Public Ruling No 5 2021–Taxation of a Resident Individual Part I

Public Ruling No. 5/2021 – Taxation of a Resident Individual Part I – Gifts or Contributions and Allowable Deductions

The IRB has issued Public Ruling (PR) No. 5/2021: Taxation of a Resident Individual Part I – Gifts or Contributions and Allowable Deductions, dated 30 September 2021. The PR provides clarification in relation to gifts or contributions made by a resident individual that are allowable in determining the individual’s total income for a YA, as well as the tax deductions that are allowable to a resident individual in computing his or her chargeable income for a YA. This new 56-page PR replaces PR No. 8/2020, which was issued on 9 October 2020 (see Tax Alert No. 18/2020). The new PR comprises the following sections and sets out 41 examples:

1.0          Objective

2.0          Relevant provisions of the law

3.0          Interpretation

4.0          Introduction

5.0          Gifts or contributions

6.0          Allowable deductions

7.0          Updates and amendments

8.0          Disclaimer

Appendix 1

Appendix 2

The contents of the new PR are broadly similar to the earlier PR. The PR’s contents have, however, been updated mainly to incorporate, explain and provide examples to demonstrate the legislative changes which were enacted via the Finance Act 2020, including the following:

• Section 46(1)(c) - The increase in tax relief for expenses (medical treatment, special needs and carer expenses) incurred for parents, from RM5,000 to RM8,000. This is effective from YA 2021.

• Section 46(1)(f) - The expansion of scope of tax relief for education fees of RM7,000 to include RM1,000 of expenses incurred for upskilling and self-enhancement courses conducted by a body recognized by the Director General of Skills Development under the National Skills Development Act 2006. This applies for YA 2021 and YA 2022.

• Section 46(1)(g) - The enhancement of tax relief for medical expenses for self, spouse and child as follows:
  • The increase of total tax relief from RM6,000 to RM8,000
  • The expansion of scope of tax relief to include RM1,000 of expenses incurred for the following vaccinations:
    • Pneumococcal
    • Human Papillomavirus (HPV)
    • Influenza
    • Rotavirus
    • Varicella
    • Meningococcal
    • Combination of tetanus-diphtheria-acellular pertussis (TDAP)
    •  COVID-19

These are effective from YA 2021.

• Section 46(1)(h) – The increase in tax relief for full medical check-up expenses from RM500 to RM1,000, effective from YA 2021. This amount forms part of the RM8,000 tax relief under Section 46(1)(g) (refer above).

• Section 46(1)(k) – The extension of tax relief of RM8,000 for the net annual savings deposited into the National Education Savings Scheme (Skim Simpanan Pendidikan Nasional – SSPN) up to YA 2022.

• Section 46(1)(p) – The scope of relief for newspapers expanded to include subscriptions to electronic newspapers. This is effective from YA 2021.

• Section 46(1)(r) – The increase in tax relief for fees paid to registered childcare centres or kindergartens, from RM2,000 to RM3,000. This applies for YA 2020 and YA 2021.

• Section 46(1)(s) – The additional tax relief of RM1,000 for the following qualifying domestic travel expenses incurred between 1 March 2020 and 31 December 2021:
  • Accommodation expenses at premises registered with the Ministry of Tourism, Arts and Culture (MOTAC), and
  • Entrance fees to tourist attractions
• Section 46(1)(t) – The additional tax relief of RM2,500 for the purchase of personal computers, smartphones or tablets from 1 June 2020 to 31 December 2020.

• Section 46(1)(u) – The additional tax relief of RM500 for sports-related expenses (i.e., purchase of sports equipment, payment of rental or entrance fee to sports facilities, and registration fees for sports competitions). This is effective from YA 2021.

• Sections 45A(1) and 47(1) – The increase in tax relief for disabled spouse from RM3,000 to RM5,000. This is effective from YA 2021.

• Section 49(1D) – The extension of tax relief of RM3,000 for contribution to Private Retirement Schemes (PRS) up to YA 2025.