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Children are their parents’ greatest pride, but usually also their greatest resource sink, as childcare has never been more expensive. From baby food to children’s entertainment to higher education, each part of child raising has gotten more and more expensive, leading to lowered standards of living for either the parent or the entire family.
To alleviate some of the burden, LHDN has provided taxpayers with tax reliefs year-on-year that relate to children. In this blog, we will cover those tax relief available for 2023 so that you can plan out your expenses to maximize any tax reliefs as you see fit. This is only part 1 of this 2-part blog, so if you are looking for early childcare, education, or lifestyle, be sure to check out the other blog after reading this one!

Child Relief

Let’s start with calculating child relief, which is the special category of tax relief given to parents/guardians. The rate of each category is given as follows:

To calculate total child relief available, check which child is eligible for what category, and total them. Remember to provide a copy of the enrolment letter of children in higher education to your employer (if you are paying MTD) and to keep one for your own records (which must be maintained for 7 years).
Do note there is a limitation to child relief if any child ends their education and starts working full-time. In the year that they end their academics, the parent is still allowed to claim child relief, but if the child’s earnings for the year exceed total child relief available for the parent, then that child is no longer eligible for claiming child relief.
An example to illustrate this: Tom has 2 children, the elder was studying at a university during the start of the year, while the younger was below the age of 18. During the year, the elder child graduated and started working, earning RM 11k during the year. The parent’s total child relief is RM10k (RM8k+RM2k), but as the elder child earned more than the total, only RM2k child relief is available to the parent for the year.

Medical
Let’s look at medical reliefs. Within this category is RM10k of possible tax relief. The 1st class of medical tax relief available is for serious diseases. It covers treatments for the following:

This notably includes mental illnesses, so please do not neglect your child’s mental health!
A new category of medical tax reliefs introduced during 2023 is intervention expenditure for the following mental disabilities:

1. Autism
2. Attention Deficit Hyperactivity Disorder (ADHD)
3. Global Developmental Delay (GDD)
4. Intellectual Disability
5. Down Syndrome
6. Specific Learning Disabilities

This new category of medical tax relief is limited to RM4,000 in 2023, which is included in the overall medical tax relief limit of RM10k.
Other categories available for your child’s medical expenses are vaccinations, and medical examinations (which includes complete medical checkup, mental health consultation & COVID-19 testkits/lab tests). Each of these are restricted to RM1k per category, but the overall medical relief cannot exceed RM10k. This means if, unfortunately, you incurred serious disease expenses of RM10k or above, you cannot claim any further tax relief on any of the above-mentioned expenses.

Should you buy any basic supporting equipment for your disabled child, you may claim up to RM6k for those expenses.
If you have additional funds, it is also highly recommended that you purchase medical insurance for your child as they can lessen the burden of rising medical costs. This category of insurance is shared with education insurance & your own/spouse’s medical insurance and is restricted to RM3k, so plan accordingly based on your needs and abilities.

Reminder to always keep any receipts/statements that are used for tax relief claim well, either hardcopy or softcopy, for 7 years minimum. Tax reliefs also do not extend their cap when jointly assessed, so plan & calculate if joint assessment or separate assessment is more tax efficient.

Conclusion
While the tax reliefs provide a much aid to those who can utilize it, it does not really solve the financial difficulties of raising a family in the current age. Prices are rising exponentially while most people see their wages not keeping up with inflation at all. Families that are struggling probably don’t make enough income to utilize the full extent of these reliefs either. For those families, we implore you to look for government initiatives such as Sumbangan Tunai Rahmah (STR) to aid your situation.
With that, covers part 1 of our 2-part blog on tax relief derived from children. Look out for part 2 of this topic, where we cover early childcare, education & lifestyle expenses.

Disclaimer
All content provided on this blog is for informational purposes only. The owner of this blog makes no representations as to the accuracy or completeness of any information on this site or found by following any link on this site.
The owner will not be liable for any errors or omissions in this information nor for the availability of this information. The owner will not be liable for any losses, injuries, or damages from the display or use of this information.

References
LHDN’s list of tax reliefs: https://www.hasil.gov.my/en/individual/individual-life-cycle/how-to-declare-income/tax-reliefs/
Belanjawan 2023 Tax Measures (Appendix 2): https://budget.mof.gov.my/pdf/belanjawan2023/ucapan/tax-measure.pdf
Sumbangan Tunai Rahmah (STR): https://bantuantunai.hasil.gov.my/

On 2 February 2023, the Companies Commission of Malaysia (CCM) or in Malay, Suruhanjaya Syarikat Malaysia (SSM) set forth a proposal to increase the audit exemption threshold. In the proposal, the following has changed:

1. Zero revenue companies with up to RM500k in total assets for the current & 2 immediate previous financial years will enjoy audit exemption. (Increased from RM300k to RM500k)
2. Threshold-qualified companies with revenue less than RM1mil, total assets less than RM1mil & having no more than 30 employees during the current & 2 immediate previous financial years can enjoy the audit exemption. (Current requirements are RM100k revenue, RM300k total assets & 5 employees)

Statutory Audit

For those unaware, all companies in Malaysia (excluding audit exemptions) are required to perform a statutory audit every financial period. This requires the company to appoint an external auditor, usually on an annual basis, to check the books & records of the company and provide an opinion on the financial statements. This opinion will inform the shareholders of the trustworthiness of the company’s books.

Audit Exemption

This exemption gives qualifying companies the choice to perform a statutory audit or not. Should the proposal be accepted, the criteria for audit exemption are as follows:
Dormant companies: Dormant since incorporation or dormant in the current & immediate previous financial year.
Zero revenue companies: Have no revenue & total assets of less than RM 500,000 during the current & 2 immediate previous financial years.
Threshold-qualified companies (i.e., normal active companies): Revenue less than RM1mil, total assets less than RM1mil & having no more than 30 employees during the current & 2 immediate previous financial years.
Dormant companies, as defined by the Malaysian Accounting Standards Board (MASB), do not carry on business nor have any accounting transactions (excluding any compliance adjustments & costs).
Keep in mind that a company audit exemption could still be required to perform an audit if a letter is issued by SSM or shareholders with no less than 5% voting rights. This letter must be received by the company at the latest 1 month before the end of the financial year.

Recently, the Malaysian government has introduced a unique sales tax on Low Value Goods (LVG) at a rate of 10% starting 1 April 2023. It has been postponed from 1 Jan 2023 to 1 April 2023.
LVG are imported goods sold through e-commerce that have a sale value of less than RM500 per unit. Any business that has made RM500k supply of LVG over the past 12 months or are expecting to exceed that threshold in the following 12 months must register with MyLVG within 1 month of exceeding the RM500k threshold.
That may have been a lot of information, so in this blog, we will break down the background of this legislative change, along with its implications on us consumers and the businesses that sell us those goods (the registered seller).

Background
For those who are unfamiliar with how sales tax operates, let’s do a quick overview:

A sales tax is a consumption tax that is levied when manufacturers sell their goods. Imported goods get taxed when they enter Malaysia. The general tax rate is 10%.
There are exceptions under specific provisions that allow the importer to be sales tax exempt but this has been reviewed and amended now.

Consumers
Let’s discuss the effects this legislation will have on us as consumers. The 1st most immediate outcome is that the price of goods will hike by 10%, which is a lot for most folks. We could mitigate the effects of the price hike by buying more local goods instead of relying on imported ones.

Next, let’s look at the implication for businesses that import LVG. Online businesses that sell imported goods will have to charge the 10% rate on all their imported goods’ sales now, assuming they become registered.

For a seller to become registered, you must 1st check the value of your transactions for the current month & the previous 11 months. If they exceeded RM500k, then the seller must become registered within 1 month of exceeding the threshold. If not, you should do a forecast and see if the current month & the future 11 months will exceed RM500k. If it does, then you also must register within 1 month. Registered sellers will have to submit LVG-02 form every 3 months.

Now, most of you are probably not running your own online platform but instead using an online marketplace to sell goods which may or may not be imported. Do be aware that this does not change your potential liability to the tax.

With the turn of the new year, comes with it new beginnings, and LHDN has already started the year with a system change in ByrHasil (payment function of MyTax). Starting 1 January 2023, taxpayers should get a Bill Number as their payment primary reference for making any direct tax payments (except for PCB & Stamp duties). To get your Bill Number, you will have to use the newly introduced e-Billing function. Tax being so important, most of you are probably hesitant to explore for fear of altering something important or initiating a payment you didn’t want to settle yet. And while LHDN has made a great user manual, it is sadly only in Malay for now. Therefore, in this blog, we will introduce the core functions of e-Billing!
But before you can see the e-Billing function, you must log in to MyTax. Afterwards, drop down the ezHasil Services menu, and you will see e-Billing. Hover over it and you will find 3 options: View Bill Taxpayer, View Employer Bill, and Generate Bill.

View Bill Taxpayer
This is most relevant to everyone, as LHDN has moved all the following taxes into e-Billing:

1. Tax instalment
2. CP204/CP500/CP250 Tax installments
3. Taxes
4. Income Tax
5. Real Property Gains Tax (RPGT)
6. LBATA
7. Penalties
8. Acquirer’s RPGT
9. Public entertainer tax
10. Withholding Tax (WHT)

You can view all these tax bills due under the “View Bill” tab. Letter/Notice of Claim and Instalment Bills can also be viewed and settled in their own separate tabs. You can see the Bill Numbers of taxes due, however, you need not pay them separately, as you can pay them at the same time on this page.

Select the bills you wish to clear and click “Continue”. You will be redirected to a payment process page, which also displays how many bills are selected along with the total payment. After checking, “Continue” to choose your mode of payment: ByrHasil (online payment) or at a counter/agent bank.

Choosing ByrHasil will bring you to the payment process of ByrHasil (no need to re-enter Bill Number). Complete the payment and you will be redirected back to e-Billing payment process. Choosing to pay at a counter/agent bank will proceed you onwards without going to ByrHasil.
The next step is ”Payment Slip”, where you can download the slip for your future reference (remember to keep it for at least 7 years!). Those paying at a counter/agent bank must save the slip to be used as a reference when paying (hard/soft copies can do).
The final tab of the menu is “Transaction Record”, where you can view & save past payment slips.

View Employer Bill

This option is the same as “View Bill Taxpayer”, except you can also view & pay Employer Bills after entering your employer number. Payment processes are the same.

Generate Bill

This option allows you to declare your Income Tax Return Form (manual) & Labuan Business Act Tax. Once the record is saved, you can pay them directly, or view them in “View Bill Taxpayer” and “View Employer Bill”.
This function is suspended until March 2023. Use e-TT to pay these taxes in the meantime.

Transitional Period

Due to the massive change, payments using Tax Identification Number (TIN) and Tax Reference Number are still acceptable until 30 June 2023.

Conclusion

That’s it for the functions of e-Billing and the legislative changes surrounding it. While it will be confusing at first, the intention of the system to streamline all tax bills into 1 system is ultimately a good one. However, advanced notice should have been given, instead of just dropping a notice on New Year’s Eve & changing the layout after the new year. Hopefully, LHDN achieves their aims with this change.

Disclaimer
All content provided on this blog is for informational purposes only. The owner of this blog makes no representations as to the accuracy or completeness of any information on this site or found by following any link on this site.
The owner will not be liable for any errors or omissions in this information nor for the availability of this information. The owner will not be liable for any losses, injuries, or damages from the display or use of this information.

References
Official statement by LHDN: https://www.hasil.gov.my/media/zi4ft0xw/20221231-kenyataan-media-hasil-penggunaan-nombor-bil-sebagai-rujukan-mandatori-pembayaran-cukai.pdf

User Manual: https://chengco.com.my/wp/wp-content/uploads/2023/01/Manual-Billing.pdf

According to the idea of business entities, a business is an independent entity. It should be viewed as a separate individual who is different from its owner, in other words. The phrase also goes by the name of separate entity and economic entity concepts.
According to the idea of business entities, businesses and their owners are considered to be different legal entities for the purpose of accounting procedures. Accountants should only keep track of the business’s affairs, not the owners private affairs.

How does a Business Entity work?
Business entity is made up of numerous people and entities. They consist of the proprietors, partners in partnership firms, or shareholders in corporation, depending on the situation. Many business ventures are managed by people other than their owner, despite the fact that other businesses, particularly partnerships and proprietary concerns are controlled by the business owners.

The hierarchy of managers may starts with the chairman, managing director, or member of the board of directors and extend all the way down to the sectional heads chosen to oversee particular business operations.

In accounting, the business entity concept prevents personal and business expenses from becoming entangled, interfering in determining the correct taxable information. Any money moving to or from the company should be recorded in a separate accounting journal to avoid confusion.

   Examples of Business Entity Concept:

• Owners Draw: You decide to take money out of your company to pay for your child tuitions because you own the company. Such withdrawal counts as an expense for the company because it permits a capital loss to finance a personal expense. To indicate that the transaction is for personal use, it must be written as an owner’s drawing. Paying yourself a salary, which would regard as regular wages, is not included.
• Loaning Money: If you want to lend personal funds to you firm, that will be viewed as a risk for the business. The loan amount will be regarded as a debt that must be repaid in accordance with the terms of the loan, with penalties for late payments. Usually, it can be done with the help of an attorney.
  Contributed Capital: Managing two accounts, one for business and one for personal use can be challenging for small business owners. It would be regarded as an instance of contributed capital by the owner if you unintentionally use your credit card to pay for a business item, such as office supplies.

Let’s look at this situation,

If the company owner pays RM 5,000 in tuition for their child’s tuition fees and RM 3,000 rent of his shop, the accountant will only record the RM 3,000 in rent. The reason for this is that, in contrast to school fees, it is a business-related subject.

All different kinds of commercial entities, such as sole proprietorships, partnerships and joint-stock companies adhere to this idea. It is only observed when recorded in the books of accounts for partnerships and sole proprietorships.

Conversely, the idea is adhered to in full by joint-stock companies. Particularly, there is no legal affiliation between the Company and the Members. Analysis of accounting data is now very simple and goal-oriented thanks to this technique.

Importance of having business entity concept:

• The idea of a business entity is crucial for analyzing a specific company’s performance in terms of profitability, cash flows, etc.
• It aid in evaluating the individual financial standing of each organization as of a given date.
• If a company’s records are mixed together with those of other businesses or people, it becomes difficult or impossible to audit them.
• The idea makes sure that every company entity is taxed differently
• Business groups frequently use the notion of a business entity. A business would not able to compare its financial performance to that of its competitors if it ignored this idea.

Businesses primarily exist to produce services and things at low cost and then exchange them for profits. However, regardless of whether they are an owner, CEO or employee of the company, the profits grained, or any losses incurred do not accrue to any single person.

For this reason, the firm as a distinct entity must be linked to the accounting idea of a business entity. Consequently, a corporation is distinct from its owners as a legal entity. All transactions must expressly refer to the company’s own undertakings in order to be valid.

References

Accounting Formation

Finance Strategist
https://learn.financestrategists.com/explanation/accounting-concepts-and-principles/business-entity-concept/

WallStreet Mojo

Khatabook
https://khatabook.com/blog/business-entity-concept/