Income Tax Law: Continued...

As our scope of taxes are narrowed to Income Tax, we will focus on Income Tax Law. And a very important point to note is that, our Income Tax Law are all accordance to Income Tax Act 1967. Even though every single year, different budget and percentage changes in the tax imposed, the basic of the law is still on ITA 1967.

A very important point to note will be how income tax is classfied. According to Section 3 of ITA 1967,
"A Tax known as income tax shall be charged for each year of assessment upon the income of any person accruing in or derived from Malaysia or received in Malaysia from outside Malaysia".

This will thus, bring different definition to our context, with the number of days of resident play an important role. It is not whether you are citizen or permanent resident or sort, but to see how long you reside in Malaysia to check your Income Tax residence status. A reminder again, this is totally distinct from your origins or citizenship status in Malaysia.

Before we go on further, we shall discuss what are 'income'. Income must be repetitive from a source of income and received in the ordinary course of business. While you may think, let's say, I'm an event organizer, and I got money from different sponsors, and my money differs a lot, is that income?

As for that, the Income Tax Act or the authority (they are not that dumb to let you go), and all the gains or profit shall be referred to Section 4 of ITA1967 as follow;

1. Profits or gains of a trade, business, profession or vocation
2. Profits or gains from personal services - employment
3. Dividends, interests and discounts
4. Rents, royalties and premiums
5. Pension, charges or annuity or other periodical payments
6. Gains or profits not falling under any of the foregoing paragraphs.

With all gains, profits or income seem quite clear, the misleading number 6 can actually mean all the money that you earn. But still, there are points to consider. This is because if money that are not declared and yet is transacted, the authority may charged you of any case even money laundering.

And during each and every year, the basis period is the period of time upon which tax is assessed. Usually income tax is assessed upon one year period and as mentioned previously, April is the month of the Income Tax month. While on the other hand, the Year of Assessment means calendar year in which tax is assessed, and it begins from January and ends in December. As for individuals, it wouldn't affect much, but for corporate or business companies, it usually do not follow this calendar year. But anyhow, for Income Tax, before 2003, individuals are assessed on different horizon, before the amendments were changed and everyone is following the same time. Thus, accountants got more job.

Let's put this scenario and speculate on the situation that might happen.

AH is a student and an entrepreneur. He works as a part-time event organizer and had been actively doing his part professionally and learning every steps. He met with a lot of people, and especially with big shots like Dato', Datuk, Tan Sri, Yg Bhg and even Tun. With that influence, recently, he was given a project to do. The project is an event and the people are willing to fund him even up to RM 30 mill. As he do not need that much of money, the people behind this project are ready to allocate, as this pool of fund is not from a sole person, but multiple person. As he draft out the proposal and RM 30 mill were sent to him. Let's do not consider the people that gave him the money and how they do it. But narrow our scope to AH's Income Tax issue. He never paid tax, and do not even own a KWSP account. And for this, case with RM 30 sent to his bank account, CIMB were even terrified.

And let's say, yes, RM 30 mill is in his account now. What will you think will happen to Income Tax Authority. Even if he declare and do his event until the next year income tax audit, he will only be charged with the max of 26.8% and he wouldn't mind paying it. But let's bring this thing to logic, do you think Income Tax people will come or Malaysian Anti Corruption Commission (MACC) will come?

Think about it, because the scenario of him paying the tax is not a problem. But why is it that way that even we pay tax, we can be charged?? Please put some feedback on this. Thanks