In case you missed it, tax season is upon us again! It’s that time of the year when Malaysian citizens and residents will begin declaring all their earnings in the previous year.
Now if you’re legally employed in Malaysia, or you are an employer here, you would have to pay taxes. However, in this article, we’ll be solely focusing on Malaysia Personal / Individual Income Tax (YA2021), that is, tax paid by employees in Malaysia.
If this is the first time you’re filing your taxes or you just need a clear guide on how to do the e-filling LHDN 2021, this article is just for you! Read on to find out all you need to know about declaring tax returns in Malaysia.
Let’s start with this basic question:
Who should file tax returns?
According to Lembaga Hasil Dalam Negeri (LHDN)–also known as the Inland Revenue Board–those earning at least RM34,000 a year after EPF deductions need to pay taxes. Those who fail to do so can face legal action, so make sure you do your part and declare your income.
However, even if you earn less than RM34,000 annually, you should still file your taxes. You won’t have to pay anything, but it’s still good to get into the habit of declaring your income. At this juncture, it’s worth mentioning that there’s a difference between filing your tax returns and paying taxes, as not everyone who files their returns will need to pay tax–only those who earn RM34,000 and more a year.
And speaking of that, any income that you earn outside of Malaysia is not taxable. But you will need to declare ALL types of income (part time and freelance included) that you earn in Malaysia.
Now, let’s jump right on to the next important question you might ask:
How are my taxes calculated?
Firstly, the total of all your incomes in the whole tax year will be added. Then, if you qualify for any of the tax exemptions and reliefs, those amounts will be deducted from your income amount. Tax exemptions and reliefs are ‘discounts’ you can get for certain expenses made in the year. We’ll look at what exemptions you can for the 2021 tax year shortly but for now, this is what you need to know:
Total income - tax exemptions and reliefs = chargeable/taxable income
Your tax rate is calculated based on your taxable income. So the more taxable income you earn, the higher the tax you’ll be paying. Per LHDN’s website, these are the tax rates for the 2021 tax year.
Coming back to the tax exemptions and reliefs, these are all the ones that were announced by the government during the 2022 Budget speech:
Individuals and families
- RM9,000 for individuals
- Up to RM4,000 for those who contribute to the Employees’ Provident Fund (EPF), including freelance and part time workers
- Up to RM3,000 for kindergarten and daycare fees
- Sales tax fully waived for new passenger vehicles
- 100% exemption on import and excise duties, sales tax and road tax for electric vehicles
- 50% off for car seat purchases for B40 families
Lifestyle and entertainment
- Up to RM1,000 for domestic travel expenses
- Full exemption on entertainment duties for theme parks, cinemas, sporting events etc.
- Up to RM2,500 for book purchases or newspaper and magazine subscriptions, both physical and online
- Up to RM2,500 for gym subscriptions or purchase of sports equipment
- Up to RM2,500 for purchases of mobile phones, laptops, tablets and similar devices
- Up to RM2,500 for internet subscriptions
Health and well-being
- Up to RM1,000 for a full medical check-up
- Up to RM,000 for vaccinations
- Up to RM8,000 for parents’ medical expenses and care
Please note that you can claim the above for expenses made on or before 31st December 2021 only.
How do I file my tax returns?
Register under e-Daftar
If this is your very first time, you’ll first need to register with LHDN. If you plan to do this manually, you can visit your LHDN branch and they will guide you accordingly. However, if you want to file your taxes online, follow the steps below.
Step 1: Visit this e-Drafter link and fill in all the required fields. But before that, click on the link that says ‘Please Check Your Income Tax No. First’ at the top of the page to ensure that you have not already not registered previously.
Step 2: Once you’ve filled in all the necessary details, double-check the information and click ‘Hantar/Submit’.
Note: If you have not attached the required documents such a copy of your MyKad at this point, you can still submit your application, but you’ll need to send in the documents within 14 days of the application. After 14 days, your application will expire and you’ll need to make a new one.
Step 3: You’ll then see a page with your tax reference number and LHDN branch. Note these down for reference. A message stating that your application has been received will be displayed. Within 3 working days, you’ll get an e-mail from LHDN stating that you have been registered, and you will receive your tax number.
Now that you’re registered with LHDN, the next thing you need is a PIN.
How to obtain PIN from LHDN?
You can get your PIN at an LHDN branch or online. If you’d like to retrieve it online, head over to the LHDN Maklum Balas Pelanggan (Customer Feedback) website.
Step 1: Click on ‘Permohonan’ or ‘Application’ (depending on your chosen language).
Step 2: Click on ‘e-Filing PIN Number Application’ on the left, and then click on ‘Form CP55D’.
Step 3: Download a copy of the form and fill in your details
Step 4: Go back to the previous page and click on ‘Next’.
Step 5: Fill in the required details and attach your Form CP55D. Click ‘Submit’ when you’re done. You will then receive your PIN from LHDN within a week.
How to login your ezHasil?
You’re just a few steps away from doing your taxes now! ezHasil is where you’ll be doing your e-Filing, and you can click here to begin.
Note: Have your EA form ready. Your EA form will be provided by your employer and it will contain the details of how much income you’ll need to declare as an employee. Each company will issue a separate EA form, so if you have worked for more than one company in one year, you will have to have an individual EA form for each. We will show you how to fill up your tax form if you have more than one EA form later in the guide.
Step 1: For first time ezHasil users, you’ll need to click on ‘First Time Login’.
Step 2: Enter your PIN from LHDN and ID number.
You’ll then need to fill up a simple form with your particulars and a new password which you’ll use for future logins. Double-check your information and click ‘Submit’. Voila, you’re all set! Head back to the ezHasil login page to start filing your tax returns.
Note: As you’re logging in, ensure that the security phrase you see is correct.
How to declare your taxes by using ezHasil?
Step 1: Once you’ve logged in, click on ‘e-Form’ under ‘e-Filing’.
Step 2: Under e-BE, select the Year of Assessment:
Step 3: Confirm your particulars on the next page and click ‘Next’.
Step 4: Confirm your other particulars such as your contact details and fill in whichever is applicable to you. If you didn’t sell any property in 2021 or have no special incentives to claim, you can leave those sections blank.
Step 5: This is where you declare all the income you’ve earned in the previous year. Now, if you’ve worked for more than one employer, enter the number of companies you’ve worked for in the ‘Number of employer’ column. Enter the total income you’ve received from your company/companies after EPF deductions in the ‘Statutory income from employment’ column.
Step 6: On this page, you can claim the reliefs and exemptions that we mentioned earlier. You may refer to that section to see what you can claim this year. But what’s great is that this section of your e-Form will already show you the maximum amount you can claim for each item. Be sure to input the exact amount you spent and only claim for what’s applicable to you.
Step 7: You’ll be shown a summary of how much income you’ve declared, all the reliefs and exemptions you’re claiming, and how much tax you’ll be paying. Click ‘Next’ after confirming the details.
Step 8: This is the final step. Once you’re sure all the information you’ve entered is correct, click ‘Sign and Submit’. Congratulations, you’ve just successfully filed your tax returns! You’ll be able to download a copy of your e-Form for your safekeeping.
Can I amend my tax form if I made an error?
Realised you declared a wrong amount only after you submitted your form? Good news: you’re allowed to fix it. However, how you can make these changes depends on whether you filled in your form online or manually, or whether you amend them before or after the submission deadline.
Login to ezHasil and click on ‘e-Application for Amended BE’ and follow the instructions shown accordingly.
For amendments made before the submission date, you only need to submit a letter explaining what the changes are together with relevant proof such as receipts, bills and so on.
For amendments that are made after the deadline, you must make them within 6 months of that deadline by filling up an Amended Return Form. This can be done online or through the LHDN branch that keeps your tax file.
According to LHDN’s website, you can use the Amended Return Form to make changes on your tax form for the following items:
- Income under declared / not declared
- Expenses / other claims over claimed
- Capital allowances / incentives / reliefs over claimed
For other types of amendments, an Amended Return Form is not needed, and you can just submit a letter with proof of your changes, similar to amendments made before the submission date.
Bonus: Important tips to remember before filing your tax returns
Take note of the LHDN e-filling 2021 deadline
If you’re a very busy person, or if this is your first time doing this, you might just forget to fill up that LHDN form on time.Please note that the deadlines for tax filing are 30th April 2022 and 15th May 2022 for manual filing and e-Filing, respectively.
Keep all your receipts
When claiming exemptions and reliefs, ensure that you have the required proof to make that claim. For example, if you had spent RM2,000 on a new laptop and would like to claim this, keep the receipt for that purchase as proof. Under Section 82A of the Income Tax Act 1987, you are required to keep such proof/documents for up to 7 years from the end of the year of assessment.
Be honest and accurate when filling up the form
And speaking of proof and documents, be sure to input the correct amount of income you earned and exemptions you’re claiming. Under Section 114 of the Act mentioned above, anyone who falsifies an entry on a tax form can be “liable to a fine of not less than one thousand ringgit and not more than twenty thousand ringgit or to imprisonment for a term not exceeding three years or to both”. They will also need to pay 3x the tax amount which was undercharged as a penalty.
Of course, you will only be penalised under this Section if you deliberately declared a wrong amount. If you made a genuine mistake, you can amend the tax form as we mentioned earlier. That being said, do your best to be as accurate as possible and double-check everything before submitting your form.
We hope this article cleared most of the doubts that you had regarding filing your taxes. If you’re about to start the process soon, good luck! The deadline is still weeks away, but we strongly urge you not to wait until the last minute.