TOO often we hear grouses when it comes to paying taxes. Some people say that paying taxes will not benefit us.
We have to look at taxes positively. If taxes are not part of Malaysia’s income structure, the government will have issues developing and managing the country. Where will the funds to build and upgrade facilities such as expressways, hospitals, universities and schools come from?
We also need to fund the country’s security and government. The stability of income that comes from taxation equals safety, guaranteeing our country’s peace, thus attracting foreign investors.
While we are quick to blame the Inland Revenue Board (IRB), we tend to forget that we also make mistakes in carrying out our responsibilities.
There are many individuals who are negligent about the requirements and responsibilities under the Income Tax Act 1967. Among those mistakes are not meeting the deadline of form submissions, not reporting actual income and fraudulent tax filings.
For some entrepreneurs, mistakes occur because they lack accounting and tax knowledge. Due to that, they only focus on the operation and marketing of their business without thinking about matters relating to management and administration.
They are often lackadaisical when it comes to keeping records and documents which may help their company keep accurate accounts. The accuracy in recording will help them know about the profit or loss they make. It can also help them in managing their taxes to avoid any penalties.
Tax evasion attempts can usually be detected by IRB staff, who are trained in spotting such attempts.
What’s best is ensuring that all our records are accurate and to not claim personal expenses. We should also know about exemptions for purchases on certain items, such as books, insurance, personal computers, savings and education funds. Optimise this benefit so that we can minimise tax payment. We can also opt to make a separate claim for spouses who have their own income. This enables individuals to maximise their exemptions.
To those who have chosen business entities, such as sole proprietorship and partnerships, might want to consider shifting to private company or limited liability partnership if income with tax has exceeded RM70,000. This is because the tax rate is almost the same as using sole proprietorship and partnership.
Individuals who receive a lot of income from rent can opt to establish a business entity, and should know the requirements to maximise expenses which can be used to reduce taxes.
To individuals who have a house and have the intention of selling it, they should know when is the best time to conduct the transaction. If they choose to sell their house after five years of owning it, a wiser action would be to delay it until the following year. This is because the real property gains tax (RPGT) for individuals in the sixth year is zero, whereas anything before that, the house owner will have to bear between 15 per cent and 30 per cent RPGT.
As a smart property investor and taxpayer, they have to take into account tax management. Don’t evade taxes because the compound sanctioned will only inflict financial losses. Choose to obey the law, know about approved exemptions for expenses and learn smart ways to reduce taxes.
In conclusion, be a smart property investor who can plan with knowledge and experience.
The writer is Amacc Corporate Services Sdn Bhd managing director.