BTW3153 Malaysian Income Tax Law Assignment Example Malaysia
Malaysian Income Tax Law is something that affects all Malaysians. It’s important to know your rights and responsibilities when it comes to this law.
Malaysian Income Tax Law can be confusing, but it doesn’t have to be! The following are 6 things you should know about Malaysian income tax law:
1) Know your taxes
2) Know where you’re taxed
3) What counts as taxable income
4) How much tax rates change
5) When is the deadline for filing taxes?
6) More information on Malaysian income tax law can be found here.
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BTW3153: Malaysian Income Tax Law Assignment Task
On successful completion of this group assignment, you will be able to:
We also provide a variety of assignments in regards of assignment BTW315, including:
- Case study
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- Cover sheet
- Assignment acknowledgment
- Reflective writing
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- Tutorial solution
Assignment Task 1: Describe the taxation concept of income
The taxation process of income is complicated. Income can be taxed under many different rules based on what type of income it is and even who the individual is. Basically, if an individual earns money through income, they are obligated to both report their earnings for taxes and pay their fair share in taxes.
An individual’s taxable income would come from wages or salary as well as business or investment sources that vary by a situation such as losses versus gains versus passive versus active profits. Income may also include monies given to an employee by way of stock options which will change depending on whether they were granted at a predetermined date with market-value shares acquired only upon the termination date or issued with company shares already accumulated and thereby accessible after granting ceremony expiration.
Assignment Task 2: Critically assess the major income and deduction components comprising taxable income
When it comes to assessing taxable income, there are many deductions and credits available depending on one’s financial situation. There are also rules for how much tax rates may change based on various situations such as filing status or even whether or not you qualify for certain types of deductions. On this note, the majority of your federal taxable income is going to come from wages and salary plus dividends and interest plus half of the capital gains and qualified dividends plus all passive business activity income net of any losses allowed.
Another major component that can affect your taxes is gains and losses and these would include:
a) Gains: Current year capital gain distributions from a mutual fund, REITs, money market funds, etc., Long-term capital gains (generally, over 1 year, taxed at lower rates than ordinary income), and Unrecaptured Section 1250 gain (from depreciated real-estate)
b) Losses: Passive activity losses Disallowed net capital losses (including carryovers from 2012 to 2013 or prior years) 5-year carryover of farming losses Deductions for casualty and theft loss Deductions for business expenses against self-employment income Miscellaneous itemized deductions subject to 2% floor.
Credit Components: Foreign tax credit Retirement savings contribution credit – Credit for certain plug-in electric vehicles American opportunity credit Lifetime learning credit Earned income credit – Adoption credit. These credits can reduce your taxable income dollar for a dollar while others such as the retirement savings contribution only give you a tax break on the income.
When it comes to itemized deductions, you are only allowed to claim them if they exceed 2% of your adjusted gross income (AGI). If this is not the case, then you would simply take the standard deduction instead. This rule becomes more complicated when filing separate returns for married couples which often have different AGIs due to one spouse earning significantly less than their partner or even being unemployed altogether. Some credits that are deducted from your taxable income would include:
a) Child & dependent care credit – Credit for child & dependent care expenses.
b) Adoption credit – Credit up to $12,970 per eligible child depending on your modified AGI.
c) Earned Income Tax Credit – A refundable credit for low-income workers.
d) Foreign Tax Credit – If you pay taxes to a foreign country, you can claim this as a credit on your federal return.
e) Health Coverage Tax Credit – You may qualify for this if you had no health care coverage or coverage that was considered unaffordable under the Affordable Care Act.
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Assignment task 3: Identify the main taxable entitles and calculate how they are taxed
There are two main taxable entities in Malaysia: an individual and a company. Both types of entities would be required to file a tax return, though companies will do so with the Malaysian Business Tax Return (MRP1) while individuals can use either Form B or EZ depending on their situation.
Malaysian tax is calculated by following the below steps:
1. The income tax
2. The statutory relief schemes
3. Employment expense relief schemes
4. Motor vehicle allowance expenses relief scheme, which was introduced on 1 January 2016 to reduce the cost of owning a car for people who are working and living away from home.
To determine the income tax, the first step is to calculate your taxable income. This includes any income earned from sources within Malaysia or abroad which you are required to report on your return. Secondly, you will need to apply for exemptions and allowances depending on your circumstances which can significantly reduce how much tax you pay each year. Next, certain statutory reliefs may be available under Malaysian law in order to reduce your taxable income even further. The final step is determining if any employment expense reliefs are applicable which requires an in-depth analysis of common expenses that employees claim in their day-to-day work life including car allowance among others.
Assignment Task 4: Analyze and apply the main administrative aspects of income tax law
Administrative aspects are divided into two main categories, procedural and substantive. Procedural aspects take the form of deadlines which you must adhere to while substantive aspects deal with allowable deductions among other things. As for deadlines, an individual will need to file their tax return by 30 June each year following the end of that tax year while companies have until 31 March. For all taxpayers, extending the filing deadline is also possible but this would require a formal request sent in writing to either the Inland Revenue Board or your respective state’s taxation office. Typically, both parties can extend the deadline 6 months beyond what is required if no penalty fees are applied through skirting the rules. As far as deductions go, they are divided into two major categories: personal and business.
Business deductions are for expenditures that directly relate to the taxpayer’s trade or professions such as using their vehicle for work purposes while personal deductions would consist of other types of expenses like education costs and charitable donations among others. As for which deductible expenses can be claimed, it will vary depending on whether you’re filing a Form B or EZ tax return with the latter having more allowable exemptions than its counterpart.
Assignment Task 5: Demonstrate an awareness of current income tax developments in Malaysia
Malaysian taxpayers should be aware of the new regulations on income tax announced by the Finance Minister in August 2018. These regulations entitle individuals to a rebate of up to RM3,000 for single filers and up to RM6,000 for taxpayers who are married or have children. The rebates will only apply if the taxpayer earns an annual salary of less than RM50, 000. In addition, out-of-pocket medical expenses in excess of a certain threshold may also be deductible from taxable income under these changes in the law. One IRS group meeting with Western Union was announced in September 2018 too! Stay tuned for more announcements coming soon!
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