New IRB move to avoid over-deduction

From: thestar online (Wednesday December 24, 2008)
By M. KRISHNAMOORTHY

KUALA LUMPUR: A new schedular tax deduction (STD) system will take effect from Jan 1 to overcome the problem of over-deduction.

This means employers and employees will have to do more - they now have to file tax exemptions on a monthly basis rather than annually.

Inland Revenue Board chief executive officer Datuk Hasmah Abdullah said the new system would ensure that an accurate amount was deducted, and would reduce the instances of over-payments and refunds or under-payment involving three million people.
Details of the new system, such as the calculation of STD, would be posted on the IRB website when it is gazetted.

“The new STD system will require employees to provide to their employers the monthly exemptions, personal relief and rebates they wish to claim as a taxpayer,” said Hasmah.
Some of the exemptions include life insurance payments, medical expenses for parents, equipment for the disabled, higher education fees, full medical examination, purchase of books, magazines, journals and computer and alimony payments.
The rebates can include zakat payments and levies for visit pass, education pass and worker permit pass.

“We will continue to give talks to employers in big groups on the new system and they will be given time to convert their systems to cope with the new STD system.”
However, the first monthly payment for the January salary would have to be made by Feb 10.
The appropriate forms for employees to submit to their employer will be released as soon as the STD is gazetted.

The completed forms will have to be forwarded to the employer to collate and consolidate before forwarding the information electronically to IRB using Form CP39 declaring all the STD deductions.

The Malaysian Employers Federation (MEF) has objected to the new system, saying that it would burden employers.

“It is going to be costly and create a lot of problems as we have to employ more people and create a new software to process the STD deductions monthly,” said MEF executive director Shamsuddin Bardan.

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