Encountered some questions on Malaysia personal tax matters?
Inland Revenue Board (IRB), the Malaysian tax authorities published some FAQ that may be relevant to individual tax payer in Malaysia. Here are some extracts:
Assessment of Tax
Q : I have changed my place of work from Kuantan and I am currently working in Shah Alam but my income tax file is at the Inland Revenue Branch in Kuantan. Can my income tax file be transferred to Shah Alam?
A : You may by way of telephone or letter to the Inland Revenue Branch Kuantan request for your tax file to be transfered to the Inland Revenue Branch Shah Alam. You have to inform the new Branch (in this case the Shah Alam branch) of any future change of address.
Q : Is there a limit to the number of children entitled to child relief under the Income Tax Act?
A : There is no limit to the number of children, but relief will only be given for any dependent unmarried child who at the time is:
i. below 18 years of age;
ii if above 18 years of age, was in receipt of full time education or is under articleship or indenture in trade or profession; or
iii. is physically or mentally disabled (relief for physically or mentally disabled child is RM 5,000.00).
Payment of Tax
Q : What is STD / PCB?
A : Schedular Tax Deduction (STD or PCB) which was introduced in 1st January 1995, is a system of tax recovery where employers make deductions from their employees’ remuneration every month in accordance with a Schedule. This is mandatory, in that neither the employer nor employee has any choice in the matter. Any deviation from the requirements of the Income Tax (Deduction from Remuneration) Rules 1994 can only be upon written authorization from the Board.
Q : What are the payments liable to STD?
A : STD is due only on employment income, i.e., on remuneration that arises from a master servant relationship, and this includes all payment other than benefits-in-kind [Section 13(1)(b)], accommodation benefits [Section 13(1)(c)] and reimbursements. Employment income subject to STD includes salary, wages, commission, overtime, allowances, director’ fees, tips and bonuses arising out of exercising the employment. The employer adds up such income, subtracts the employee’s EPF contribution (subject to a maximum of RM416. per month or RM 5000 per year), and deducts the STD in accordance with the relevant category in the Schedule that the employee comes under. However, where the payment is bonus or other lump sum amount, a special formula has to be adopted to determine the STD.
Q : How to calculate the STD for director’s fees?
A : In cases where the Director’s Fees is paid monthly together with other monthly remuneration, both the relevant amounts must be added together in order to determine the STD.
For cases where only Director’s Fees is paid monthly, the STD is determined in the usual manner.
Where a director is paid a monthly remuneration and he receives Director’s Fees in a lump sum, the STD is calculated by using the Bonus Formula.
In instances where the director receives only Director’s Fees and paid in a lump sum, the relevant amount is divided by the number of months for which the payment relates. STD is determined accordingly and then multiplied by the number of months in question. E.g. A director receives annual Director’s Fee of RM36,000.00, without any other remuneration. Therefore the amount applicable per month is RM3,000.00 (RM36,000.00 / 12). The STD for RM3,000 is determined and then multiplied by 12.
Q : How to deduct STD if the reference number of the employee is not known?
A : Contact the nearest Inland Revenue branch to check for the tax reference number. If that employee does have a tax reference number, action must be taken to register a tax file.
Q : Remittance of an amount in excess of that stated in the deduction table has been discovered? Can an adjustment be made in the following month’s deduction?
A : An adjustment is acceptable provided a covering letter explaining the position is sent together with the adjusted deduction. Adjustments are not allowed for different years, for example, an error relating to the deduction in December 1999 cannot be rectified by an adjustment in the deduction made in January 2000. It is advised that you seek assistance from the nearest IRB Branch before making any adjustments.