Budget 2009 and you (Part III)
Concluding to What goodies does the budget have for individual taxpayers?
Tax Planning-By Yong Siew Chuen
Personal Money/Taxition-The Edge.
-edited by Jacob Mathews.
Dear residents, This is a continuations of some useful informations before we fill up our 2009 tax return forms.
Bonus and director's fee: Timing of taxation.
Previously, bonuses and director's fees were related back to the basis period for which they were payable. With effect from Year 2009, they are taxable for the year in which they are paid.
Mr Eksekutif received bonuses as follows:
For financial year ended Dec 31,2007(Paid on May 5, 2008) (Taxable for Year 2007)
For financial year ended Dec 31,2008(Paid on May 5,2009) (Taxable for Year 2008)
This measure is aimed at reducing the need to revise an earlier year's tax when the bonus or director's fee is paid after the financial year-end.
Is this advantageous for you? It depends on your marginal rate for Year 2008 relative to Year 2009.
In the above example, if Mr Eksekutif has reached the maximum taxable rate of 28% for Year 2008, then he would get a tax saving of 1% because the maximum rate for Year 2009 will drop to 27%.
Distributions received by REIT unit holders.
If you are an individual, whether resident or non-resident, the distribution you receive from your investment in a real estate investment trust (REIT) will be subject to a withholding tax rate of 10% for Year 2009 to Year 2011, as compared with 15% for Year 2008. This means that where previously you had to have a marginal rate exceeding 15% to benefit from investing in REITs, effective from Year 2009, that threshold will drop to 10%. Of course, if you are a non-resident individual, the 10% compares most favourably against your normal fixed rate of 27%.
But do be mindful that the rate reduction to 10% is effective only for three years from 2009.
Not that as the withholding tax is a final tax, it is not necessary for your to report the REIT distribution in your annual tax return.
Interest income fully exempted.
Previously, interest was exempted, subject to certain stipulations on the quantum of each deposit.
With effect from Aug 30, 2008, there will be full exemption on all interest received by individuals from moneys deposited in all approved institutions. The law relating to this proposed exemption has yet to be publicised (other than in the Budget speech). Therefore, I am unable to explain in more detail beyong saying that it does not appear to translate into significant tax savings. This is because, hitherto, with a little planning, it has been rather easy to achieve full exemption of interest anyway.
For those of you who run a business, either through a sole-proprietorship, a partnership or a company, there are some deductions. They are as follows:
1. Full deduction is allowed for an employer who pays travel allowance for his employees' daily commute to the workplace (note that the employee is exempted up to RM2,400 a year only [see travel allowance above].
2.Double deduction for sponsoring employees to pursue postgraduate studies in ICT, electronics and life sciences. However, this deduction is applicable only for four years, from year 2009 to Year 2012.
The technical experts who come to Malaysia to provide technical tranning services in the above mentioned fields are accorded tax exemption from withholding tax. The period of exemption is from Aug 30,2008 to Dec 31,2012.
3. Businesses can claim 100% (previously 60% in the first Year and 40% in the second Year) capital allowance on capital expenditure on ICT assets. Note that the 100% claim is allowable only for the five-year period of Year 2009 to Year 2013. So, do hurry and get those "caggih" ICT stuffs!
4. If you run your business through an SME (small and medium-sized enterprise) company, there are several changes with regard to the definition of SME, the claiming of 100% capital allowance on small value assets and on the provision of tax estimates for new companies.
These aspects are too detailed to be discussed here. Do consult with your tax adviser.
The reductions in tax rates are as follows: Middle-level tax band rate of 13% reduced to 12% and the maximum rate of 28% reduced to 27%.
The reduction translates into a saving of a mere RM150 for middle-income earners who have a chargeable income (after personal reliefs) of $50,000 and above and another 1% if your chargeable income exceeds RM250,000.
The tax rebate for an individual whose chargeable income does not exceed RM35,000 was increase to RM400 from RM350. Additionally, if the individual claims spouse relief, the rebate is similarly increased to RM400 instead of the existing RM350.