Personal Financial Planning (FIN533) - Chapter 3 - Tax Planning PDF

PERSONAL FINANCIAL PLANNING (FIN533) CHAPTER 3 TAX PLANNING Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. Planning Your Tax Strategy Chapter 3 Learning Objectives 2 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. Describe the importance of taxes for personal financial planning A...

PERSONAL FINANCIAL PLANNING (FIN533) CHAPTER 3 TAX PLANNING Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. Planning Your Tax Strategy Chapter 3 Learning Objectives 2 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. Describe the importance of taxes for personal financial planning Are You Taxable? Scope of Taxation Tax Exemptions REFER TO IRB Types of Income EXPLANATORY NOTES AND FORMS Tax Relief for Resident Individual Donations and Gifts Tax Rebate Monthly Tax Deduction (MTD) & Tax Assessment Record Keeping Tax Planning Strategies Taxes and Financial Planning 3 Describe the importance of taxes for personal financial planning ◻ An effective tax strategy is vital for successful financial planning ◻ Understanding tax rules and regulations can help you reduce your tax liability Taxes and Financial Planning (continued) 4 To help you cope with the many types of taxes you should... Know current tax laws as they affect you Maintain complete tax records Plan purchases and investments to reduce your tax liability ◻ Tax planning – Take advantage of tax benefits while paying your fair share of taxes What should I do if my income is taxable? 5 ◻ ◻ ◻ ◻ ◻ ◻ Application to register an income tax reference number can be made at the nearest IRBM branch. Documents Required For Registration A copy of the latest Salary Statement (EA/EC Form) or latest Salary Slip A copy of Identification card (IC) / police IC / army IC / international passport A copy of marriage certificate (if applicable) You can also register an Income Tax reference number via e-Daftar Monthly Tax Deduction (MTD) & Tax Assessment 6 ◻ A taxpayer with employment income is subjected to Monthly Tax Deduction (MTD). The deduction will be made by the employer. ◻ The MTD deducted is considered as an advance payment made by the employee. The employee shall make a comparison between the MTD deduction and the amount of tax assessed when making the tax submission. Monthly Tax Deduction (MTD) & Tax Assessment (Cont’…) 7 ◻ If the MTD is less then the amount of the tax assessed, the taxpayer only needs to pay the shortfall. If the MTD exceeds the amount of the tax assessed the tax payer can claim a refund at the time when the Income Tax Return Form (ITRF) is furnished to the Inland Revenue Board of Malaysia (IRBM). ◻ The balance of tax needs to be paid on or before the deadline for submission of the tax return form. Record Keeping 8 ◻ Taxpayer is required to keep the following documents for 7 years: ◻ EA/EC Form ◻ Original dividend vouchers ◻ Insurance premium receipts ◻ Books purchase receipts ◻ Medical receipts ◻ Donation receipts ◻ Zakat receipts ◻ Children`s birth certificates ◻ Marriage certificate ◻ Other supporting documents ◻ Working sheets (if any) ◻ The calculation of the 7 year period begins from the end of the year in which the ITRF is filed. Tax-Planning Strategies 9 Select appropriate tax strategies for different financial and personal situations ◻ Practice Tax Avoidance Legitimate methods to reduce your tax obligation to your fair share but no more Financial decisions related to purchasing, investing, and retirement planning are the most heavily affected by tax laws ◻ In Contrast, Tax Evasion Illegally not paying all the taxes you owe, such as not reporting all income