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FAQs by Young Employees on Their Tax Filings Answered
A. When Is the Deadline for Filing Personal Income Tax Returns for the Year 2022?
30 April 2023 (manual filing), 15 May 2023 (electronic filing) - unless an extension of time is granted by the Government.
B. What Are Some of the Y/A 2022 Tax Deductions I Didn’t Know I Could Claim?
For Your Parents
Medical Treatment, Needs and Care Expenses
Supporting Equipment for Disabled Parents
For Your Children
For Yourself, Spouse and Child
For Yourself
This list does not include all eligible deductions and the restrictions for each deduction. Eligible Tax Deductions and relief change every year. The see the full list go to: https://www.hasil.gov.my/en/individual/individual-life-cycle/how-to-declare-income/tax-reliefs/
C. What Documents Do I Need for Filing My Personal Income Tax Return?
EA-Form (provided by your Employer)
Proof and receipts of all deductions being claimed
Invoices/receipts/proof for any other non-employment sources of income
D. When Can I Get a Tax Refund?
When you have paid excess tax to LHDN. Eg., when the total tax paid to LHDN via your PCB is higher than your actual chargeable income (after claiming Tax Deductions), the Government must refund the excess paid. Refunds will be made to the bank account registered with LHDN.
Note: You must file your Income Tax Return and claim your Tax Deductions if you want to receive the refund.
E. My Employer Has Already Remitted PCB Payments to LHDN, Why Do I Still Have to File an Income Tax Return?
Filing your Income Tax Return is mandatory in law, even when you have already paid the PCB to LHDN. This is because you may also have other sources of taxable income (i.e., rental income) and the PCB does not cover the tax for other sources. Further, the filing of your Income Tax Return is needed to claim Tax Deductions.
If you have taxable income and do not file an Income Tax Return, it is a criminal offence. Further, the filing of your Income Tax Return is needed to claim Tax Deductions.
F. When I Claim My Tax Deductions, Do I Need to Show Proof/Receipts?
You do not need to attach proof/receipts of payments when you file your Income Tax Return with LHDN. However, you should keep the proof with you for at least 7 years because LHDN can audit you any time and ask for proof for the Tax Deductions claimed. If you cannot show the proof, LHDN may disallow the Tax Deduction and impose penalties upon you.
G. How Long Do I Need to Keep My Personal Income Tax Records?
All Documents related to your Income Tax Return, including proof of deductions, EA-Form, receipts and documents for other income sources and the completed Income Tax Return should be kept for at least 7 years.
H. I Am Filing My Income Tax Return for Y/A 2022 on 30.4.2023. Can I Claim Expenses Incurred From 1.1.2023 to 30.4.2023 for Y/A 2022?
No. Deductible Expenses incurred in 2023 (starting 1.1.2023), can only be claimed against income for Y/A 2023 (income earned from 1.1.2023 to 31.12.2023).
I. Does It Matter When in the Year I Incurred My Expenses and Earned My Income? Does This Affect My Tax Deductions?
No, as long as the income was earned and the deductions were incurred in the same Year. Income and expenses for a Y/A cannot be broken up or fragmented. So, if you only earned income in the first half of 2022 but your expenses were incurred in the second half of 2022, you can still claim the deduction against the income for 2022.
J. How Do I Calculate the Correct Amount of Tax to Pay in My Income Tax Return?
You do not need to do such calculations. The LHDN’s electronic filing is automated to calculate the amount of income tax you have to pay. As long as the relevant fields of income and expenses are keyed in correctly, the system will calculate and determine the amount of tax payable/refunds due for you.
K. What Happens If I Don’t File My Income Tax Return?
Failure to file an Income Tax Return (where there is chargeable income) is an offence in law and can result in financial penalties and even jail time in certain circumstances.
L. What Happens If I Do Not Correctly Declare My Income in My Income Tax Return?
Wrongful and non-declaration of income is an offence in law and can result in financial penalties and even jail time in certain circumstances.
M. I Do Not Have Any Chargeable Income For Y/A 2022 but Did Have Chargeable Income For Y/A 2021, Must I Still File an Income Tax Return For Y/A 2022?
Yes
N. What Is the Tax Rate on My Income?
For individuals, tax in Malaysia is imposed on a sliding scale- i.e., the rate of tax depends upon the amount earned. The below table shows the rate of tax applicable depending on the amount of chargeable income:
Accordingly, the first RM 5,000 of your income is taxed at 0%. The next RM15,000 (after the first RM 5,000), is taxed at the rate of 1% and so on.
O. Is My Bonus Subject to Tax?
Yes. Bonus payments whilst discretionary still form part of income earned from employment and are therefore taxable. Your Employer may already have remitted the tax for your bonus to the LHDN before you received it (in the same way as a PCB).
P. Are My Allowances Received From My Employer Subject to Tax?
Yes. Certain Employers may provide allowances such as travel, parking, clothing, phone allowances etc. These allowances are considered benefits of employment and are subject to tax. These should already be reflected in your EA Form.
Q. Besides My Employment I Also Earn Income from Other Sources Where I Am Not an Employee (I.e., Freelance Work, E-Hailing, Rental of Property, Modelling, TikTok etc.). Do I Have to Pay Income Tax on This?
Yes. Employment income is only one source of income. Other income sources would also be taxable under the Income Tax Act and must be declared and brought to tax in your Income Tax Return. As these are separate from your Employment Income, they will not be reflected on your EA Form.
R. I Bought Shares in Malaysian Listed Companies That Earn Dividends. Do I Have to Pay Income Tax on The Dividends?
No. Dividend income of such a nature in Malaysia is exempt in the hands of shareholders.
S. If I Sell My Malaysian Shares, is Gain on the Shares Subject to Income Tax?
No. Shares are capital in nature (not income) and Malaysia does not presently have a capital gains tax. (However, please note that the disposal of shares in real property companies may attract RPGT depending on the disposal).
T. I Paid for Certain Eligible Medical Expenses but Claimed My Insurance and Was Reimbursed. Can I Claim Tax Deduction for The Medical Expense Payments?
No. If you have been reimbursed fully for any expense, you cannot claim a deduction. You can, however, claim Tax Deductions any applicable portion that your insurer did not reimburse and for your insurance premiums.
This guide is limited to employment and personal income tax filings and is based upon the law applicable for Y/A 2022. This guide does not amount to legal advice and legalistic language and definitions have been omitted / summarised for ease of understanding.