Good news to all taxpayers at Malaysia : the Income Tax Exemptions and Tax Reliefs for 2019/20 that you shall know.

An income tax is a tax imposed by the Malaysian Government onto income generated by individuals and businesses. Income taxes are a source of revenue for governments. They are used to fund public services, pay government obligations, and provide goods for citizens. Hence, it is an obligation of every taxpayer who is liable to tax to declare the income to Inland Revenue Board of Malaysia.

As such, every responsible taxpayer must know the entitlement of exemptions and reliefs to the income tax and fundamental rights as taxpayers before fulfilling your obligations.

Part 1: Tax Exemptions & Tax Reliefs 2019 for Individual & Business Taxpayer

Any Malaysian taxpayer shall be exempted from tax payment for the following employment income:-

Types	Amount (RM)
Leave passages               a) One overseas leave passage (for fares only); or     b) Three local leave passages including fares, meals and                          accommodation	Maximum of 3,000 Fully Exempted
Medical and dental benefit (maternity expenses and traditional medicine)	Fully Exempted
Petrol allowance, travelling allowance or toll payment	Maximum of 6,000
Child care allowance in respect of children 12 years old and below	Maximum of 2,400
Achievement award (money or gifts)	Maximum of 2,000
PTPTN Loan paid by an Employer	Fully Exempted
Gratuities	Fully Exempted
Compensation for Loss of Employment	Considered on case by case basis
Pensions	Fully Exempted
Scholarships	Fully Exempted
Income from appearances in cultural performances	Fully Exempted
Royalty	Considered on case by case basis
Income remitted from outside Malaysia	Fully Exempted
Fees or honorarium for expert services	Fully Exempted
Income from research finding	50% on the statutory income
Women returning to workforce	Fully Exempted
Interest earned from	Fully Exempted
Dividend from	Fully Exempted

[This list is not exhaustive.]

An individual shall be eligible for the following Income Tax Reliefs:-

Types	Amount (RM)
Individual and dependent relatives	9,000
Medical treatment, special needs and carer expenses for parents (Medical condition certified by medical practitioner)	5,000
Basic supporting equipment for disabled self, spouse, child or parent	6,000
Disabled individual	6,000
Education fees	7,000
Medical expenses for serious diseases for self, spouse or child	6,000
Complete medical examination for self, spouse and/or child
Fertility or IVF Treatments
Lifestyle – Expenses for the use / benefit of self, spouse or child	2,500
Purchase of breastfeeding equipment for own use for a child aged 2 years and below	1,000
Child care fees to a registered child care centre / kindergarten for a child aged 6 years and below	1,000
Net deposit in Skim Simpanan Pendidikan Nasional	6,000
Husband / wife / payment of alimony to former wife	4,000
Disabled husband / wife	3,500
Life insurance and EPF	7,000
Deferred Annuity and Private Retirement Scheme (PRS)	3,000
Education and medical insurance
Contribution to the Social Security Organization (SOCSO)	250

[This list is not exhaustive.]

Meanwhile, companies are entitled for deductions falling within the categories below:-

Business Expenses

1)     Expenses incurred in the production of income i.e. payment of salaries, EPF, rental of business premise, interest on business loan and expenses for repair of premise and vehicles used for business purpose.

The deductions in respect of capital expenditure is known as capital allowances which are given only in respect of expenditure falling within the following categories:-

1)     Qualifying expenditure on machinery and plant;

2)     Qualifying expenditure on industrial buildings;

3)     Qualifying agriculture expenditure;

4)     Qualifying forest expenditure;

5)     Qualifying mining expenditure; and

6)     Qualifying prospecting expenditure.

The types and rates of Capital Allowances are as below:-

Types of Allowances	Types of Assets	Rate (%)
Initial Allowance	All types of Assets	20
Annual Allowance	Motor Vehicles and Heavy Machineries	20
	Plant and Machinery	14
	Office Equipment, Furniture and Fittings	10
	Computer	20

Allowable Specific Expenses

1)     Expenditure incurred in providing equipment for disabled employee (OKU);

2)     Expenditure incurred in respect of publication in National Language;

3)     Donation to libraries;

4) Expenditure incurred in providing services, public amenities and contribution to a charity or community project;

5)  Expenditure incurred in providing and maintenance of a child care centre for the benefit of employees;

6)     Expenditure incurred in establishing and managing a musical or cultural group; and

7)     Expenditure incurred in sponsoring any art or cultural event.

Part 2: Taxpayer’s Rights

Taxpayer’s Rights during Tax Investigations

Inland Revenue Board shall investigate any taxpayer being charged under Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 for money laundering when the taxpayer found to be evading taxes. Pursuant to Tax Investigation Framework 2020, the aggrieved taxpayer shall appoint a qualified lawyer and an approved tax agent during tax investigations.

Taxpayer’s Right to Appeal

Under the Income Tax Act 1967, the taxpayer may appeal against the assessment made by Inland Revenue Board. The aggrieved taxpayer shall submit the prescribed form to the Director of the relevant Investigation Branch which provides a taxpayer the right to appeal to the Special Commissioners of Income Tax within 30 days after service of the notice of assessment by the Inland Revenue Board. Nevertheless, this is not the last resort, any aggrieved taxpayer being dissatisfied with the decision of Special Commissioners of Income Tax shall further appeal to the High Court to challenge the said decision.

Burden of Prove

It is the obligation of the Special Commissioners of Income Tax to satisfy the court there is fraud, wilful default or negligence against the part of taxpayer on the balance of probabilities by virtue of Section 91(3) of Income Tax Act 1967.

As a taxpayer, should you face any dilemma posed by taxation, kindly consult a qualified lawyer to achieve a legal solution.

*The above article is written by Jashvini Rajendran, a Lawyer with Messrs Esther Ong Tengku Saiful & Sree. Kindly feel free to contact us should you have any query.

*You may contact us at:

Address: 51-1, Jalan USJ 10/1A, Taipan Triangle  47620 Subang Jaya, Selangor Darul Ehsan, Malaysia.

Tel        : 603-56379700

E-mail  : etscare@lawyermalaysia.com