Where or how to get Malaysian tax rebates

Where or how to get tax rebates COMPILED BY LISA GOH

Claimable expenses: According to KPMG Tax Services executive director Datin Pauline Tam, there are a lot of deductions that taxpayers can claim for within the legal framework, if they have the appropriate supporting documents.

There’s still the taxes to file even if you are caught up in the fever of the 13th General Election.

WHEN filing your taxes, it helps to know which incomes are taxable and where or how you can get rebates. So, from rental income to stock gains, KPMG Tax Services executive director Datin Pauline Tam tackles some of the queries raised by Sunday Star readers.

> I have four children. Three registered under my wife and one registered under my name for the National Education Savings Scheme (SSPN). How is the tax rebate claimed in such a situation?

Your wife is entitled to claim the net deposits (but limited to a maximum of RM6,000) in the three accounts registered under her own name. Likewise, you are entitled to claim the same for the accounts registered under your name. The claim is only allowed for Years of Assessment 2012 to 2017.

> If I invest RM3,000 on the Private Retirement Scheme (PRS) this year, can I claim the rebate, then sell it early next year and reinvest? Can the reinvestment be claimable again against RM3,000? Can this approach also apply to the SSPN scheme?

An individual can claim an aggregate amount of payment of deferred annuity or contribution to the PRS or both up to maximum of RM3,000 for a year. In this respect, technically, you could claim contributions to PRS (assuming that you are not claiming for payment of deferred annuity) based on your aggregate amount of contributions to the PRS as evidenced by the relevant statement issued by the PRS.

However, effective from Jan 1 this year, the withdrawal of contributions from a PRS by an individual before he reaches the age of 55 would be subject to a withholding tax at the rate of 8%. In addition, contributions to a PRS may involve some terms and conditions which may not offer you the flexibility to switch over to another PRS in the subsequent year. The claim for deduction for contributions to PRS is from Years of Assessment 2012 to 2021.

With regard to the deduction for deposits in the SSPN account, the allowable deduction is limited to the net deposit (after taking into account the withdrawals during the same year) and up to a maximum of RM6,000. Further, we understand that there could be some restriction on the quantum that you could withdraw from the SSPN account. The claim for deduction for net deposit into the SSPN account is from Years of Assessment 2012 to 2017.

> Can the pap smear test be classified under medical fees?

You can claim an amount of up to RM500 in respect of a complete medical examination expenses expended on yourself or your spouse or your children as evidenced by receipts issued by a licensed hospital or licensed medical practitioner. Thus, you can make a claim if a pap smear test is part of the complete medical examination. However, if the medical fee is just for pap smear test, it would not be claimable.

> a) For parents’ medical expenses, can I claim for chemotherapy treatment of my mother’s cancer?

The tax relief under “medical treatment, special needs and carer expenses for parents” which is limited to RM5,000 includes chemotherapy treatment for parents.

b) Must the medical expenses be incurred at, or paid to, a government hospital or clinic? Can treatment at a private hospital or traditional Chinese treatment/medical hall qualify for deduction?

The claim must be evidenced by a receipt issued by a registered medical practitioner certifying that the medical treatment has been provided to the parents. In the case where the receipt is issued in the name of the patient, the tax payer must obtain an endorsement on the receipt by the doctor to certify the medical charges were paid by him. As an alternative, if the charges were paid via his credit card, the credit card receipt (as well as a clear photocopy in case the original receipt fades over time) and the hospital bills should be kept as evidence of payment.

Rent collection: Property owners only need to declare rental income when their properties are rented out.

> On deductions for parents’ medical expenses, can I claim for my in-laws?

The current tax laws only allow claim of specified medical expenses on one’s own parents and not parents-in-law.

> I have a question on the RM10,000 deduction for interest on housing loan (which has a three-year expiring period commencing from the date in which the interest is first expended). I bought my house in 2009 under a developer interest bearing scheme (DIBS) and took delivery of the house in mid-2011. I made my first (interest deduction) claim in assessment year 2011 and am making the second claim for assessment year 2012. Is this claim my last?

We note from Section 46B(2) of the Income Tax Act 1967 (“ the Tax Act”) in relation to the deduction of interest on housing loan, that the wordings used are “…a period of three consecutive basis years beginning from the basis year in which the interest referred to …is first expended by that individual”. Applying the above in your circumstances, if the first year you expended interest is 2011, then you are eligible for the claim of interest for 2011, 2012 and 2013.

> Does the RM500 broadband deduction cover fixed broadband and mobile Internet?

Based on the Inland Revenue Board guidelines issued on April 12, 2011, the relief can be given for fees paid for Internet connection via cable or Digital Subscriber Line with the speed of 256kbps or more but not for fees paid for dial-up service (56kbps) for Internet connection. The fees must be paid by the individual for broadband subscription that is registered under his own personal name. The deduction is only allowed for Years of Assessment 2010, 2011 and 2012.

> If my income is RM30,000 per annum and my calculations show that I don’t have tax payable after deduction rebate, do I still need to submit tax assessment to IRB?

You are required to submit a tax return by the due date even if you do not have any chargeable income under the following circumstances – you have chargeable income in the immediate preceding year; or you have submitted a tax return in the immediate preceding year; or you are required to submit a tax return (but failed to submit) for the immediate preceding year. However, you do not need to submit a tax return if you are able to obtain a waiver from the IRB.

> As my EPF has exceeded the maximum of RM6,000, I claim 60% on my insurance under medical. However, I only did this last year. Can I make a claim for all the previous years that I did not submit this 60%?

You could claim a relief not exceeding RM3,000 on insurance premiums in respect of medical or education benefits for yourself or your spouse or your child. If you have omitted to claim for the past years, you could make an appointment to meet with an IRB official at the IRB’s branch where your tax file is maintained and submit an official letter with the original supporting documents to make the claims for the past six years.

> I bought an iPad in 2011 and during the year, I was not entitled to tax deduction as I had already claimed for a computer bought in 2008. Can I claim tax deduction on the iPad in year 2012?

The claim for the purchase of a personal computer is allowed once in three years. As you have made your last claim in 2008, you could make the next claim in 2011. Personal computer means a desktop computer, laptop computer and handheld computer and does not include computer accessories. We understand that with recent innovations in IT, the definition has expanded to include mobile computers like tablet PC, as long as the gadget does not include the features of a mobile phone.

With regard to whether the claim of iPad as purchase of a personal computer is allowed, it is still not clear. Since you made the purchase in 2011 and you should have submitted your 2011 tax return, you may wish to check with the IRB’s branch where your tax file is maintained whether you could make a revised claim against your 2011 income in respect of the purchase of iPad in 2011.

> I retired in Malaysia in August 2011, and was subsequently offered a one-year contract till August 2012 in Cambodia. During the tenure of my contract, I paid income tax to the Cambodian government (there is no double taxation agreement between Cambodia and Malaysia), and none to the Malaysian Government.

Since I did not have any employment income in Malaysia for assessment year 2012, I should be submitting a NIL return for my tax filing. However, since I have received Malaysian corporate tax-deducted shares dividends in 2012, I will be filing my tax return for the shares dividends income. Need advice/clarification on the following:

a) In 2012, I continued to contribute to EPF in Malaysia via my employer in Malaysia. Can I claim the EPF contributions as rebate/deduction in my tax filing? I have the EPF statement as proof of the contribution.

You are eligible to claim your EPF contributions as a personal deduction under “Life insurance and provident fund” in your tax return if you qualify as a tax resident in 2012. The claim for EPF contributions and life insurance premiums is limited to RM6,000. If you have taken a loan to finance your investment in shares, the interest expenses incurred by you would be deductible against the dividend income.

b) In the income tax form, there is a column/category: “Interest on loan employed in the production of gross dividend income” eligible to be deducted from total dividend received. How can I enjoy this deduction? What type of bank documents are required as proof of the loan employed, if any?

Documented evidence such as the offer letter from the bank and the bank statements indicating the flow of funds for financing the share investments would be required to prove that the funds have been utilised to finance the acquisition of the share investments.

All taxpayers are subject to tax audits. Therefore, the supporting documents to substantiate the utilisation of funds for the purchase of the share investments and interest expenses incurred by you are required to be kept for seven years from the end of the year in which you have made a claim for the interest expenses.

> My husband has already submitted his tax assessment. Later, we noticed that he did not fill a column for rebate on disabled spouse, which is RM3,500. I submit my tax separately from him. Is he entitled for the rebate if we write to IRB?

It appears that you have elected for separate assessment. In this respect, your husband is not entitled to claim a deduction for a disabled spouse.

> My spouse has quit her job to become a full-time housewife with no income. a) Am I better off filing under joint or separate assessment?

Based on your circumstances, the type of assessment (indicated in the tax return) that is applicable on you is under category 4 (if the individual is married with a spouse who has no income/no source of income or has income which is tax exempt).

b) Does she have to fill in too (assuming if I’m better off in separate assessment)?

Your wife is required to submit a tax return by the due date even if she does not have any chargeable income under the following circumstances – she has chargeable income in the immediate preceding year; or she has submitted a tax return in the immediate preceding year; or she is required to submit a tax return (but failed to submit) for the immediate preceding year.

However, she does not need to submit a tax return if she is able to obtain a waiver from the IRB. The type of assessment that she should indicate in her tax return is category 1 (joint in the name of husband) to allow you to claim the personal relief for spouse and children.

> I am a pensioner. I opted for early retirement at the age of 40 and I turned 55 last year. Do I have to declare the full year’s pension for last year or until April (my birth month)?

Pensions that you received up to the date before you turned 55 are taxable and only that portion is required to be declared.

> I am a pharmacist. In 2012, I took a professional exam. There were no classes involved. I bought the e-book for US$300 (RM906) online, which I will claim under Books. I also paid US$700 (RM2,115) exam fees. Is this fee tax deductible? Do I claim it under education?

According to Section 46(1)(f) of the Tax Act, a maximum of RM5,000 is deductible in respect of fees expended by the taxpayer on himself in any institution or professional body in Malaysia recognised by the Government or approved by the Finance Minister, as the case may be, for the following:

(i) on any course of study up to tertia­ry level, other than a degree at Masters or Doctorate level, undertaken for the purpose of acquiring law, accounting, Islamic financing, technical, vocational, industrial, scientific or technological skills or qualifications; or

(ii) any course of study for a degree at Masters or Doctorate level undertaken for the purpose of acquiring any skill or qualification.

Please check whether your course of study falls within the above to determine your fees are deductible under “Education Fees”.

> Do I need to declare profit from buying and selling shares as an income?

Whether the profit from buying and selling of shares is regarded as a taxable income would depend on the facts and circumstances of the case. If the transaction can be demonstrated as a realisation of a capital investment, it can then be regarded as a capital gain not subject to income tax. On the other hand, if the transaction is derived from an adventure in the nature of a trade, then the profit from buying and selling of shares would then be seen as a revenue gain subject to income tax.

> I have a few properties, one of which is occupied by my son. Do I have to declare that as rental income? If there is another house left empty, do I have to declare that as well?

You only declare when you start to let out your properties.

> I receive a rental income from my new apartment. What are the deductions I can claim and are there limits?

Expenses which are allowed deduction from rental income are the direct expenses that are wholly and exclusively incurred in the production of the rental income.

Examples of such expenses are as follows – assessment and quit rent, interest on loan and fire insurance premium, expenses on rent collection, expenses on rent renewal, expenses on repair and service charges. However, only expenses incurred after the new apartment has been rented out are deductible from the rental income. Initial expenses are not deductible. Examples of initial expenses are the cost incurred to obtain the first tenant, such as advertising cost, legal cost to prepare rental agreement, stamp duty and commission for real property agent.

> I have two properties under joint ownership with my wife. The rental agreement is in my wife’s name and she collects all proceeds. She is unemployed and we have separate assessments as she was working previously.

Do we need to submit rental income in both our tax submissions equally divided or can she report all the rental income ?

The registered owners (as evidenced in the title deeds or any equivalent documents to demonstrate ownership) of the properties are the rightful recipients of the rental income. Thus, both you and your wife would be required to declare your respective portion of the rental income in your individual tax returns based on the ratio of your joint ownership.

> I am currently working overseas but own three properties in Malaysia. Do I need to declare anything to the Inland Revenue Board (IRB)?

Generally, Malaysian-derived income is subject to Malaysian income tax. As the properties are located in Malaysia, the rental income from the letting of properties is regarded as Malaysian-derived income. Therefore, you are required to declare the rental income to IRB by completing and submitting the relevant tax return form. The type of tax return to be submitted is dependent on your tax residence for the year concerned. Generally, tax resident individuals are subject to the progressive tax rates and entitled to personal reliefs/deductions and rebates. Non-tax residents are taxed a flat rate of 26% without any personal reliefs/deductions and rebates.

> If I have two properties purchased under the DIBS during the qualifying period for housing loan interest deduction, say house A in 2009 (completion 2011) and house B in 2010 (completion 2014), can I claim deduction for house A from 2011 to 2013, and house B from 2014 to 2016? At any one time, I intend to claim deduction for one house only.

The current tax laws only allow an individual who is a Malaysian and tax resident to claim interest expenses on housing loan provided certain conditions are satisfied. One of the conditions is the claim is limited to only one unit of residential property. If you have claimed interest expenses for house A in your 2011 tax return, you will be eligible to claim the interest expenses for house A in your 2012 and 2013 tax returns provided you have fully complied with the stipulated conditions. You would not be able to claim any deduction for house B.

> A father and son jointly purchased a house in 2010. Assuming the house was rented out and the son received the rent and used it to repay the housing loan, is the father required to declare any rent received? If so, how should the father compute his net income from rent?

As the property is jointly owned by the both the father and son in the title deed or any equivalent document, the rental income would be regarded as the income of both registered owners. Both would be required to declare their share of the net rental income (after deduction of the relevant expenses) in accordance to the ratio of the ownership of the property. The net rental income is arrived at after deduction of the interest on loan, fire insurance, assessment and quit rent, and repairs and maintenance. However, only the expenses incurred after the letting of the property are deductible.

> Disclaimer: The answers contained in this article are provided for general purposes only. Answers may differ based on personal and specific circumstances. While every effort has been made to ensure that the answers are accurate and up to date at press time, KPMG Tax Services Sdn Bhd and the contributor to the answers accept no responsibility for any loss which may arise from reliance on the answers contained in this article.

Tags: Accounting, Earned income tax credit, Income tax, Sales tax, Tax, Tax refund, Taxation, United States