Final Report
Final Report
Final Report
1.0 Introduction
Wintrip Sdn Bhd (WSB) is a private limited company incorporated under Company Act, 1965 on
20th May 1992 and has been carrying out family business. The company originally commenced
operation as THE CONTRACTOR located at Sungai Nyalau Estate, Bintulu District in
September 1992. The WSB has expanded its business activities to Kuching Division since 1998.
The principal activity of WSB consists of logging and oil palm plantation contract
activities. These involve supplying all material, labour, vehicles, agricultural machinery, and
heavy equipment for the felling, clearing, pre-planting and maintenance works.
Presently, WSB employs a total workforce of 419 people consisting of 1 Chairman, 2
Directors, 8 accountancy & clerical, 8 management staff to control the operation of plantation
works and also 400 undirected staff with Work Permit Holder (Mechanic, Excavator Driver,
Tractor Driver and General & Skill Workers).
Due to its commitment and ability to fulfill the works specification as stated in agreement
of contract works by clients, WSB has acquired its reputation as a Trusted Contractor in oil palm
plantation.
Page | 1
Managing Director
Tan Peng Nguang
Director
Tan Pheng Liang
General Manager
Senior Estate Manager
Estate Manager
Danny Lim Chung Teck
Tan Khee Wei
Tan Khee Nam
Tan Kim Seong
Project Manager
Yeap Seng Yong
Tay Joo Ho
Director
Cheng Khar Tiang
Chief Account
Tan Poay See
Admin Manager
Tan Poay Chee
Head Office
Account Clerk
Head Office
Admin Clerk
SupervisorMechanic/Excavator/Tractor
General
Driver& Skill Workers
Estate Account ClerkEstate Admin Clerk
Yeap Eng Liang
Yeap Seng Hooi
Figure 1 : Organization Chart
Page | 2
Page | 3
For the taxpayers who are the first time to submit the BE Form, they have to apply a pin
number and the income tax number.
The government has entrusted its faith in them to assess and settle their income tax with
the introduction of the self-assessment system commencing from the year of assessment 2004 for
individual and non-corporate taxpayers. The e-filing service is convenient for taxpayers to save
time and cost. The self-assessment system must be filled by taxpayers. So in this company, I just
calculated the tax by using the working sheets.
The BE Form consists of eight parts:
-
Part D: deductions
Declaration
Page | 4
To identify the purpose and problems faced in preparing the tax planning.
3.0 Methodology
Page | 5
Internet Search
The Internet provides a lot of information about the tax preparation and tax planning. There are
many websites that give useful information. These websites were searched by using Yahoo,
Google, and UUM Library Website. The information that I obtained from the internet was mainly
journal, articles, current news, and newsletter.
Inquiries
To inquire managers and colleagues will assist me in understanding the process of working
aspect of the company. Therefore, the response from the colleagues indirectly gave a lot of
knowledge and information about the scope of work and companys details to me in order to
complete my report.
Observations
I carried out some observations on the daily activities such as key in data for the companys tax;
calculate the tax payable or tax refund. Besides that, I also referred to the previous companys
information and data.
I referred to many textbook to get more information to complete my report. The textbook I
referred to was Malaysian Taxation written by Choong Kwai Fatt. The purpose is to get the
preliminary understanding regarding my study. The relevant information on in the textbook is
readily accessible to me. Apart from that, this method gives me a clear understanding of the
theory and examples because it elaborates most of the parts written in that particular book.
Because of the limitation of information, I had to refer to a few textbooks to gather more
information and examples.
The Inland Revenue Board was established in accordance with the Inland Revenue Board
of Malaysia Act 1995 to give it more autonomy especially in financial and personnel
management. Besides that The Inland Revenue Board has proposed to improve the quality and
effectiveness of tax administration.
The agency is responsible for the overall administration of direct taxes under the following acts
such as:
Besides that, IRB has responsibility to advise the Government on matters relating to
taxation and to liaise with the appropriate Ministries and statutory bodies on such matters.
Moreover, IRB also has its main purpose in participating in or out of Malaysia with
respect of matters relating to taxation.
Furthermore, IRB is responsible for performing such other functions as are conferred on
the Board by any other written law.
The last function of IRB is to act as a collection agent for and or on behalf of any body
for the recovery of loans due for repayment to that body under any written law as well.
To utilize all property of the Board, movable and immovable, in such manner as the
Board may think expedient including the raising of loans by mortgaging such property;
To grant loans to employees of the Board for any purpose specifically approved by the
Board ;
To provide recreational facilities and promote recreational activities for, and activities
conducive to, the welfare of employees of the Board;
Page | 9
To provide training for employees of the Board and to award scholarships or otherwise
pay for such training ; and
5.0 Discussion
5.1 Implication of Malaysian Taxation
In Malaysia, the law governing income taxation is the Income Tax Act 1967. Malaysian income
tax is territorial. That means all individuals are liable to pay tax on income accrued in or
derived from Malaysia is tax. Moreover, the foreign income remitted into Malaysia by both
resident and non-resident is exempted from tax.
Page | 10
The transaction that is the income in nature and such income is accrued in or derived
from Malaysia. For example the capital gain arise from the disposal of long-term
ii.
investment; or
The transaction that is the income such as income tax on Malaysia derived income and
foreign source income received in Malaysia.
Gains or profits from business, for whatever period of time carried on;
d)
e)
Section 7 (1) (a) individual must be physically present in his/her calendar year, at least 182
days in a calendar year. The 182 days can be made up of one period or multiple periods
during that particular calendar year.
For example:
a) Single period
Year 2010
xxxxxxxxxxxxxxxxxxxxxxxx
Jan 1
182 days
Dec 31
b) Multiple periods
Year 2010
Jan 1
xxxxxxx
xxxxxxxxxxx
xxxxxxxxxxxx
II
III
Dec 31
Page | 12
Section 7 (1) (b) - a period of less than 182 days but that period is linked to another period
following or preceding where he was present in Malaysia for 182 or more consecutive days.
For Example:
The day
Link by
or
01.01.2010 and
Link to
31.12.2010 and
31.12.2009
01.01.2011
Temporary absence from part of the 182 consecutive days physical presence
Connecting with
Ill health
service matter
Attending conference
- himself
Study abroad
- immediate family
seminars
- Exclude holidays
Page | 13
Section 7 (1) (c) - 90 days or more during the year and he was present in Malaysia for at least
90 days in any 3 of the 4 immediate preceding years.
Section 7 (1) (d) - he is a resident for a particular year if he is resident for the immediate
following year and for each of 3 immediate preceding year.
However, individual with chargeable income of less than RM2, 500 is not taxed. The
chargeable income of an individual resident is derived by deducting the personal relief from his
or her total income. Tax liability of a resident individual id reduced by rebates. Furthermore,
income tax matters in Malaysia are under the jurisdiction of Inland Revenue Board of Malaysia.
5.2 Responsible for Employee
Most of the responsibilities for the employees are:
a) To submit a prescribed form to the employer to notify information relating to the
individual employment with previous employer in the current year.
b) To submit a prescribed form to the employer if employee wishes to claim deductions
and rebates in the relevant month. The deductions and rebate will be effected subject to
approval by employer.
c) To submit a prescribed form if employee wishes to include benefits in kind (BIK) and
value of living accommodation (VOLA) as part of their own monthly remuneration in
ascertaining the MTD amount subject to approval by employer.
Page | 14
d) To keep and retain in safe custody each and every receipt relating to claims of
deductions for a period of seven years from the end of that year of assessment under the
Act.
e) To furnish complete and accurate personal information and update any changes of their
own personal particulars to the employer.
f) To furnish correct information in a prescribed form relating to their own chargeability to
tax and failure by the employee to do so constitutes an offence under paragraph 113 (1)
(b) of the Act.
After calculating the monthly tax payable, the employees should pay the tax due on the
10th of every month commencing from the second month of the basis period. For the taxpayers
who fail to pay the tax installment on the 10th day of the following month will subject to 10%
penalty on the amount unpaid.
Page | 16
income tax under Pare 28 Schedule 6. A non-resident individual will be taxed only on income
earned in Malaysia.
Hence, for Malaysian individual who plans to work overseas or is working overseas
should structure the non-resident at the time of remittance of such foreign source income into
Malaysia to avoid the exposure of such foreign source income to Malaysian tax. As we know that
a non-resident is exempted from tax on his foreign source income received in Malaysia form
outside border of Malaysia.
On the other hand, expatriates working in Malaysia should strive their best to be
Malaysian tax resident because tax residents will enjoy the scale rates 0% - 26% and be eligible
to for tax reliefs and rebates.
Effective from year of assessment 2010, a non-resident individual is liable to tax at the
rate of 26% without any personal relief. However, the non-resident individual can claim rebated
with respect of to fees paid to the government for the issuance of an employment permit. Besides
that, a resident individual is taxed on his chargeable income after deducting personal reliefs at a
scale rate from 0% to 26% with effect from the year of assessment 2010.
RM
9,000
6,000
Wife/husband
3,000
3,500
Page | 17
5,000
5,000
1,000
ii.
Disabled child
5,000
iii.
Life
premiums
or
approved
fund
contributions
4,000
7,000
3,000
1,000
3,000
Broadband subscription fees applicable from the year of assessment 2010 until
2012
500
Page | 18
The following are the benefits provided to employees that are exempted from income tax or
accorded a lower tax treatment:
i.
ii.
assessed at comparative value under Section 13(1) (c) accordingly. The following is the
table provided by IRB of the value of household furnishings.
a.
840.00
1,680.00
3,360.00
Payment of allowances
Allowances given by employers, such as travelling allowances, entertainment allowances
and housing allowances are assessed as tax on full value by virtue of Section 13 (1) (a).
Page | 20
However, the employee is allowed a deduction against the gross employment income if
the employee can demonstrate that such travelling or entertainment expenses are incurred
wholly and exclusively for the production of employment income. The tax authorities are
very strict on the claim and require the employee to keep a proper record showing the
date, the amount of expenditure incurred, and the relevant receipts. In order to avoid tax
administration disputes, it is advisable for employees to claim such expenses on a
reimbursement basis rather than being paid a fixed allowance because 'reimbursement'
expenditure is conducted without any private benefit so it is not viewed as income to
employee and thus it is not subject to income tax. Therefore, claiming the expenses on
reimbursement reduce the amount assessed in Section 13 (1) (a) and may possibly reduce
the section13 (1) (c) amount if accommodation is provided by the employer.
Provision of car
The employers may provide company car with fuel to employees for official duties and
private use after work. Employees is regarded as having received a benefit from using the
company car and thus assessed as tax. The value of car benefit is dependent on the age
and cost of the car. This is based on the Income Tax Ruling issued by the tax authorities
on 25 August 1997. Therefore, the employer is able to claim a tax deduction on the
expenses incurred on the company car and at the same time, eligible to claim a capital
allowance or lease rental payment on the car, depending on the mode of financing. The
following is the value of motorcar and fuel provided by IRB.
Cost of Car
Annual Value of
(When New)
(RM)
Up to 50,000
50,001 75,000
75,001 100,000
100,001 150,000
150,001 200,000
200,001 250,000
250,001 350,000
350,001 500,000
(RM)
1,200
2,400
3,600
5,000
7,000
9,000
15,000
21,250
600
900
1,200
1,500
1,800
2,100
2,400
2,700
Page | 21
Above 500,000
25,000
Table 3: Value of car and fuel
3,000
Page | 22
home, day care centers or home care centers. Currently the tax relief of up to RM5, 000 medical
expenses for parents is for treatment in clinics and hospitals, treatment in nursing homes and
dental treatment excluding cosmetic dental treatment.
Besides that, the EPF relief scope has also been extended but limit not increased. Existing
EPF relief of maximum RM6, 000 is extended to include employees contributions to Private
Pension Fund (PPF) to be set up by the government in 2011. This benefits the lower income
group as most of the medium to high income group may already claim up to the maximum relief
of RM6, 000 as the relief of RM6, 000 also includes the life insurance premium, apart from
employees own EFP contributions. Presently, employers contributions to the approved schemes
in excess of 19% of the employee's remuneration will be disallowed as tax deductions. However,
employers contributions to this new PPF will be allowed for tax deductions and will not count
towards the 19% cap.
However, the employers can always increase the employer (portion) EPF contribution as
long as it is not exceeding the 19% tax deduction limit. The structure, investment policies as well
as return to the new PPF are unknown, compared to the well-established EPF. The new PPF will
benefit self-employed person if a person carried out a business under the sole proprietorship or
partnership, the EPF contributions made by the business are not allowed as tax deductions but
instead the contributions will be added back and form part of the profit derived from the business
by that person and assessed for individual tax accordingly (due to sole proprietorship and
partnership are not a separate legal entity). On the other hand, the proprietor or partner can claim
EPF relief of up to RM6, 000 under his personal capacity as an individual taxpayer. With the
introduction of new PPF, contributions made by the business will be allowed for tax deductions.
On the other hand, there is 50% stamp duty exemption for housing sale and purchase and
loan agreements on a residential house with price not exceeding RM35, 000 from1 Jan 2011 to
31 Dec 2012. Residential properties include terrace house, condominium, apartment or flat.
The service tax also has increased from5% to 6% with effect from1 Jan 2011. This will
impact quite a number of service industry as well as individual consumptions. This may be a
Page | 24
temporary measure to increase government revenue while pending the implementation of Goods
and Services tax (GST).
Furthermore, the ASTRO subscription fee will be subject to service tax of 6% with effect
from1 Jan 2011. Service tax of 6% will be imposed on paid satellite broadcasting services in
which this service was not subject to service tax previously.
An individual with a chargeable income not exceeding RM35, 000 enjoys a rebate
of RM400 effective from year of assessment 2009. If the wife is not working or the
wifes income is jointly assessed, she also enjoys a further rebate of RM400.
Similarly, a wife who is assessed separately also enjoys a RM400 rebate, provided
ii.
Effective from year of assessment 2010, a non resident individual is liable for tax at the rate of
26% without any personal relief. However, he or she can claim rebates in respect of fees paid to
the government for the issuance of an employment work permit. Thus a resident individual is
taxed on his or her chargeable income after deducting personal reliefs at the scale rate from 0%
to 26% with effect from the year of assessment 2010.
Page | 25
aggregate income.
Activity or Sport Body (Amount is limited to 7% of aggregate income.
Gif of money or cost contribution in kind for any Approved Project of national Interest
of Health.
Gift of paintings to the National Art Gallery or any State Art Gallery.
Adjusted Income
(Business Income)
Gross Income
(Non-Business Source)
Employment, dividend,
interest, rents, royalty
Page | 26
Less:
Allowance
Expenses
in respect
Statutory Income
(Business Income)
Aggregate Income
(From All Source of incomes)
The source of income can be broadly divided into business source and non-business
source. The business source is computed from gross income. Permitted/Allowable expenses are
deducted from gross income to derive at adjusted income. The allowance expenses can be
divided into double deduction and special deduction.
The adjusted income plus the balancing charge after deducting the capital allowance
gives the statutory income. The capital allowance can be divided to into the unabsorbed capital
allowance brought forward, current year capital allowance, and balancing allowance.
For the non-businesses income, each source of the business needs to be computed
separately. The non-business income sources are the following:
i.
ii.
iii.
iv.
v.
vi.
Section 33 and Section 39 to derive the adjusted income. When allowable expenses exceed gross
income, the excess is a permanent loss. It is not allowed to carry forward or set off in the current
year. So there is no capital allowance available for non-business source. Therefore, adjusted
income can be equal to statutory income.
Aggregate income is the summation of all the statutory income from non-business source
and business source.
The following expenses are only applicable to a company.
a. Adjusted loss for the basic period business(Section 44 (2));
Page | 28
b.
c.
d.
e.
it equals to chargeable income. After that a schedule or scale tax rate is used to calculate the
income tax payable.
The total income tax after deducting the rebates (individual only) equals to tax payable.
Then we can deduct the set-off dividend under section 110 to get the tax payable or tax to be
repaid.
Page | 29
Besides that, claims for capital allowance can be made in the relevant column provided in the
Return Form.
Type Of Asset
Initial Allowance (%)
Heavy Machinery/ Motor Vehicle
20
Plant and Machinery
20
Computer and Machinery
20
Other
20
Table 4: Type and Rate of Capital Allowance
ii.
Tax planning basically involves two things: firstly paying the right amount of tax at the right
time and secondly, seeking tax deductions wherever possible and reduce tax liabilities.
With effect from YA 2001, husband can elect to have his income to be jointly assessed with his
wife or one of his wives, provided none of his wife or wives elect for joint assessment with him.
The husband has to fulfill the following conditions:
a) Both husband and wife they are living together in that calendar year and do not cease to
live together or to be husband and wife of each other.
b) The husband elect in writing before 1 st of April in the following YA that his income is to
be aggregated with the total income of his wife and assessed in her name for that YA.
c) He must have total income to be aggregated with his wife.
d) If her husband is not resident for the basis year of YA, he must be a Malaysian citizen.
5.5 E-Filing
The government has established the Self-assessment for individuals implemented since YA 2004.
Under the Self Assessment System (SAS), the taxpayer himself assume to bear the primary duty
to revise his tax, compute his income tax liability, and account for his tax payable in the current
year as well as the final balance at the time when submit his Form B or Form BE to the
authorities in the following year.
In the year of 2009, 1.25 million taxpayers were reported to have filled their tax return
through the e-filing (Bernama, 2009). The Inland Revenue Board in Malaysia (IRB) introduced
this system to enable taxpayers to submit their tax return through the internet.
E-Filing is an electronic tax tool for taxpayers to submit their tax computation and
payment via the internet. Taxpayers can submit their tax details to IRB via e-filing without
worrying about making mistakes by making use of TaxSaya. The application was introduced for
corporate taxpayers in 2003 and was expanded to cover individual taxpayers in 2004.
With the e-filling function available, user can now file their tax return forms even on the
last day of filing date. Nowadays, user will have more time to complete more cases and have no
Page | 32
worries or doubts if their income tax return forms send via mail or couriers are received by IRB
processing office on time. Each return form filled via e-filing will receive an acknowledgement
from IRB via e-mail almost immediate and this acknowledgement can be printed as a proof of
receipt which states the time and date of return received by IRB.
Inland Revenue Board chief executive officer and director-general Hasmah Abdullah has
already improved tax compliance integrate the e-filing system with IRB main system, so when
tax return is sent through e-filing, the information will be immediately uploaded to main system
and can be processed fast. She said the implementation of the e-filing system where taxpayers
submit their return forms online would expedite tax refunds. E-filing is easy, accurate, safe
and fast compared to manual submission of tax return for manual form. Besides there is no risk
of mail being lost, tax returns are more accurate as the e-filing system computes the tax for
taxpayers. IRB will reimburse excess tax payments for year of assessment 2006 within 30
working days for those using the e-filing system. This means individuals and companies will be
paid back their excess tax payments even though the assessments for earlier years have yet to be
processed. Repayments for assessments before 2006 will be made separately. IRB will also
continue reimbursing excess tax payments directly to taxpayers without waiting for specific
applications by them while the reimbursements will be within 30 working days for e-filing users.
(http://www.bernama.com.my/).
An application on filling and filing Income Tax Return Form (ITRF) electronically through
internet for the following forms:
Form
Form B
Form BE
Form P
Form M (e-M)
Form E (e-E)
Form C (e-C)
Form R (e-R)
e-Estimated (e-CP204)
Type of Business
Business Income
Non- Business Income
Partnership
Non-resident Individual
Employer
Company
108 statement for company
An online Estimate Tax Payable From
submission for Company/ Co-operation
Society/Trust Body
Page | 33
It is much easier to use e-filling as we do not need to refer to the explanatory notes. So, it
is easy as we just need to select the options from the drop-down menu. All the additional
details are also just a click away. This also can save a lot of time.
5. More efficiency
For the IRB, this is more efficient to process the form submitted through e-filling
compared to the traditional hardcopy way. Besides that, the e-filling also reduce a lot of
IRB personal and the process of the system become more efficient and beneficial.
6. Faster tax refund
The other advantages are getting the tax refund faster for those who have the refund from
their income tax. This is because the IRB process is more efficiently.
problem if we are using hardcopy. So, to solve this problem is we do not do the e-filing
during last minutes.
4. Forget the password
It is easy to forget the password as nowadays there are so many pin numbers and
passwords that we need to remember. If we have forgotten the password, we just contact
the IRB office to get a new password. Or, we also can easiest and fastest way to visit the
e-filling website. Within in few minutes, we will get the passwords.
5. Security
Filling records electronically may not be as secure as sending them via mail or post.
Especially for those who employ an outside or third party service to do the electronic
filling for them, we are providing identifiable information that service may keep on file
for a long period of time. This means that more individuals can have access to the
information. For example, we are supposed to receive tax refunds and we want it dine
immediately, we will have to provide the bank account number and routing number for
the deposit. Thus, the date is less secure.
6.0 Conclusion
The bulk of this report assessed the tax planning on employment income for individual under the
Income Tax Act 1967. This report started off with an introductory chapter detailing the history of
the company and the writers experiences undergoing practicum in the Wintrip Sdn Bhd. After
that, the objectives of this report were presented. Next, the methodologies used to assess and
gather information regarding the tax planning also was mentioned. The following chapter
explained, in detail, the findings of this study, including the Malaysian taxation, discussion of
personal reliefs and discussion of the e-filling.
Page | 36
In this company, the tax is calculated based on the Income Tax Act 1967. The company
follows all the Section under the Act. Besides that, the government has established the selfassessment system for YA 2004. This self-assessment system gives more convenience and
efficiency to the company. It is because the employee can fill in the form via internet themselves.
Moreover, the data calculated by e-filling is more accuracy than we use the manual document.
Lastly, the employees can have their tax refunded if they have paid excess. For example
they have a credit balance after deducting the tax payable. However, for the individual with
income less than RM2, 500 is not taxed and the chargeable income not exceeding RM35,000 can
enjoy a rebate of RM400 effective from year of assessment 2009.
In conclusion, the tax relief is available for individual taxpayer who is a resident in
Malaysia. Individual can claim the tax relief in their tax Form BE / B -Part D. In case of doubt,
taxpayer should make reference to explanatory notes enclosed in the tax form.
Page | 37