This is the final of a three-part ACCA Easy Guide to Tax Filing for Employees, which looks at income tax threshold, child relief and penalties
FOR YA2008, employees need to make a minimum annual salary of RM26,804 before triggering income tax.
Married couples should ensure that the higher-earning spouse claims child relief to lessen the tax burden. Remember to abide by income tax regulations to avoid heavy penalties.
Income Tax Threshold
For YA 2008, an employee is required to file Form BE by or before April 30 through electronic filing or actual submission of the tax return form to the Pusat Pemprosesan at Pandan Indah, Cheras.
The employee is entitled to the following tax reliefs:
Employees must make a minimum salary of RM26,804 to be liable for income tax for YA 2008.
Example 1: An individual with only EPF contributions as relief
An employee may not be required to pay tax on employment income exceeding RM26,804 if said individual employee incurred other tax reliefs on books, medical check-ups or life insurance premiums.
Example 2: Assuming an individual with a salary of RM30,062 has tax reliefs other than EPF contributions, he may not be liable for income tax. His tax payable is:
An employee earning annual salary exceeding RM30,062 may also not be liable to pay income tax if he incurred the following expenses:
(a) Medical expenses for parents RM5,000
(b) Medical or educational insurance for taxpayer, spouse, child RM 3,000
(c) Basic supporting equipment for taxpayer, spouse, child, parents RM3,000
An employee with an existing SG income tax reference number may need to file in a nil return on Form BE even though his annual salary for YA 2008 is below RM30,062.
Married couples can claim child relief for maintaining any child during the calendar year 2008 whether the child is their own, a stepchild, or a legally adopted child.
The amount of child relief is:
18-years-old or less (RM1,000); above 18 and studying in university or college (RM4,000).
Child relief is given for any number of children who are not married.
Child relief for disabled children is RM5,000.
An additional RM4,000 is granted if the disabled child is studying in university or college.
To minimise tax payable, child relief should be claimed by either spouse who has the highest taxable income.
Example: Li and Choo have three children below 18 years. Li’s total income is RM90,000 and Choo’s RM60,000 for YA 2008. The child relief entitlement is RM1,000 x 3 = RM3,000. (see charts above)
The Income Tax Act 1967 imposes various penalties for non-compliance. These include:
(a) Non-submission of return
Return Form BE for YA 2008 needs to be submitted by or before Apr 30, failing which taxpayers incur a:
(i) Penalty that is 3 times of tax
(ii) Fine between RM300 to RM2,000
In practice, the tax authorities impose 2%-20% on the tax payable as the penalty instead of the statutory formula of 300%.
(b) Non-payment of final tax
The employer deducts the employee’s monthly tax which is paid to IRB on the 10th of every month. The difference between the actual tax and the total tax deducted by the employer must be paid to IRB on / before Apr 30. Failure to pay the final tax on Apr 30 will result in a late payment penalty of 10% being imposed.
An additional 5% will be imposed if the final tax or penalty is still not paid by June 30 (60 days after Apr 30)
(c) Not keeping sufficient records
Under the self assessment system, an employee is required to keep sufficient records on his tax affairs for seven years. Only the tax return Form BE is submitted to IRB by or before Apr 30.
These records comprise a copy of Form BE, salary slips, Form EA (Statement of Employment Income), and credit card statements in relation to petrol claims, travelling, parking, and toll charges incurred in relation to official duties.
Failure to maintain sufficient records is an offence and the penalty will be:
(i) A fine between RM300 to RM10,000 or
(ii) Imprisonment ≤ 1 year.