Please enable JavaScript.
Coggle requires JavaScript to display documents.
09 Individual Tax Planning - Coggle Diagram
09 Individual Tax Planning
Resident status
R: enjoy reliefs, rebates and scale rates (Para 21 Sch 6)
Remuneration Package
Reduce S13(1)(a)
: whole cash amt received is taxable
Reclassify em'ee remuneration -->
eligible for exemption
ie. travelling allowance (director X get 6000 exemption), parking + meal alllowance (full exemption on reasonable amt), child allowance (2000 exemption per YA)
Increase BIK S13(1)(b)
: car, petrol, maid (400 pm), gardener (300 pm), driver (600 pm)
taxable only on the
amt prescribed by the public ruling
amt taxable normally
lower
than actual amt benefited
Accommodation to em'ee:
Lower
of
DV or 30% of S13(1)(a) income
normally 30% of S13(1)(a) income is lower
Expatriate staff
: highly skilled/expertise
Co pay tax for foreign workers, thus pay less tax by reduce S13(1)(a), inc S13(1)(b)
Comparison
All cash remuneration
Advantages
larger base for EPF (higher em'er cont with higher salary), bonus payment (more bonus if calculated by month) and salary increment (% of salary)
Disadvantage
every $$ of remuneration is subject to tax
Cash remuneration + BIK + Accom + Shares
Advantages
rental pd by em'er not fully taxed, only 30% of his S13(1)(a) is taxed (normally is lower)
capital gain from shares: appreciate in value
lower tax payable
higher net disposable income
Disadvantage
base for EPF/bonus is lower
Gratuity VS CLE
Gratuity is better :+1::skin-tone-3:
IF
em'ee >= 55 y/o
ceasation of employment not too far from statutory retirement age + 10 yrs employment period
--> extend employment period to get full exemption
director
CLE is better :+1::skin-tone-3:
IF
em'ee < 55 y/o (young)
employment period < 10 years
Contract of Service
VS
Contract for Service
Dec 2020
Contract of Service
EMPLOYMENT INCOME
master (em'er) and servant (em'ee) relationship/ appointment of office
Tax Treatment
Y taxable only when received in the YA of receipt
ie. salary X received, X taxable
11 mths salary in 2020 - YA 2020 tax 11 mths of salary
Dec salary pd Mar 2021 - YA2021 tax 1 mth salary
X claim CA
lesser deductible exp (own clothing/ rental X)
Exp > Y = Permanent Loss (cannot c/f)
Contract for Service
Business Income
Principle + Agent relationship
Tax Treatment
Y taxable on accrual basis in YA of receivable
ie. 11 mths sales received, Dec sales received in next year, tax 12 mths sales
if can't collect Dec, claim reduction on bad debts
can claim CA (car used for biz)
more deductible exp ie.rental, salary, quit rent
Exp > Y = Current Year Business Loss (CYBL), can set off aggregate Y (biz Y + non-biz Y)
Excess loss = c/f up to another 7 YAs
Factors
to determine type of contract:
Nature of remuneration
ie. salary, annual leave, EPF (under employment）
Delegation of duties
(em'ee X delegate; sub-contract agent may delegate to its staff)
Extent of control
(high control on em'ee time and scope of job)
Provision of equipments
ie. firm provide laptop for em'ee