Taxation

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TAXATION 1ATX 2033DIA-10/12-00090

TAXATION

Table of Contents

1.INTRODUCTION

2.TASK 1

2.1TAX RETURN FORM e-BE:

3.TASK 2

3.1Dr Aron Tax Computation

3.2Madam Arina Tax Computation

3.3Madam Ardhia Tax Computation

4.CONCLUSION

5.REFERENCES

Table 1: INCOME TAX RATES

1. INTRODUCTION

Taxation is a vital economic tool that the Government employs to regulate the economy. Taxes are the most important source of income for the government and the government uses the taxes collected to finance its expenditure. Income tax can be charge for individual, company, sole proprietor and partnership. Income tax shall be charged for each year of assessment (YA) upon the income of any person accruing in or derived from Malaysia or received in Malaysia from outside Malaysia. Individual who charge for income tax must be a resident. It is important to determine the residence status of individual as it will determine the tax treatment. Section 7(1) (a) – (d) will determine whether an individual is resident or non-resident. Section 7(1) (a) – (d) are:

  1. Section 7(1)(a)
    • Individual must present in Malaysia more than 182 days
  2. Section 7(1)(b)
    • Individual may not in Malaysia for 182days, but is linked by or linked to another period of 182 or more consecutive days in immediate preceding or immediate following YA.
    • Temporary absence can be included as part of 182 days which are:
      • Absence due to his service in Malaysia
      • Absence due to ill-health of himself or immediate family
      • Absence due to social visit not exceeding 14 days
  1. Section 7(1)(c)
    • Individual must be in Malaysia amounting 90 days or more and in 3 out of 4 immediate preceding YA, he was a resident in Malaysia or in Malaysia 90 days or more.
  2. Section 7(1)(d)
    • Individual must resident for the basis year of the following year of assessment and was resident for each of the three basis year for immediate preceding years of assessment.

Form e-BE is the one of form tax return. An individual who has income from non-business sources is required to fill out the Form e-BE.

2. TASK 1

2.1 TAX RETURN FORM e-BE:

BASIC INFORMATION:

1Name as per identity card

2Income tax number

3Enter the identity card number

4Passport number as per passport book

5Passport No. Registered with LHDNM

PART A: PARTICULARS OF INDIVIDUAL

A1 CitizenEnter “MY” if you are a citizen of Malaysian.

A2 SexEnter “1” for male or “2” for female

A3 Status as at 31/12/13Enter ‘1’ for unmarried; ‘2’ for married; ‘3’ for divorcee / widow / widower or ‘4’ for deceased.

A4 Date of Marriage/DivorceEnter the date of marriage; or date of divorce/separation (in accordance with any law); day, month and year if it occurred in the current year.

A5 Type of AssessmentEnter:

  1. ‘1’ if the wife elects for joint assessment to be raised in the name of the husband. She does not have to fill in items B7 to B19 and Part F of her Form BE; or
  2. ‘2’ if the husband elects for joint assessment to be raised in the name of his wife. He does not have to fill in items B7 to B19 and Part F of his Form BE; or
  3. ‘3’ if the individual and spouse elect for separate assessment; or
  4. ‘‘4’ if the individual is married with a spouse who has no income / no source of income or has income which is tax exempt.
  5. ‘5’ if the individual is single / a divorcee / a widow / a widower / a deceased person.

PART B: STATUTORY INCOME, TOTAL INCOME, TAX PAYABLE AND STATUS OF TAX

STATUTORY INCOME

The statutory income of a person from a source for a year of assessment (that year of assessment being in this section referred to as the relevant year) shall consist of:

  1. the amount of his adjusted income from that source for the basis period for the relevant year
  2. the amount of:
    1. any balancing charge or the aggregate amount of the balancing charges
    2. any agriculture charge or the aggregate amount of the agriculture charges
    3. any forest charge or the aggregate amount of the forest charges, falling to be made for the relevant year under Schedule 3 in relation to that source,
    4. reduced by the amount of any allowance or the aggregate amount of the allowances falling to be made for the relevant yew under that Schedule in relation to that source

B1: STATUTORY INCOME FROM EMPLOYMENT

  • Income tax on employment income is an important source of revenue to the Government.
  • It is assessable under Section 4(b) of the income tax act 1967.
  • Employment income relates to an employee, a consideration paid by employer for the services rendered.
  • In income tax act 1967 under section 4(b) - employment income also divided into section 13(1) where under this section employment income categorizes into section 13(1) (a) - (e).
  1. Section 13(1) (a) – wages, salary, remuneration, leave pay, fee, commission, bonus, gratuity, perquisite or allowance.
  2. Section 13 (1) (b) – Furniture benefit, motor vehicle benefit, leave passage, medical/dental treatment/child care benefit (exempted), driver, membership in recreational club, gardener, domestic servant, guard and utilities.
  3. Section 13 (1) (c) – accommodation
  4. Section 13 (1) (d) – unapproved pension, annuity, periodical payment
  5. Section 13 (1) (e) - compensation of employment loss

B2: STATUTORY INCOME FROM DIVIDENDS AND RENTS

  • Section 4(c) – dividends
  • Section 4(d) – rents

B3: STATUTORY INCOME FROM INTEREST, DISCOUNTS, ROYALTIES, PREMIUMS, PENSIONS, ANNUITIES, OTHER PERIODICAL PAYMENTS AND OTHER GAINS OR PROFIT

  • Section 4(c) – interest, discount income
  • Section 4(d) – royalties, premiums
  • Section 4(e) – pensions, annuities or other periodical payment
  • Section 4(f) – others

B4: AGGREGATE INCOME (B1 + B2 + B3)

  • Aggregate income is the summation of statutory income from non-business (determined on an individual source basis) and the statutory income of business less the unabsorbed business loss brought forward. It is also includes recoveries of abortive prospecting expenditure, which had been allowed as deduction in the previous years.

B5 LESS: APPROVED DONATIONS/ GIFTS/ CONTRIBUTIONS

  • Donations are not revenue expenses and not deductible against gross income. These merely social responsibility expenses. Approved donations in cash to approved institutions, Government, State Government, local authority are allowed against aggregate income. Unabsorbed donations are not allowed to be carried forward to the following year in the event the amount of donations exceeded aggregate income. Approved donations include:
  • Donations to approved institutions or Government
  • Donations of artefact, manuscript or painting to Government
  • Donations to approved libraries
  • Donations for public facilities by individual
  • Donations for healthcare facilities by individual
  • Donations of painting to National or State Art Gallery
  • Zakat perniagaan
  • Donations to approved sports activity
  • Donations to project of National Interest

B6: TOTAL INCOME (SELF) (B4-B5)

  • Total income is the residue of aggregate income after deducting the following:
  • Adjusted loss for the basis period
  • Prospecting expenditure
  • Expenditure on approved agriculture projects
  • Qualifying pre-operational business expenditure
  • Proportion of permitted expenses (for investment holding company, unit trust)
  • Trust annuity
  • Approved donations

B7: TOTAL INCOME TRANSFERRED FROM HUSBAND/ WIFE*FOR JOINT ASSESSMENT

  • Item B7 have to be filled in by the individual in whose name the joint assessment is to be raised. Transfer the total income of the spouse which is to be aggregated with the total income of the individual to this item. Enter ‘1’ if the income transferred from husband / wife includes income from a business source or ‘2’ if not. B7 NEED NOT be filled if:
  1. the individual is single/a divorcee/a widow/a widower
  2. the spouse of the individual does not have any source of income or has income which is tax exempt
  3. elects for separate assessment
  4. elects for joint assessment to be raised in the name of his/her spouse

B8: AGGREGATE OF TOTAL INCOME (B6+B7)

B9: TOTAL RELIEF

  • Total relief refer to amount F19.

B10: CHARGEABLE INCOME (B6 – B9) or (B8 – B9)*Enter “0” if value is negative

  • Income tax payable is computed by reference to the chargeable income as ascertained in the basis year for the YA. The ascertainment of chargeable income is explained in section 5 of the Act. Section 5 sets up the scope of chargeable income, begins with the determination of basis period, ascertainment of gross income, adjusted income, statutory income, aggregate income, total income till chargeable income.

B10a: SPECIAL RELIEF RM2000

  • A special deduction of RM2, 000 is granted if the Aggregate Income (Item B4) does not exceed RM96, 000. Leave the item blank if the Aggregate Income is exceeding RM96, 000.

B10b: CHARGEABLE INCOME (B10 – B10a)*Enter “0” if value is negative

B11: INCOME TAX COMPUTATION

  • A tax computation is a statement showing the tax adjustments to the accounting profit to arrive at the income that is chargeable to tax. Following are tax rate schedule:

TAX SCHEDULE

Category

Range of Chargeable Income

Computation

(RM)

Rate

(%)

Tax

(RM)

A

0 – 5000

First 5,000

0

0

B

5001 – 10000

First 5,000

Next 5,000

2

0

100

C

10001–20000

First 10,000

Next 10,000

2

100

200

D

20001–35000

First 20,000

Next 15,000

6

300

900

E

35001 - 50000

First 35,000

Next 15,000

11

1200

1650

F

50001–70000

First 50,000

Next 20,000

19

2850

3800

G

70001-100000

First 70,000

Next 30,000

24

6650

7200

H

Exceeding 100000

First 100,000

For every next ringgit

26

13850

…………..

Table 1: INCOME TAX RATES

B11a TAX ON THE FIRST

  • Match the chargeable income from item B10 or B10b of the Form BE with the range of chargeable income as provided in the tax schedule.

B11b TAX ON THE BALANCE

The following are example to fill in tax on the balance:

Chargeable income as per B10 or 10b: RM5, 500

Use category B of the tax schedule to compute as follows:

Tax on the first RM5, 000 RM 0.00

Tax on the balance RM500 @ 2% RM10.00

Total income tax RM10.00

Fill in items B11a and B11b of the Form BE as shown below:

Tax on the first

5000

.00

0

.00

Tax on the balance

500

.00

At rate (%)

2%

10

.00

B12 TOTAL INCOME TAX (B11a + B11b)

  • Amount at B11a plus B11b, enter in item B12.

B13 LESS: TOTAL REBATE

  • Tax rebate for self
  • Tax rebate for husband/wife
  • Tax rebate for Zakat and Fitrah

B14 TOTAL TAX CHARGED (B12 – B13)*Enter”0” if value is negative

  • To find the amount total tax charged, then B12 minus B13.

B15 LESS:

  1. TAX DEDUCTION UNDER SECTION 51 OF FINANCE ACT 2007 (DIVIDENDS)
  2. TAX DEDUCTION UNDER SECTION 110 (OTHERS)
  3. SECTION 132 TAX RELIEF
  4. SECTION 133 TAX RELIEF

B16 TAX PAYABLE (B14 – B15)

  • To find the amount tax payable B14 minus B15. If the sum of amounts in B15 exceeds the amount in B14, enter “0” in this item (B16).

B17 OR: TAX REPAYABLE (B15 – B14)

  • To find the amount tax repayable B15 minus B14. This item is applicable if the amount in B15 exceeds the amount in B14.

B18 INSTALMENTS/MONTHLY TAX DEDUCTIONS PAID FOR 2013 INCOME – SELF AND HUSBAND/WIFE FOR JOINT ASSESSMENT

B19 BALANCE OF TAX PAYABLE (B16 – B18) / TAX PAID IN EXCESS (B18 – B16)

  • The balance of tax payable must be paid within the stipulated period. If tax paid in excess, B18 minus B16. Enter “X” in the box provided if Tax Paid in Excess.

PART C: PARTICULARS OF HUSBAND/WIFE

C1Name of the husband/wife.

C2The identity card number of the husband/wife.

C3Passport number of the husband/wife.

PART D: OTHER PARTICULARS

D1Telephone number of office/tax agent’s firm/residence/hand phone. Individual must ensure the information is correct and accurate. This information will be used for LHDNM official purposes

D2 Employer’s No. *Enter the employer’s E file reference number.

D3 Name of Bank*

D4 Bank Account No.*Account number at the bank concerned.

D5 e-Mail address (if any). Individual must ensure the information is correct and accurate. This information will be used for LHDNM official purposes

PART E: INCOME OF PRECEDING YEARS NOT DECLARED

E1-E2Income received in respect of any earlier year not previously declared such as payment of salary in arrears. Bonus or director’s fee shall, when received in the basis year, be treated as part of the gross income from employment for the basis year in which it is received and assessed as such.

PART F: DEDUCTIONS

F1 Individual and dependent relatives – RM9000

F2 Medical treatment, special needs and carer expenses for parent (certified by medical practitioner) – Restricted to RM5000

F3 Basic supporting equipment for disabled self, spouse, child or parent - Restricted to RM5000

F4 Disabled individual – RM6000

F5 Education fees (self) – Restricted to RM5000

F6 Medical expenses on serious diseases for self, spouse or child

F7 Complete medical examination for self, spouse or child

(Restricted to RM500)

F8 Purchase of book/magazines/journals/similar publications (except newspaper and banned reading material) for self, spouse or child – Restricted to RM1000

F9 Purchase of personal computer for individual (deduction allowed once in every 3 years) – Restricted to RM3000

F10 Net deposit in Skim Simpanan Pendidikan Nasional (total deposit in 2012 minus total withdrawal in 2013) – Restricted to RM6000

F11 Purchase of sports equipment for any sports activity as defined under the Sports Development Act 1997 – Restricted to RM300

F12 Interest on housing loan (Conditions for eligibility to claim must be fulfilled)

(The Sale and Purchase Agreement has been executed within 10/03/09 – 31/12/10) – Restricted to RM10, 000

F13 Husband/ wife/ payment of alimony to former wife – Restricted to RM3000

F14 Disabled husband/wife – Restricted to RM3500

F15 Child:

F15a Child – Under the age of 18 years – RM1000

F15b Child – 18 years & above and studying – RM6000

F15c Child – Disabled child – RM5000

F16 Life insurance and provident fund – Restricted to RM6000

F17 Private Retirement scheme and Deferred Annuity – Restricted to RM3000

F18 Education and Medical insurance – Restricted to RM3000

F19 Total Relief (F1 to F18) (Transfer this amount to B9)

PART G: PARTICULARS OF TAX AGENT WHO COMPLETES THIS RETURN FORM

G1Name of firm

G2Telephone number of the firm

G3Tax agent approval no.

G4Signature of person who completes Form BE.

3. TASK 2

3.1 Dr Aron Tax Computation

Dr Aron

Tax Computation for Year of Assessment 2013

Section 4(b) – Employment Income

Section 13(1) (a):

Salary (RM 8000 x 12)RM96, 000

BonusRM8, 000

Share Incentive/Option:

Market valueRM2.50

Less: Option PriceRM1.00

RM1.50

Number of shares3,000

Perquisite (3000 x RM1.50)RM4, 500RM108, 500

Section 13(1) (b):

Furnishing Benefit (70% x RM3360)RM2, 352

Driver (RM600 x 12)RM7, 200

Gardener (RM300 x 12)RM3, 600

Domestic Servant (RM400 x 12)RM4, 800

Utility BillsRM3, 600

Child Care BenefitsEXEMPTEDRM21, 552

Section 13(1) (c):

AccommodationRM25, 200

Lower of: RM3000 x 12 x 70% = RM25, 200

RM108, 500 x 30% = RM32, 550RM25, 200

Section 13(1) (d):

Amount contributed by employerRM43, 000

Amount contributed by employeeEXEMPTED

Interest earnedRM12, 000RM55, 000

Statutory income from employmentRM210, 252

Section 4(c) – Dividend/Interest Income

Malaysia DividendRM18, 000

Interest(Malaysian Banking Bhd)EXEMPTED

Interest (Flying Colours Bhd)RM1, 200RM19, 200

Section 4(d) – Royalty Income

Royalty incomeRM23, 000

Less: Para. 32B exemptionRM20, 000RM3, 000

Section 4(e) – Annuity

AnnuityRM4, 500RM4, 500

Aggregate IncomeRM236, 952

Less: Relief

SelfRM9, 000

First ChildRM6, 000

Second ChildRM5, 000

Third ChildRM3, 000

Others Child (2 x RM1, 000)RM2, 000

Handicapped ChildRM5, 000

EPF and Life Insurance Premium RM2, 380RM32, 380

Chargeable IncomeRM204, 572

Income Tax Computation:

Tax on the First: RM100, 000RM13, 850

Tax on the Balance: RM104, 572 @ 26%RM27, 188.72

Total Income TaxRM41, 038.72

Less: Total Rebate

Rebate (Zakat)RM2, 198

TAX PAYABLERM38, 840.72

3.2 Madam Arina Tax Computation

Madam Arina

Tax Computation for Year of Assessment 2013

Section 4(b) – Employment Income

Section 13(1) (a):

Salary (RM4000 x 12)RM48, 000

Travelling RM2, 000

EntertainmentRM3, 600

AllowanceRM5, 000RM58, 600

Less: Allowable Expenses

TravellingRM2, 000

EntertainmentRM3, 600RM5, 600

Adjusted Employment IncomeRM53, 000

Less: Relief

SelfRM9, 000

EPF and Life Insurance PremiumRM530

Chargeable IncomeRM43, 470

Income Tax Computation:

Tax on the First: RM35, 000RM1, 200

Tax on the Balance: RM8, 470 @ 11%RM931.70

Income Tax PayableRM2131.70

3.3 Madam Ardhia Tax Computation

Madam Ardhia

Tax Computation for Year of Assessment 2013

Section 4(a) – Business Income

Business A: Restaurant Ardhia

Adjusted IncomeRM6, 000

Add: Balancing ChargeRM3, 500RM9, 500

Less: Capital AllowancesRM2, 100

Statutory IncomeRM7, 400

Business B: De Fashion Boutique

Net ProfitRM16, 800

Add: Non Allowable Expenses

Donation to SchoolRM2, 000

DepreciationRM7, 500

Donation to Approved InstitutionRM500RM10, 000

Adjusted IncomeRM26, 800

Less: Capital AllowancesRM4, 700

Statutory IncomeRM22, 100

Aggregate Statutory Income from BusinessRM29, 500

Section 4(c) – Dividend Income

DividendRM10, 800

Aggregate IncomeRM40, 300

Less: Double Deduction

Donation to Approved InstitutionRM500

Donation to SchoolRM2, 000

Total IncomeRM37, 800

Less: Relief

SelfRM9, 000

Chargeable IncomeRM28, 800

Income Tax Computation:

Tax on the First: RM20, 000RM300

Tax on the Balance: RM8, 800 @ 6%RM528

Tax PayableRM828

4. CONCLUSION

In conclusion, the concept of ‘resident’ is important in the Income Tax Act 1967. It is important to determine the residence status of individual as it will determine the tax treatment. Income tax rate for resident is scale rate (0 – 26%).

Income tax payable is computed by reference to the chargeable income as ascertained in the basis year for a year of assessment.

Sources of income generally can be divided into business income and non-business income. Non-business income refers to employment income, dividends, interest or rental income.

5. REFERENCES

  • Choong,K.F.,(1994) Malaysian Taxation – Principles and Practice, Kuala Lumpur, Malaysia: Infoworld
  • Choong,K.F.,(2003) Malaysian Taxation – Principles and Practice, Kuala Lumpur, Malaysia: Infoworld
  • Choong,K.F.,(2010) Malaysian Taxation – Principles and Practice, Kuala Lumpur, Malaysia: Infoworld

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