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Employers Can Reduce Their Employees' Monthly Tax Deductions

With effect from 2009, employers are given the option to make adjustments to reduce their employees' monthly tax deductions.

A statement issued by the Inland Revenue Board Malaysia (LHDNM) on 9 January 2009 said these adjustments can be made by taking into account the allowances, perquisites and benefits-in-kind which have been exempted from tax including those announced in Budget 2009.

Prior to this new ruling, employers only make EPF, Socso and income tax deductions from the gross salaries of their employees every month.

With the adjustments, allowances for the employees such as petrol and food allowances and perquisites can be included in the tax deductions, meaning employees would be paying lesser tax for the year.

For further inquiries and assistance, contact LHDN at 1-300-88-3010 or logon its website at
http://www.hasil.gov.my .

Tax Deductions Announced in Budget 2009

(1) Petrol card, petrol allowance, or travel allowance between the home and workplace (until Year Assessment 2010 only, claimable up to RM 2,400 / year).

(2) Petrol card, petrol allowance, or travel allowance and toll card for official duties (claimable up to RM 6,000 / year).

(3) Allowance or fees for parking.

(4) Meal allowance.

(5) Allowance for subsidies for child care (claimable up to RM 2,400 / year).

(6) Medical benefits (including maternity expenses and traditional medicines such as ayurvedic and acupuncture) or dental.

(7) Employers' own goods provide free or at a discounted value (claimable up to RM 1,000 / year).

(8) Employers' own services provide free or at a discount provided such benefits are not transferable.

(9) Telephone, mobile phone, pager and Personal Data Assistant (PDA).

(10) Bills for Telephone, mobile phone, pager and PDA registered in the name of employee or employer.

(11) Gift of new personal computer (until Year Assessment 2010 only).

(12) Monthly broadband subscription fee (registered in the name of the employer) from the employer (until Year Assessment 2010 only).

(13) Perquisites (whether in money or otherwise) provided to the employee pursuant to his employment in respect of :

(a) past achievement award;

(b) service excellence award, innovation award, productivity award;

(c) long service award (provided that the employee has exercised an employment for more than 10 years with the same employer).

(Claimable up to RM 2,000 / year)

(14) Leave passages (only applicable to employee and immediate family)

(a) With in Malaysia (including food and accommodation) not exceeding three times a year (claimable up to RM 3,000 / year);

(b) Outside Malaysia (once a year - limited to RM 3,000).

(15) Compulsory insurance premium paid for foreign employees in lieu of SOCSO payment.

(16) Group insurance premium to protect the employees in the event of accident.

(17) Interest subsidies for loans up to RM 300,000 in respect of housing, motor vehicle and educational loans. Exemption is given in existing loans and new loans.

Employers are given further option to make adjustments to reduce the employees' monthly tax deductions by taking into account other tax deductions and rebates as provided for by the Income Tax Act 1967.

Tax Deductions and Rebates as Provided by The Income Tax Act 1967

(1) Medical expenses for own parents certified by medical practitioner for up to RM5,000 a year.

(2) Basic supporting equipment for disabled self, spouse, child or parents up to RM5,000 a year.

(3) Basic supporting equipment for disabled person (self) up to RM6,000 a year.

(4) Taxpayers going for further education up to tertiary level for the purpose of acquiring law, accounting, Islamic financing, technical, vocational, industrial, scientific or technological skills or qualifications or for a Masters or Doctorate level, will enjoy a tax exemption of up to RM5,000 a year.

(5) Medical expenses on serious diseases for self, spouse or child, the exemption is up to RM5,000 a year.

(6) Complete medical examination for self, spouse or child limited to RM500 a year.

(7) Purchase of books, journals, magazines, similar publications for self, spouse or child, the exemption is limited to RM1,000 a year.

(8) Purchase of personal computer for an individual, with deduction allowed once in every three years, limited to RM3,000 a year.

(9) Placing a net deposit in Skim Simpanan Pendidikan Nasional, it is tax exempt for RM3,000 a year.

(10) Buying sports equipment for any sports activity as defined under Sports Development Act 1997 will enjoy a tax exemption of RM3,000 a year.

(11) Payment of alimony to former wife (total deduction for wife and alimony) shall not exceed RM3,000 a year.

(12) Payment of alimony for disabled husband/wife limited to RM3,500 a year.

(13) Life insurance and EPF deductions is limited to RM6,000 a year.

(14) Education and medical insurance limited to RM3,000 a year.

Posted Date: 27 Feb 2010

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