With proper planning and awareness of tax obligations, taxpayers can navigate this tax season efficiently.
IT’s that time of the year again ... income tax filing time.
I have been receiving numerous calls with queries on taxation matters ... such as on deductibility of expenses, taxability of fixed deposit interest income, timing of taxation for business income, for example, if the invoice is raised by a sole proprietor in December 2024 but the fees are received only in January 2025 – is it taxable as income in 2024 or 2025 ... and a myriad of other questions.
This is certainly a challenging time for Malaysian taxpayers as well as employers that are generating EA forms for their employees.
According to the Inland Revenue Board (IRB), a Malaysian individual must register a tax file if the person has income of RM34,000 (after Employees Provident Fund deduction) from all sources, including but not limited to salary.
If an individual is earning below this threshold, he may still opt to file a tax return voluntarily, particularly if he wishes to claim tax reliefs or rebates.
When do individual taxpayers need to file tax returns in 2025 (for the year of assessment 2024)? It depends on whether the taxpayer is a salaried employee, or someone who carries on a business, whether he is a tax resident or non-resident, and a number of other considerations.
Resident taxpayers who do not carry on business and earn only employment income essentially would be filing the Form BE by April 30 2025.
There is a grace period of 15 days for submission via e-filing, which effectively means that the final deadline for Form BE submissions is May 15, 2025.
A resident individual running a business will need to submit the Form B (or Form e-B for e-filing). Individuals that are earning employment income as well as carrying on business would also be filing the Form B.
The deadline to submit the Form B for the YA 2024 is June 30, 2025, with the deadline for e-filing submissions being July 15, 2025.
Employers are required to issue EA forms to their employees who worked for them during the year of assessment by Feb 28 of the following year. This means that for year 2024, employees should have already received their EA forms from their employers by Feb 28, 2025.
If an individual has worked for more than one employer over the course of 2024, he needs to reach out to the human resources department of the previous employer for a separate EA form.
For all Malaysian businesses, it is crucial to submit the Form E to the IRB via e-filing by April 30, 2025. Failure to submit the form on time could result in a penalty of RM200 to RM20,000, imprisonment for up to six months, or both.
Given the strict enforcement by the IRB, businesses must ensure compliance to avoid unnecessary penalties.
For employed individuals, in addition to salaries, there might be other benefits or perks that they receive as part of their employment income.
Are such benefits taxable in Malaysia? This isn’t such a straightforward answer, as it depends on the type of benefits – as well as exemptions available.
In short, there are two types of benefits:
> Benefits-in-kind (benefits that are not convertible into money)
> Perquisites from employment (in cash, or convertible into money)
Both categories are technically taxable, although there are exemptions such as petrol and medical benefits.
These exemptions however do not apply if the employee in question is a director, or an employee who has “control over his employer” via the holding of shares. It is important for both employers and employees to understand these nuances to avoid unintended tax liabilities.
For most taxpayers, the immediate priority during the tax season would be to start looking for information on all the tax reliefs, deductions, and rebates that are claimable so that they would pay less tax.
Keeping proper documentation is crucial in this regard, as the IRB has the authority to request supporting documents for claims made.
With proper planning and awareness of tax obligations, taxpayers can navigate this tax season efficiently while ensuring compliance with tax regulations.
Another crucial aspect to be aware of is the potential for a tax audit by the authorities. The IRB conducts tax audits to ensure compliance and detect under-reported income or improper claims. Taxpayers should ensure that their records are accurate, complete, and readily available in case of an audit.
Common triggers for tax audits include inconsistencies in reported income, excessive claims for deductions, or discrepancies between employer-submitted records and individual filings.
Being prepared and maintaining proper documentation can help mitigate risks and ensure a smooth process in case of a tax audit.
Harvindar Singh is SCS Global Consulting (M) Sdn Bhd’s tax partner and Chartered Tax Institute of Malaysia’s council member. The views expressed here are the writer’s own.
