A quick guide to filing tax returns for individuals

FEBRUARY 28 — Does the thought of filing your tax return make you break out in a cold sweat? It is about time to file your income tax return for this year, everyone. But, fear no more! For a quick guide to help you understand how income tax works in Malaysia and how filing your income tax return can actually be a simple and no-stress process, read on!

Who needs to file income tax returns?

An individual who earns an annual income exceeding RM41,000from Malaysia must register a tax file and file annual tax returns. Taxable income includes all your income derived from Malaysia e.g. rental from property in Malaysia, and is not confined to your salary from employment.

Registration of a tax file can be done at the nearest Inland Revenue Board of Malaysia (IRB) branch or online via e-Daftar at the IRB website, with a copy of your identification card / passport. Once the tax file has been registered, you must apply for a PIN number at the nearest IRB branch for first-time login into the e-Filing system.

What documents do you need to prepare your tax return?

In order to complete your tax return, you need to gather the following documents:-

• Statement of Remuneration (EA form) which should be provided to you by your employer by 28 February of each year
• Income Statement for your sole-proprietorship business, if relevant to you
• Any documents, forms or receipts relating to other income that you have earned from Malaysia during the year (rental, royalties, etc.)
• EPF statement, receipts, etc. if you plan to claim personal reliefs and rebates

Bear in mind that records to support the income declared and deductions claimed must be maintained on file for at least 7 years to be presented to the IRB in the event of an audit. Key point to bear in mind – keep adequate supporting records!

Which tax return form to submit and what is the filing deadline?

For individuals, the basis period for a year of assessment (YA) is the calendar year i.e. from 1 January through 31 December of each year. Your tax return is due to be filed in the following year after your income is earned i.e. you file your YA2020 tax return (for income earned in calendar year 2020) by the given due date in 2021. The e-Filing system is available for use starting from 1 March of each year.

The type of return form to submit and the filing deadline depends on your source of income and tax residence status as follows:-

What tax reliefs and rebates can you claim?

Reliefs and rebates are only available for resident individual taxpayers.

Depending on your marital status and spending, you can be eligible for a variety of reliefs and rebates. Hence, it is important to go through the full list of personal reliefs and tax rebates available and identify which are applicable to you to maximising the claims and ultimately, to reduce your overall tax burden.

Some of the newly introduced and enhanced reliefs are highlighted below:-

• With everyone facing immense challenges due to the COVID-19 pandemic, a much welcomed proposal under Budget 2021 is an increase in tax relief on child-care fees up to RM3,000 for YA2020
• A new tax relief of up to RM1,000 for domestic-related tourism expenditure incurred between 1 March 2020 and 31 December 2021
• In addition to the existing lifestyle relief of RM2,500, an additional relief of RM2,500 can also be claimed for the purchase of personal computers, smartphones or tablets. This incentive aims to support those who need to work from home or attend classes online during this COVID-19 pandemic period (this is applicable for YA2020 and YA2021)

For the complete list of the tax reliefs and rebates available, you can visit the IRB website at http://www.hasil.gov.my/.

How do you file your tax return?

There are two ways to file your tax return, either manually or by e-Filing. E-Filing is a preferred approach as it is faster, easier and you are less likely to make mistakes as the system calculates your tax liability for you automatically. It is important to file your return within the stipulated deadline or risk incurring up to 45% penalty for late filing.

When and how do you pay your taxes?

Any balance of tax payable for the year can be paid to the IRB, via ByrHASIL at the IRB website through FPX or credit card, via cheques or online fund transfer through appointed agent banks. Payment from overseas can be made through Telegraphic Transfer.

Ensure that you pay your tax by the filing deadline, failing which a late payment penalty of 10% of your unpaid taxes will be imposed.

When and how do you claim your tax refund?

If you have overpaid your taxes during the year, the refund will be automatically processed by the IRB after you have filed your tax return. The money will be credited into your bank account and for this reason, it is important that details of your bank account are stated correctly in your tax return.

According to the IRB, you will get your refund within 30 working days from the date you submit your return via e-Filing, whereas, the refund could take up to 90 working days if your return is filed manually.

So, have you started to prepare for your tax filing? If you just take a little time and effort to organise your documents on the front end, the filing process can be done smoothly and stress-free. If you have questions and need additional help, it is always best to consult a qualified tax professional to avoid making mistakes or incurring penalties.

Source: Malay Mail