PR No 5 2022 Taxation of a Resident Individual Part II

PR No. 5/2022 – Taxation of a Resident Individual Part II

The Inland Revenue Board (IRB) has published PR No. 5/2022: Taxation of a Resident Individual Part II – Computation of Total Income and Chargeable Income, dated 9 December 2022. This new 45-page PR replaces PR No. 5/2018, which was issued on 13 September 2018 (see Tax Alert No. 20/2018). The new PR comprises the following paragraphs and sets out 15 examples:

1.0          Objective
2.0          Relevant provisions of the law
3.0          Interpretation
4.0          Determination of total income and chargeable income
5.0          Determination of basis period
6.0          Residence status
7.0          Computation of gross income
8.0          Computation of adjusted income or loss
9.0          Computation of statutory income
10.0      Computation of aggregate income
11.0      Computation of total income
12.0      Taxation of husband and wife
13.0      Computation of chargeable income
14.0      Updates and amendments
15.0      Disclaimer

The content of this new PR is broadly similar to the earlier PR and explains the computation of total income and chargeable income of a resident individual who derives income from business, employment and other sources. The new PR was updated mainly to reflect the legislative changes from 2018, including the following:

• Effective from the year of assessment (YA) 2019, the carry-forward period for unabsorbed business losses is limited to ten consecutive YAs.
• Effective from YA 2019, the tax relief on contributions to approved provident funds or payment for life insurance premiums was increased from RM6,000 to RM7,000 (subject to conditions).
• Effective from YA 2020, the scope of tax deduction pursuant to Section 34(6)(h) of the Income Tax Act 1967 (ITA) was expanded to include contributions for the maintenance of a building designated as a heritage site by the Commissioner of Heritage under the National Heritage Act 2005.
• Effective from YA 2020, the tax deductions given for sponsorship of local arts, cultural and heritage activities in Malaysia (pursuant to Section 34(6)(k) of the ITA) was increased from RM700,000 to RM1 million per YA.
• Effective from YA 2021, the tax relief for expenses (medical treatment, special needs and carer expenses) incurred for parents was increased from RM5,000 to RM8,000.