Saturday, April 26, 2008

Malaysian Personal Income tax (Part 1)

With the deadline to submit the income tax returns by 30 April 2008, here is an important source of information on personal income tax found in The Star Online, complied by Deloitte KassimChan .

Claims deduction to lower taxable income (From the Star Online)
Friday April 25, 2008

I am a Malaysian citizen. I returned to Malaysia in mid-2007 after spending 10 years overseas. Can I claim deductions?

Deductions are available to tax residents of Malaysia. Generally, if you were physically present in Malaysia for at least 182 days in 2007, you qualify as a tax resident. Being a Malaysian citizen does not necessarily mean that you are entitled to deductions.

Our customary wedding ceremony was held in December 2007, but our marriage was registered in January 2008. Can I claim a deduction in respect of my wife in 2007?

For tax purposes, a woman who is regarded by virtue of any law or custom (whether or not she has gone through any religious or other ceremony) as the “wife” of a man or as one of his wives.

You can claim for a spouse relief of RM3,000 in your 2008 tax return but not 2007 since you only legally married in 2008. Your wife must also elect for a combined assessment with you if wife relief is to be available.

My spouse and I are working. Should we elect for joint assessment?

A joint assessment will be more advantageous if your spouse has no income, as you will be gaining an extra deduction of RM3,000 from the spouse relief. In a separate assessment, this RM3,000 spouse relief will not be available.

Separate assessment is usually advantageous as you and your spouse can then each claim RM8,000 personal relief (i.e. total RM16,000) against the income of each person, instead of one spouse claiming personal relief of RM8,000 plus spouse relief of RM3,000.

I am now the sole breadwinner for our family as my husband met with an accident and was unemployed throughout 2007. Can I claim a deduction in respect of my husband?

Yes, a deduction of RM3,000 in respect of your husband is available to you upon due claim.

Can I claim for medical expenses incurred in respect of my parents and parents-in-law?

Parents refer to natural parents or foster parents in the case of an adopted child. Hence, you can only claim a deduction if you have incurred medical expenses in respect of your own parents.

Your spouse can claim medical expenses incurred in respect of your parents-in-law if the receipts are in your spouse’s name. Your maximum deduction is RM5,000. Original receipts are required to support the claim and the receipts must be endorsed by the medical practitioner certifying that treatment was provided to the parents.

Medical care and treatment provided by a nursing home and dental treatment limited to tooth extraction, filling, scaling and cleaning would qualify for deductions. However, cosmetic dental treatment expenses such as teeth restoration and replacement involving crowning, root canal and dentures are excluded as stated in Public Ruling 2/2005 issued by the Inland Revenue.

My colleague’s mother contracted cancer and had undergone expensive treatment with costs borne by my colleague. I hear that there is a claim for deduction for the medical expenses incurred in respect of serious disease. Is this correct?

Deduction for expenses in respect of serious illness is only available if the individual has incurred expenses on himself/herself, his/her spouse or his/her children. Since the medical expenses were incurred for your colleague’s mother, a claim under the “medical expenses for parents” should be made – see question above.

Serious diseases for tax purposes include AIDS, Parkinson’s disease, cancer, renal failure, leukaemia, heart attack, pulmonary hypertension, chronic liver disease, fulminant viral hepatitis, head trauma with neurological deficit, tumour in brain or vascular malformation, major burns, major organ transplant and major amputation of limbs.

Deduction for medical expenses on serious diseases is limited to RM5,000 and must be supported by a receipt and certified by a medical practitioner registered with the Malaysian Medical Council.

Every year my family spends around RM2,000 on newspapers, books, magazines and journals. Can I claim the whole amount as deduction?

A claim of up to RM1,000 for purchase of books including school textbooks, magazines and journals, whether purchased locally or overseas, and other similar publications (hardcopy or electronic) may be made where evidenced by receipts. However, the Inland Revenue excludes the purchase of newspapers and banned publications from deduction.

I intend to pursue a MBA course. Am I able to claim deduction in respect of the fees arising?

The 2007 deduction of up to RM5,000 relates to any course of study up to tertiary level in any institution in Malaysia recognised by the Government, for the purpose of acquiring law, accounting, Islamic financing, technical, vocational, industrial and scientific or technological skills or qualifications.

Effective 2008, the courses qualifying for the deduction are extended to Masters and Doctorate for any skill or qualification. The above criteria relating to an institution will still apply.

Refer to

No comments: