TAX NEWS - 2010

Malaysia Tax: Is removal of 20% tax rebate by Malaysian IRB means inceasing tax ?

PETALING JAYA -- The schedular tax deduction system (STD) implemented last year that removes a 20% tax rebate is among the reasons that could lead to confusion over the tax amount.

The 2009 tax deduction system no longer gives a 20% tax rebate on the monthly schedular tax deduction for individuals earning below RM10,000 a month, said Ernst & Young Malaysia human capital director Irene Ang.

"Therefore, the amount collected under this monthly deduction can be higher than the actual tax to be paid by an individual at the end of the assessment year," she said.

However, Ang stressed that the overpaid amount from the monthly schedular tax would not be a sizeable sum.

Under this 2009 STD, Ang said taxpayers could also request their employers to lower the tax deduction for the particular month in the event the employees had incurred incidents allowing for tax relief.

These included the purchase of computers, paying for parents' medical bills and buying reading materials.

Ang advised employees to be diligent in claiming for tax reliefs, although some effort – such as the need to fill forms – was required.

A financial controller of a company said not all companies were actively helping their employees to make the tax relief claims because the process was tedious.

"Can you imagine the extra paper work for employers and employees should there be a high number of employees making such requests every month," said the high-level executive working in a public-listed company in Kuala Lumpur.

A consultant with a local tax agency said most taxpayers would rather pay the estimated tax (accumulated from the STD) first and apply for tax relief when doing their taxes at the end of the assessment year, instead of applying for the tax relief every month to reduce the STD amount.

"Many people find the tax calculations too confusing.

"I suggest that the IRB continue to simplify the tax deduction measures," he said.