relief of up to RM5, 000 medical
expenses for parents is for treatment in clinics and hospitals, treatment in nursing homes and
dental treatment excluding cosmetic dental treatment.
Besides that, the EPF relief scope has also been extended but limit not increased. Existing
EPF relief of maximum RM6, 000 is extended to include employees contributions to Private
Pension Fund (PPF) to be set up by the government in 2011. This benefits the lower income
group as most of the medium to high income group may already claim up to the maximum relief
of RM6, 000 as the relief of RM6, 000 also includes the life insurance premium, apart from
employees own EFP contributions. Presently, employers contributions to the approved schemes
in excess of 19% of the employee's remuneration will be disallowed as tax deductions. However,
employers contributions to this new PPF will be allowed for tax deductions and will not count
towards the 19% cap.
However, the employers can always increase the employer (portion) EPF contribution as
long as it is not exceeding the 19% tax deduction limit. The structure, investment policies as well
as return to the new PPF are unknown, compared to the well-established EPF. The new PPF will
benefit self-employed person if a person carried out a business under the sole proprietorship or
partnership, the EPF contributions made by the business are not allowed as tax deductions but
instead the contributions will be added back and form part of the profit derived from the business
by that person and assessed for individual tax accordingly (due to sole proprietorship and
partnership are not a separate legal entity). On the other hand, the proprietor or partner can claim
EPF relief of up to RM6, 000 under his personal capacity as an individual taxpayer. With the
introduction of new PPF, contributions made by the business will be allowed for tax deductions.
On the other hand, there is 50% stamp duty exemption for housing sale and purchase and
loan agreements on a residential house with price not exceeding RM35, 000 from1 Jan 2011 to
31 Dec 2012. Residential properties include terrace house, condominium, apartment or flat.
The service tax also has increased from5% to 6% with effect from1 Jan 2011. This will
impact quite a number of service industry as well as individual consumptions. This may be a
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temporary measure to increase government revenue while pending the implementation of Goods
and Services tax (GST).
Furthermore, the ASTRO subscription fee will be subject to service tax of 6% with effect
from1 Jan 2011. Service tax of 6% will be imposed on paid satellite broadcasting services in
which this service was not subject to service tax previously.
5.3.3 Tax Rebate

The tax charged on a resident is reduced by way of the following rebates that can be claimed:
i.
An individual with a chargeable income not exceeding RM35, 000 enjoys a rebate
of RM400 effective from year of assessment 2009. If the wife is not working or the
wifes income is jointly assessed, she also enjoys a further rebate of RM400.
Similarly, a wife who is assessed separately also enjoys a RM400 rebate, provided
ii.
her chargeable income does not exceed RM35, 000.

Any fee paid to the government for the issue of an employment pass, visits pass or
work permit.
Effective from year of assessment 2010, a non resident individual is liable for tax at the rate of
26% without any personal relief. However, he or she can claim rebates in respect of fees paid to
the government for the issuance of an employment work permit. Thus a resident individual is
taxed on his or her chargeable income after deducting personal reliefs at the scale rate from 0%
to 26% with effect from the year of assessment 2010.
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5.3.4 Tax Deduction

The following items are eligible for tax deduction under donation and gift.
Gift of money to the Government, State Government or Local Authorities
Gift of money to Approved institutions or Organizations (Amount is limited to 7% of
aggregate income.
Activity or Sport Body (Amount is limited to 7% of aggregate income.
Gif of money or cost contribution in kind for any Approved Project of national Interest
Approved by Ministry of Finance (Amount is limited to 7 % of aggregate income)

Gift of artifacts, manuscripts or paintings.
Gift of money for provision of Library Facilities or to Libraries
Gift of money or contribution in kind for the provision of facilities in Public Places for
the benefit of disabled persons.

Gift of money or medical equipment to any healthcare facility approved by the Ministry
of Health.
Gift of paintings to the National Art Gallery or any State Art Gallery.
5.4 Tax Computation Flow Chart

Gross Income
(Business Source)
Less: Allowable Expenses
Adjusted Income
(Business Income)
Gross Income
(Non-Business Source)
Employment, dividend,
interest, rents, royalty
Page | 26

Less:
Allowance
Expenses
in respect
of the relevant source

Less: Capital Allowance
Brought forward businesses losses
Statutory income
(Non-Business
Income)
Statutory Income
(Business Income)
Aggregate Income
(From All Source of incomes)
LESS: Currents year business loss

Donation/Approved Cash Contribution
Total Income
LESS: Deduction for individual
Taxable Income Subjects To Tax rates
Total Income Tax
LESS: Rebate (Individual only)

Tax Charged
LESS: Section 110 set off

Page | 27

Foreign tax credit

Tax Payable / Tax to be Repaid
(Repayment)
The source of income can be broadly divided into business source and non-business
source. The business source is computed from gross income. Permitted/Allowable expenses are
deducted from gross income to derive at adjusted income. The allowance expenses can be
divided into double deduction and special deduction.
The adjusted income plus the balancing charge after deducting the capital allowance
gives the statutory income. The capital allowance can be divided to into the unabsorbed capital
allowance brought forward, current year capital allowance, and balancing allowance.
For the non-businesses income, each source of the business needs to be computed
separately. The non-business income sources are the following:
i.
ii.
iii.
iv.
v.
vi.
Section 4 (a) Business income

Section 4 (b) Employment income
Section 4 (c) Dividend, interest, Discounts
Section 4 (d) Rental, royalties, Premiums
Section 4 (e) Pensions, Annuities, Periodical payments
Section 4 (f) Others casual income
The gross income for the non-business after deducting the allowance expenses under
Section 33 and Section 39 to derive the adjusted income. When allowable expenses exceed gross
income, the excess is a permanent loss. It is not allowed to carry forward or set off in the current
year. So there is no capital allowance available for non-business source. Therefore, adjusted
income can be equal to statutory income.
Aggregate income is the summation of all the statutory income from non-business source
and business source.
The following expenses are only applicable to a company.
a. Adjusted loss for the basic period business(Section 44 (2));
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b.
c.
d.
e.
Prospecting expenditure (Schedule 4);

Qualifying pre-operational business expenditure (Schedule 4B);
Approved donations under Section 44(6) Section 44(11C);
Gross loss relief (Section 44A).
For the individual, after personal relief etc has been deducted from the total income, then
it equals to chargeable income. After that a schedule or scale tax rate is used to calculate the
income tax payable.
The total income tax after deducting the rebates (individual only) equals to tax payable.
Then we can deduct the set-off dividend under section 110 to get the tax payable or tax to be
repaid.
5.4.1 Capital Allowance

In determining the business adjusted income during the basis period, there are no deductions
allowed for expenditures which are capital in nature or depreciation value for the assets and used
in the production of that business income. However, Schedule 3 of the Income Tax Act 1967 has
laid down several allowable deductions in the form of allowances, for the capital expenditures
that have incurred.
Capital allowance is only given to business activity. The person who has the right to
claim capital allowance is the person who has expended on the purchase or acquisition of the
said asset. Examples of assets that are used in the business are motor vehicles, machines, office
equipment, furniture, etc.
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Besides that, claims for capital allowance can be made in the relevant column provided in the
Return Form.
Type Of Asset
Initial Allowance (%)
Heavy Machinery/ Motor Vehicle
20
Plant and Machinery
20
Computer and Machinery
20
Other
20
Table 4: Type and Rate of Capital Allowance
Annual Allowance (%)

20
14
40
10
The following are details for the type of the assets:

1. Heavy Machinery Bulldozers, cranes, ditchers, excavators, graders, loaders, rippers,
rollers, rooters, scrappers, shovels, tractors, vibrator wagons and so on.
2. Motor Vehicles All types of motorized vehicles such as motorcycles, aero planes,
ships, and so forth.
3. Plant and Machinery General plant and machinery not included under heavy
machinery such as air conditioners, compressors, lifts, laboratory and medical
equipment, ovens and so forth.
4. Others office equipment, furniture and fittings.
In the case of motor vehicles, other than a motor vehicle licensed by the appropriate
authority for commercial transportation of goods or passengers, as purpose the qualifying plant
expenditure incurred shall be limited to a maximum of RM 50,000 only.
Moreover, motor vehicles which are licensed for commercial transportation of goods or
passengers such as lorry, truck, mini bus, van, and so on are not included in those restrictions.
Nevertheless, starting from year of assessment 2001, the limitation amount for qualifying
plant expenditure for motor vehicle, other than a motor vehicle licensed by the appropriate
authority for commercial transportation of goods or passengers, which is bought on or after
28/10/2000, has been increased from RM50,000 to RM100,000 on the condition that:
i.
The motor vehicle bought where is a new motor vehicle, and

Page | 30

ii.
On the road purchase price does not exceed RM150, 000.
Tax planning basically involves two things: firstly paying the right amount of tax at the right
time and secondly, seeking tax deductions wherever possible and reduce tax liabilities.
5.4.2 Joint or Separate Assessments

With the amendment to Section 45 (2) of the Income Tax Act, 1967, a wife is automatically
assessed separately on her income, unless the husband or the wife elects in writing before 1 April
each year for their income to be jointly assessed. If the spouse is non-resident, he or she may
make the election only if he or she is a citizen.
Under combined assessment, a wife just as a husband, is given a spouse relief of
RM3, 000 (and a further RM3, 500 in case the spouse is disabled) if the spouse elects for joint
assessment under his or her name, or the spouse has no source of income.
To qualify for joint assessment, the wife needs to satisfy the conditions under section 45 (2) as
follows:
a. The wife and husband must be living together and do not stay separately in order to get
the joint assessment.
b. The wife elects in writing before the 1 st of April in the following YA (or any subsequent
date as permitted by Director General).
c. She must have total income to be aggregated with her husband.
d. If the wife is a non-resident for the basis year of YA, she must be Malaysian citizen.
Page | 31

With effect from YA 2001, husband can elect to have his income to be jointly assessed with his
wife or one of his wives, provided none of his wife or wives elect for joint assessment with him.
The husband has to fulfill the following conditions:
a) Both husband and wife they are living together in that calendar year and do not cease to
live together or to be husband and wife of each other.
b) The husband elect in writing before 1 st of April in the following YA that his income is to
be aggregated with the total income of his wife and assessed in her name for that YA.
c) He must have total income to be aggregated with his wife.
d) If her husband is not resident for the basis year of YA, he must be a Malaysian citizen.
5.5 E-Filing
The government has established the Self-assessment for individuals implemented since YA 2004.
Under the Self Assessment System (SAS), the taxpayer himself assume to bear the primary duty
to revise his tax, compute his income tax liability, and account for his tax payable in the current
year as well as the final balance at the time when submit his Form B or Form BE to the
authorities in the following year.
In the year of 2009, 1.25 million taxpayers were reported to have filled their tax return
through the e-filing (Bernama, 2009). The Inland Revenue Board in Malaysia (IRB) introduced
this system to enable taxpayers to submit their tax return through the internet.
E-Filing is an electronic tax tool for taxpayers to submit their tax computation and
payment via the internet. Taxpayers can submit their tax details to IRB via e-filing without
worrying about making mistakes by making use of TaxSaya. The application was introduced for
corporate taxpayers in 2003 and was expanded to cover individual taxpayers in 2004.
With the e-filling function available, user can now file their tax return forms even on the
last day of filing date. Nowadays, user will have more time to complete more cases and have no
Page | 32

worries or doubts if their income tax return forms send via mail or couriers are received by IRB
processing office on time. Each return form filled via e-filing will receive an acknowledgement
from IRB via e-mail almost immediate and this acknowledgement can be printed as a proof of
receipt which states the time and date of return received by IRB.
Inland Revenue Board chief executive officer and director-general Hasmah Abdullah has
already improved tax compliance integrate the e-filing system with IRB main system, so when
tax return is sent through e-filing, the information will be immediately uploaded to main system
and can be processed fast. She said the implementation of the e-filing system where taxpayers
submit their return forms online would expedite tax refunds. E-filing is easy, accurate, safe
and fast compared to manual submission of tax return for manual form. Besides there is no risk
of mail being lost, tax returns are more accurate as the e-filing system computes the tax for
taxpayers. IRB will reimburse excess tax payments for year of assessment 2006 within 30
working days for those using the e-filing system. This means individuals and companies will be
paid back their excess tax payments even though the assessments for earlier years have yet to be
processed. Repayments for assessments before 2006 will be made separately. IRB will also
continue reimbursing excess tax payments directly to taxpayers without waiting for specific
applications by them while the reimbursements will be within 30 working days for e-filing users.
(http://www.bernama.com.my/).
An application on filling and filing Income Tax Return Form (ITRF) electronically through
internet for the following forms:
Form
Form B
Form BE
Form P
Form M (e-M)
Form E (e-E)
Form C (e-C)
Form R (e-R)
e-Estimated (e-CP204)
Type of Business
Business Income
Non- Business Income
Partnership
Non-resident Individual
Employer
Company
108 statement for company
An online Estimate Tax Payable From
submission for Company/ Co-operation
Society/Trust Body
Page | 33

Table 5: Type of Income Tax Return Form

The deadline to submit the Form B with business income is not later than 30 th June and that of
the Form BE without business income is not later than 30th April.
5.5.1 Advantages of E-Filing:
1. Speed and safe
Once of the advantage using an en electronic filing system is speed. Obviously, using
technology is much faster than utilizing a local postal service. For instance, when filling
the tax income, just take a minute to using the internet and e-mailing tax forms directly to
the IRB. There is no need for standing in lines and manually filling out forms. Besides
that, the data checking and tax calculation is done automatically which is more accurate
rather than doing it manually by using the e-filling application. E-Filing is also safer
because e-Filing application is controlled by safe technology feature which is called as
Public Key Infrastructure (PKI) with digital signature to make sure secrecy, validation
and data integration of the tax payer.
2. Convenience and Practicality
With electronic filling, taxpayers can conveniently send a tax return anytime during the
week. This constant availability allows a taxpayer to conveniently pay at his own
convenience, whether during a weekend, a holidays, or on evenings. Taxpayers can easily
handle their taxes and finances right own homes, with just a few clicks of a mouse. It is a
really a great convenience for users.
3. Cost
We can save a lot of money when we practice electronic filling since we do not have to
use couriers, postage stamps, and fax messaging. Since filling electronically eliminates
the need to send physical documents to the IRB, taxpayers can quickly and easily
complete their return without the need to leave home, send documents, make telephone
calls or otherwise interface with financial and tax professionals. Besides that, anything
related to e-ways or electronic ways also save a lot of paper.
4. Simpler and Easier
Page | 34

It is much easier to use e-filling as we do not need to refer to the explanatory notes. So, it
is easy as we just need to select the options from the drop-down menu. All the additional
details are also just a click away. This also can save a lot of time.
5. More efficiency
For the IRB, this is more efficient to process the form submitted through e-filling
compared to the traditional hardcopy way. Besides that, the e-filling also reduce a lot of
IRB personal and the process of the system become more efficient and beneficial.
6. Faster tax refund
The other advantages are getting the tax refund faster for those who have the refund from
their income tax. This is because the IRB process is more efficiently.
5.5.3 Disadvantages of e-filling

1. Must be IT-Literate
One must be IT-Literate or at least with basic computer skills to file in their income tax
through e-filling otherwise they cannot proceed to their e-filling system. So, they must
have got a friend or family member to help to do the e-filling or hire an income tax agent
and pay them for their services.
2. Access to Internet
Many people are worried if taxpayers are not allowed to use income tax form. This will
cause difficulty to the taxpayer who does not know how to access the website by using
computer. By fully using e-filling system will create difficulties to the taxpayer who lives
in rural areas and do not have computer. So, we must have internet to get access to the
IRB e-filling website. If we do not have internet access at home, we can use the internet
access from work place. It poses a lot of difficulty for those who have trouble with access
to the internet.
3. System down
For e-filling, the system has some problem in sometimes. System could also be slow as
too many people get access to the system at one time. But we do not have system down
Page | 35

problem if we are using hardcopy. So, to solve this problem is we do not do the e-filing
during last minutes.
4. Forget the password
It is easy to forget the password as nowadays there are so many pin numbers and
passwords that we need to remember. If we have forgotten the password, we just contact
the IRB office to get a new password. Or, we also can easiest and fastest way to visit the
e-filling website. Within in few minutes, we will get the passwords.
5. Security
Filling records electronically may not be as secure as sending them via mail or post.
Especially for those who employ an outside or third party service to do the electronic
filling for them, we are providing identifiable information that service may keep on file
for a long period of time. This means that more individuals can have access to the
information. For example, we are supposed to receive tax refunds and we want it dine
immediately, we will have to provide the bank account number and routing number for
the deposit. Thus, the date is less secure.
6.0 Conclusion
The bulk of this report assessed the tax planning on employment income for individual under the
Income Tax Act 1967. This report started off with an introductory chapter detailing the history of
the company and the writers experiences undergoing practicum in the Wintrip Sdn Bhd. After
that, the objectives of this report were presented. Next, the methodologies used to assess and
gather information regarding the tax planning also was mentioned. The following chapter
explained, in detail, the findings of this study, including the Malaysian taxation, discussion of
personal reliefs and discussion of the e-filling.
Page | 36

In this company, the tax is calculated based on the Income Tax Act 1967. The company
follows all the Section under the Act. Besides that, the government has established the selfassessment system for YA 2004. This self-assessment system gives more convenience and
efficiency to the company. It is because the employee can fill in the form via internet themselves.
Moreover, the data calculated by e-filling is more accuracy than we use the manual document.
Lastly, the employees can have their tax refunded if they have paid excess. For example
they have a credit balance after deducting the tax payable. However, for the individual with
income less than RM2, 500 is not taxed and the chargeable income not exceeding RM35,000 can
enjoy a rebate of RM400 effective from year of assessment 2009.
In conclusion, the tax relief is available for individual taxpayer who is a resident in
Malaysia. Individual can claim the tax relief in their tax Form BE / B -Part D. In case of doubt,
taxpayer should make reference to explanatory notes enclosed in the tax form.
Page | 37

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BKAX4998 PRACTICUM REPORT

Tax Planning On Employment Income

BKAX4998 PRACTICUM REPORT

Workshop Manager Field Manager

BKAX4998 PRACTICUM REPORT

1.1 Activities Performed During Practical Training

BKAX4998 PRACTICUM REPORT

Part A: particulars of individual

Part B: particulars of husband/wife

Part C: statutory income and total income

Part E: tax payable

Part F: status of tax for the year of assessment 2010

Part G: income of preceding years not declared

Part H: particulars of executor of the deceased persons estate

Particulars of tax agent who completes this return form.

BKAX4998 PRACTICUM REPORT

2.0 Scope of Study

2.1 Project Objective

To study the implication of Malaysian Taxation.

To clarify the impact of tax planning on employment income.

To understand the tax planning for the individual.

To elaborate the validity, completeness and accuracy of tax planning.

BKAX4998 PRACTICUM REPORT

Textbook and Reference

BKAX4998 PRACTICUM REPORT

4.0 Background of Inland Revenue Malaysia (IRB)

BKAX4998 PRACTICUM REPORT

Income Tax Act 1967

Petroleum (Income Tax) Act 1967

Real Property Gains Tax Act 1976

Promotion of Investment Act 1986

Stamp Act 1949

Labuan Offshore Business Activity Tax Act 1990

4.1 Function of IRB

BKAX4998 PRACTICUM REPORT

4.2 The Powers Provided by IRB

To enter into contracts ;

To engage in any activity, either alone or in conjunction with other organizations or

To provide technical advice or assistance, including training facilities, to tax authorities of

To impose fees or charges for services rendered by the Board ;

BKAX4998 PRACTICUM REPORT

To do anything incidental to any of its powers.

BKAX4998 PRACTICUM REPORT

5.1.1 Scope of Charge

5.1.2 Source of Income

b) Income from employment

Dividend, interest and discounts

Rents, royalties or premiums

Pensions, annuities or other periodical payments

f) Gains or profits not falling under any of the above

BKAX4998 PRACTICUM REPORT

5.1.3 Resident Status

I + II + III 182 days

BKAX4998 PRACTICUM REPORT

Social visit 14days

BKAX4998 PRACTICUM REPORT

The tax resident status of an individual is important because it determines:

The individual rate of tax

BKAX4998 PRACTICUM REPORT

5.2.1 Calculation of the MTD

BKAX4998 PRACTICUM REPORT

5.2.2 Method to Calculate MTD

5.2.3 Function of Calculate MTD