MALAYSIAN INCOME TAX LAW

ANSWERS TO TUTORIAL QUESTIONS (Sem. 1, 2023)

Week 4: Personal Relief & Individual Taxation

Question 1
Alvin Chan, who was earning a salary of RM12,000 per month retired from Naxis Berhad
(Naxis) on 30 September 2022 at the age of 48 due to ill health after having worked with the
telecommunications company for 13 years. He received a gratuity of RM90,000 which he
used to set up a mobile phone retail business 0n 1 November 2022. Just before retiring, he
underwent an elbow ligament surgery at the Singapore Health Centre in July 2022. The
surgical and medical expenses incurred amounted to RM100,000 of which RM75,000 was
paid by Naxis.

His wife, Darleen Chan earns RM6,000 per month teaching part-time at Mannix College in
Kuala Lumpur. During her spare time, she translates literary works for the Ministry of
Education, Malaysia as well as performs in cultural shows organised by the Ministry of
Culture, Arts and Tourism, Malaysia.

Alvin and Darleen have 3 children, Ray, Orca and Anemone. Ray, aged 21, is pursuing
engineering at Melbourne University in Australia and the annual cost of maintaining him is
RM60,000. Orca, aged 13, studies at a secondary school in Petaling Jaya and Anemone, aged
20, is physically handicapped and is pursuing a business degree in University Malaya.

Alvin and Darleen Chan love to travel and the details of their stay within and out of Malaysia
in 2021 and 2022 are as follows:-
Alvin Chan
1.1.2021 - 20.1.2021 (20 days) In Malaysia
21.1.2021 - 2.7.2021 (163 days) In New Zealand
3.7.2021 - 14.9.2021 (74 days) In Malaysia
15.9.2021 - 30.9.2021 (16 days) Attended a
telecommunications
seminar in USA
1.10.2021 - 31.12.2021 (92 days) In Malaysia
1.1.2022 - 31.1.2022 (31 days) In Malaysia
1.2.2022 - 31.12.2022 (334 days) In Singapore
Darleen Chan
1.1.2021 - 24.2.2021 (55 days) In Malaysia
25.3.2021 - 27.8.2021 (124 days) In Switzerland
27.8.2021 - 31.12.2021 (126 days) In Malaysia
1.1.2022 - 31.5.2022 (149 days) In Indonesia
1.6.2022 - 17.9.2022 (109 days) In Malaysia
18.9.2022 - 30.9.2022 (13 days) Social visit to Indonesia
1.10.2022 - 30.11.2022 (61 days) In Malaysia
1.12.2022 - 31.12.2022 (31 days) In South Africa

1
Alvin Chan has provided the following additional information in respect of the year ended 31
December 2022 for both him and his wife:
Alvin Chan Darleen Chan
RM RM

Adjusted Business Loss (S. 44(2) 60,100

EPF - Employer’s portion 3,200 2,080

- Employee’s portion 2,800 1,700
Insurance - Capital sum insured 80,000 50,000
- Premium paid 2,100 1,800

Leave passage provided by employer 4,200 5,000

(Overseas) (2 local trips)
Children’s maintenance expenses
- Ray 60,000 -
- Orca 8,000 -
- Anemone 22,000 -
Medical expenses incurred in respect of
- Alvin’s’s parents 1,700 -
- Darleen’s parents - 7,000
Donations to approved institutions
- Computer (worth) 3,000 -
- Cash 600 4,000
Dividend income (Malaysian)
Mobico Bhd 19,320 37,300
Translation fees received from Ministry
of Education - 12,200
Interest from RM120,000 savings account
each in Public Bank Bhd 4,200 4,200

Required:

(a) Ascertain the residence status of Alvin and Darleen Chan for the years 2021 and 2022

(b) Compute the income tax payable, if any, by Alvin and Darleen Chan on the basis that
they opted for separate assessment for the Y/A 2022. Assume that all child relief is
claimed by Alvin Chan.

(c) List three (3) benefits of Alvin and Darleen Chan opting for separate assessment instead
of joint assessment.

2
Answer
(a) Taxpayer Y/A Section Residence Status Remarks

Alvin 2021 s7(1)(a) Resident 20+74+92 = 186 days

2022 s7(1)(b) Resident 31days in 2021 linked
to 182 consecutive
days in 2018 (incl.
seminar in USA, i.e
74 +16+92).
Darleen 2021 - Non-resident 55 + 126 =181 days
So Not s7(1)(a)
2022 - Non-resident Social visit to
Indonesia making it
183 days NOT
relevant ‘cos big
gap fr 1/1/21-31/5/21
& cannot link to 2019
s7(1)(a) also won’t
apply ‘cos 170 days.

b) Alvin Chan-Y/A 2022

Gross Income RM RM Remarks
Sec. 4 (b): Employment Income
 s. 13(1)(a)
Salary 108,000 s13(1)(a) – 12,000 x 9
Gratuity - Para 25 Sch 6 –
Illness; totally exempt
 s 13(1)(b)
Surgical/Medical Exp - Exempt
Leave Passage 1,200 s13(1)(b)(ii)- overseas
109,200 Exempt up to 3,000
Sec. 4(c): Dividend/Interest Income
Dividend (Mobico) - Single Tier System
Interest (Public Bank) - - Exempt
Adjusted/ Aggregate Income 109,200
Less: Current year adjusted loss 60,100 s44(2)
Approved Donations 600 60,700 s44(6) – only cash
Total Income 48,500

Less: Reliefs
- Personal 9,000 s46(1)(a)
- Parent’s med 1,700 s46(1)(c) - 8,000 max
- EPF & Ins 4,900 s49(1) – 2,800 +2,100
- Child (Ray) 8,000 s48(1)(b)+s48(3)(a)(i)
- Child (Orca) 2,000 s48(1)(a)+48(2)(a)
- Child (Anemone) 14,000 (39,600) s48(1)(d)+48(2)(b)-
8,000 + 6,000
Chargeable Income 8,900
3
Income tax payable:
First 5,000 0
Next 3,900@1% 39
Gross Tax Payable 39
Less: Low Income Rebate (LIR) 39 RM400 limited to 39
Net Tax Payable NIL
Note: No refund if LIR>tax payable

Darleen Chan-Y/A 2022

Gross Income RM RM Remarks
Sec. 4 (b): Employment Income
Section 13(1)(a)
Salary 72,000 6,000 x 12
Section 13(1)(b)
Leave Passage - 2 local trips
exempt up to 3 trips
Sec. 4 (c): Dividend/Interest Income
Dividend (Mobico) - Single Tier System
Interest Public Bank - Exempt

Section 4(d)
Translation Fees 12,200 Para 32A Sch 6 –
Doesn’t apply-non res
Adjusted/Aggregate 84,200
Less App Donations (4,000) sec 44(6)
Total / Chargeable Income 80,200

Income Tax payable = 80,200 x 30% = RM24,060 Para 1A Part 1 Sch1-

[Note: No relief for non-resident] Non-resident rate – 30%

c)
 Each individual gets RM9,000 personal relief which totals RM18,000 instead of RM9,000
+ RM4,000 which only totals RM13,000. But here not relevant because she is a non-
resident and does not get relief.
 If joint assessment then the combined chargeable income would hit a higher tax bracket.
Thus, an election of a joint assessment will attract more tax.
 Only the primary tax payer in a joint assessment can claim relief for his/her parents’
medical expenses, whereas under separate assessment, both can claim. But not relevant
on the facts as Darleen is a non-resident.