There’s just one thing I can’t figure out. My income tax! –Nat King Cole
He’s not the only one who gets befuddled by taxes. All we know is that we look forward to the reliefs. In October this year, Malaysia unveiled a variety of tax measures in its new budget that will impact businesses and individuals in 2022.
Since we only have a month left of the year, let’s see where we can save more money.
We have to clarify a couple of terms used in this article:
- The year of assessment: The calendar year from Jan 1 to Dec 31, in which your income is assessed and taxed. For example, by April 31st 2022, you file and pay tax for what you earned in the 2021 year of assessment
- Tax filing: Filling in a form to provide information about how much you earned in the year of assessment. For individual taxpayers in Malaysia, this can be done through a manual paper form, or through an online e-filing system (ezHASiL)
Most of these initiatives are for Budget 2022, it means that they can only be used during the 2022 year of assessment.
Some are extensions of already-existing initiatives, which means that they can be applied for 2021 when you file your taxes in 2022.
So what are the key tax measures impacting individuals?
Expansion of the tax relief for medical expenses
The scope of relief under this incentive has now been expanded to include costs incurred for examination or consultation relating to mental health.
In 2021, the maximum tax relief for the treatment of serious illnesses was raised from RM6,000 to RM8,000; and this includes costs for yourself as well as children and/or spouse. From this total, up to RM1,000 can be claimed for medical examinations.
Also, there will be a relief for C19 booster shots, if you pay for them yourself.
Expansion of EPF contributions
The minimum monthly contributions to the Employees’ Provident Fund (EPF) will continue to be set at the reduced rate of nine percent (from 11 percent) until June 2022. This has also been expanded to include voluntary contributors (self-employed).
The EPF manages the compulsory savings plan and retirement planning for private-sector workers in Malaysia.
Expansion on the tax relief for SOCSO payments
The tax relief on the individual Social Security Organization (SOCSO) contribution has been increased from RM250 to RM350 ringgit and expanded to include contributions under the Employment Insurance System Act 2017 (EIS).
Freelancers and gig workers also get up to RM4k in EPF tax relief
Freelancers, self-employed, and gig workers have traditionally been left out of the EPF loop simply because there’s no requirement to do it.
Budget 2022 is fixing this by making allocations to also provide the same RM4,000 tax relief if you voluntarily make contributions to your EPF account.
Even though this will only start in 2022, this is a good time to start growing a nest egg for retirement especially if freelancing or gig-working is your full time job. Check out the EPF self-contribution page to see how you can do it.
This applies to government servants who are on the pension scheme.
Review of real property gains tax
Currently, the disposal of real property, including shares in real property companies, by citizens, permanent residents, and persons other than companies is subject to a real property gains tax (RPGT) of five percent. This is applicable in the sixth and subsequent years after acquisition.
The government is proposing that the RPGT rate after the sixth and subsequent year after acquisition be reduced to between five and zero percent.
Extension of tax relief for domestic tourism
The tax relief for domestic travel expenses for tourism has been extended from January 1, 2022, to December 31, 2022. This incentive provides tax relief of up to RM1,000.
Expansion of tax relief on upskilling course fees and education
Under this incentive, an applicant is eligible for tax relief on fees expended on courses for upskilling or self-enhancement, limited to RM1,000 per YA. This has now been increased to RM2,000 until YA 2023.
Kindergarten and nursery fees
A parent sending their kids to registered nurseries and kindergartens can claim up to RM3,000 in tax relief for the fees. This will apply for the current year – meaning you can claim the amount when you file your taxes in 2022 – and has been extended till the year of assessment 2023 (which you will file and pay by April 2024).
When to file: 2022, 2023, and 2024
Skim Simpanan Pendidikan Nasional
If you’re a parent, you can also start saving for your kids’ tertiary education through the Skim Simpanan Pendidikan Nasional (formerly known as Skim Simpanan Pendidikan 1Malaysia). You can claim up to RM8,000 in relief for this year, and extended till year of assessment 2022.
Educational and upskilling courses for yourself
If you’re missing college/university and you don’t mind the pressure of preparing for exams ( I still get nightmares so this is a no-go zone for me) and would like to go back to school, you can claim up to RM7,000 in tax relief for the course fees, as long as you’re in a recognized higher education institution (ie, colleges or universities).
This has actually been around for a while, but what’s new is that the relief now includes fees from approved professional bodies for courses in Accounting, Finance, and Environmental, Social and Corporate Governance (ESG).
For those looking to pick up or further develop new skills, the tax relief for the cost of upskilling courses will be increased from RM1,000 to RM2,000 up to the 2023 year of assessment. For this year though, it’s still at RM1,000.
When to file:
- RM1,000 in 2022
- RM2,000 in 2023 and 2024
Extension of tax relief for deferred annuity premium payments
Budget 2022 has extended the tax relief of up to RM3,000 ringgit available for those who deferred their annuity premium payments until 2025.
Tax relief on expenses related to electric vehicle charging facilities
The government has provided tax relief of up to RM2,500 ringgit on expenses related to the installation, purchasing, or rental of electric vehicle charging facilities. This is effective from YA 2022 until 2023.
An extra RM2,500 tax relief for electronic gadgets
There’s already a RM2,500 Lifestyle Relief which covers purchases of educational reading material (electronic or printed), electronic devices, and internet subscription.
However, during the work-from-home year of 2020, the government introduced a special tax relief for an additional RM2,500 if you buy a computer, smartphone, or tablet, which has been extended to December 31st 2022.
When to file: 2022 and 2023
Esports Prize Money Tax Exemption
You’ve been working from home and taking part in Esports tournaments to increase your income. Good news! The government has a RM20 million allocation under Budget 2022.
Any prize money you might win from selected international tournaments will be tax-exempted. Essentially, this means that the prize money won’t be counted as part of your taxable income.
RM1,000 tax relief on domestic travel expenses
If you’re tired of staying at home and plan to do some domestic travel, there is a tax relief up to RM1,000 for accommodation and entry fees to tourist attractions.
This is applicable for the current year, and has been extended till the end of 2022.
You have to stay at a hotel that’s registered with the Ministry of Tourism, Arts, and Culture. Here’s a link to the full searchable list of hotels on their site.
When to file: 2022 and 2023
You can get the full scope of these tax reliefs, plus other benefits that aren’t income tax related on the Manfaat Bajet 2022 website.
Make sure you keep your receipts for these claims. In fact, you’re actually required to keep your receipts for 7 years.