TAXATION

ACKNOWLWDGEMENT
In performing this assignment, I had to take the help and guideline of some respected
persons, who deserve our greatest gratitude. The completion of this assignment gives me
much pleasure. I would like to show my gratitude Miss Nor Asyillah course Taxation, Kolej
Masa for giving me good guideline for assignment throughout numerous consultation. I
would like also like to expand my deepest gratitude to all those who have directly and
indirectly guided me in writing this assignment.
Many people especially my classmate has made valuable comment suggestion on this
assignment which give me an inspiration to improve my assignment. Thanks to all people for
their help directly and indirectly to complete my assignment.

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INTRODUCTION TO TAXATION
Taxation, system of raising money to finance government. All governments require payments
of money taxes from people. Governments use tax revenues to pay soldiers and police, to
build dams and roads, to operate schools and hospitals, to provide food to the poor and
medical care to the elderly, and for hundreds of other purposes. Without taxes to fund its
activities, government could not exist.
Governments impose many types of taxes. In most developed countries, individuals pay
income taxes when they earn money, consumption taxes when they spend it, property taxes
when they own a home or land, and in some cases estate taxes when they die.
An individual income tax, also called a personal income tax, is a tax on a persons income.
Income includes wages, salaries, and other earnings from ones occupation, interest earned by
savings accounts and certain types of bonds; rents that is earnings from rented properties,
royalties earned on sales of patented or copyrighted items, such as inventions and books, and
dividends from stock. Income also includes capital gains, which are profits from the sale of
stock, real estate, or other investments whose value has increased over time.

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TAXATION IN MALAYSIA
Overview of the Malaysian taxation system, a sound foundation of the principles of taxation
of income and a good appreciation of how these principles and the provisions of the Income
Tax Act 1967 are applied in the taxation of individuals, unincorporated businesses and
corporations.
In addition, taxpayer compliance behaviour is also important in determining the amount of
income tax collection. Income tax can be avoided (avoid) or taken without pay (evade) by a
taxpayer. Avoidance of environmental regulations in the tax laws is allowed, but without
paying tax evasion is considered a crime by the tax regimes. The maximum penalty will be
imposed to circumventing the intention of not paying income tax. On the other taxpayer
compliance behaviour is also unpredictable.

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2.1

TAX RATES IN MALAYSIA

2.1.1

Resident Individuals
YA 2015
Chargeable income

Rate %

YA 2016

Tax Payable RM

Rate %

Tax Payable

On the first

RM
5,000

RM
0

On the next
On the first

15,000
20,000

150
150

150
150

On the next
On the first

15,000
35,000

750
900

750
900

On the next
On the first

15,000
50,000

10

1,500
2,400

10

1,500
2,400

On the next
On the first

20,000
70,000

16

3,200
5,600

16

3,200
5,600

On the next
On the first

30,000
100,000

21

6,300
11,900

21

6,300
11,900

On the next
On the first

150,000
250,000

24

36,000
47,900

21

36,000
47,900

On the next
On the first

150,000
400,000

24.5

36,750
84,650

24.5

36,750
84,650

On the next
On the first

200,000
600,000

25

50,000
134,650

25

50,000
134,650

On the next
On the first

400,000
1,000,000

25

100,000
234,650

26
28

104,000
238,650

Above

1,000,000

25

YA 2016, tax rates for resident individuals whose chargeable income from RM600,001 to RM
1,000,000 be increased by 1% and chargeable income exceeding RM 1,000,000 increased by
3%
A qualified person that defined who is a knowledge worker residing in Iskandar Malaysia is
taxed at the rated of 15% on income from an employment with a designated company
engaged in a qualified activity in that specified region. The employment must have
commenced on or after 24 October 2009 but not later than 31 December 2015

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An approved individual under the Returning Expert Programme who is a resident is taxed at
the rate of 15% on income in respect of having or exercising employment with a person in
Malaysia for 5 consecutive years of assessment (YAs)
2.1.2

Non-Resident Individuals

Types of income
Public Entertainers professional income
Interest
Royalty
Special classes of income

Rental of moveable property

Technical or management services fees
Payment for services rendered in connection with use of property or
installation or operation of any plant, machinery or other apparatus

YA 2016
15
15
10

10

purchased from a non-resident person.

Dividends (single tier)
Business and employee income
Income other than the above

2.2

Exempt
28
10

DATE OF SUBMISSION DECLARATION OF INCOME

TAXATION
All tax residents who are subject to taxation must file a Malaysian tax return. The submission
deadline is the 30th of April for the preceding tax year. This deadline cannot be extended. A
tax year equals a calendar year.
You will receive an Income Tax Return Form from the Inland Revenue Board of Malaysia.
Residents, according to Malaysian tax law, have to fill in a BE Form, non-residents an M
Form. You have to fill the respective forms completely and to return them within 30 days to
an IRBM (Inland Revenue Board of Malaysia) office.
After your declaration has been processed, your credit in the account will be refunded to you
automatically.

2.3

RESIDENT STATUS

An individuals resident status is determined by the duration of his stay in Malaysia and NOT
by his nationality or citizenship. An individuals liability to tax depends on the resident status
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of the individual. A non-resident will be taxed on income arising from sources in Malaysia.
The following illustrates the circumstances that may determine the resident status of an
individual for tax purposes.
1.

In Malaysia for 182 or more days in a basis year

If an individual is in Malaysia for a period of 182 days or more, he is a resident for
that basis year.
Example:
An individual was not in Malaysia during the year 2011. He arrives the first time in
Malaysia on 01.01.2012 i.e. a period of 183 days.
Period of stay in Malaysia
Days of stay
Residence status
01.01.2012 02.07.2012
183
Resident
The individual is thus a resident in Malaysia for the Year of Assessment 2012.

2.

In Malaysia for less than 182 days in a basis year

An individual who is in Malaysia for a period of less than 182 days and that period is
linked by or to another period of 182 days or more consecutive days throughout which
he is in Malaysia in the basis year for the year of assessment immediately preceding
that particulars year of assessment or in that basis year for the year of assessment
immediately following that particular year of assessment.
Provided that any temporary absence from Malaysia.
a) Connected with his service in Malaysia and owing to service matters or attending
conferences or seminars or study abroad.
b) Owing to ill health involving himself or a member of his immediate family, and in
respect of social visits not exceeding 14 days in the aggregate.

2.4

TAX FILLING STATUS

Under the self-assessment system, individuals are required to file and pay their tax within
the time stipulated.
Every person must file a tax return is he has:

TAXATION
i.
ii.

Chargeable income for a year of assessment; or

No chargeable income for that year of assessment but;
has chargeable income for the year of assessment immediately preceding that year of

assessment or
has furnished a return for the immediately preceding year; or
Has been required to furnish a return for the immediately preceding year.

The tax filing deadline for a year of assessment for a person carrying on a business is 30 June
of the following year, while the deadline for a person who receives income from other than
business source is 30 April of the following year.
All taxpayers, except for employees are covered under a compulsory instalment payment
scheme. Inland Revenue Board of Malaysia (IRBM) determines the estimated tax payable
based on the tax assessed in the preceding year. The taxpayer is required to pay the estimated
tax payable in six bi-monthly instalments as directed by IRBM beginning from the month of
March. For individuals with employment income, income tax is deducted through the
monthly salary deductions under the Scheduler Tax Deductions (STD) scheme. Employers
are required to deduct tax monthly from their employees remuneration and remit it to Inland
Revenue Board of Malaysia by the tenth day of the following month.

2.5

OTHER TAX CHARGES ON INDIVIDUAL

Service Tax
The Service Tax Act 1975 provides that a 5% service tax shall be charged certain taxable
services provided by taxable persons except for export taxable services (which are exempt
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from tax). Export taxable service has been defined as service supplied for and to a person in
a country other than Malaysia (excluding Langkawi, Labuan and free zones), provided that
the service is not supplied in connection with goods or land situated in Malaysia and the
person is not in Malaysia at the time the service is performed.

Taxable Persons and Taxable Services

A complete list of taxable persons and taxable services is prescribed in the Service

Tax Regulations, 1975.

Licensing
A taxable person who carries on a business of providing taxable services has to apply

for a service tax licence and charge service tax on all taxable services provided.
Charge and Remittance of Service Tax
Service tax charged and received by the taxable person must be paid to Customs
within 28 days after the end of a taxable period. A taxable period is defined as 2
calendar months. Service tax is only due at the time when payment is received for the
taxable service provided by the taxable person. However, where the whole or any part
of the payment for any taxable service is not received from the customer within a
period of 12 calendar months from the date of the invoice for the taxable service
provided, service tax shall be due on the day following that period of 12 calendar
months.

2.6

PENALTIES

Any amount of service tax which is unpaid after the due date (28 days after the end of a
taxable period) will attract a penalty of 10% of such unpaid amount. If the amount remains
unpaid, the penalty will be increased by a further 10% for every succeeding period of 30 days
or part thereof subject to a maximum of 50% of the taxes unpaid.

TAXATION IN EGYPT

Taxes in Egypt may be divided into two categories. The first one concerns direct taxation of
individuals and legal entities on their income or profit. The second involves indirect taxation
of goods, services and events. The Egyptian taxation framework is statutory based. Tax
administrators are given, under the relevant legislation, few discretionary powers. Courts are
primarily responsible for the interpretation of statutes. The nature of the Civil Law system
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operating in Egypt allows precedent to have an influential but not necessarily a binding
effect.
Over the last several years, Egypt has made many changes in its tax system. Some of these
changes are merely cosmetic while others are rather substantial. Given this trend, it is
advisable to seek up-to-date advice on recent and future changes to the tax law before
pursuing commercial plans in Egypt.

3.1 TAX RATES IN EGYPT

3.1.1 Residents individuals
Taxable income bracket

Total tax on income below bracket

Tax

rate

income
To EGP

EGP

on
in

bracket
(%)

From EGP

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TAXATION
6,500

30,000

30,000- 6,500 = 23,500x 10% = 10

45,000

2,350
45,000 - 30,000 = 15,000 x 15% = 15

200,000

2,250
200,000-45,000=155,000 x 20 %= 20

1
6,501
30,001
45,001

31,000

Over 200,000

25

For taxpayers (foreign expatriates) living in Egypt for less than 183 days during one calendar
year, the tax rates which are mentioned above will be applied. Annual tax is imposed on total
net income of natural persons for income derived in Egypt or outside Egypt if Egypt is the
centre of their commercial or industrial or professional activity.
The individual's principal place of residence is Egypt. Article 2 of the Executive Regulations
states that an individual is considered to have a permanent residence in Egypt if:
a) The taxpayer stays in Egypt for the majority of the year, either in his own property, in a
rented property or in any other place;
(b) The taxpayer has a local commercial presence, professional office, industrial site or any
other place where he carries on his activities in Egypt;
(c) The individual is an employee who performs his duties abroad and receives a salary from
an Egyptian public or private source.
3.1.2 Non-Residents
Annual tax is imposed on Egyptian source income for non-resident natural persons.
3.2 DATE OF SUBMISSION DECLARATION OF INCOME
The Tax Year in Egypt is 1st January to 31st December.
It is the Employers responsibility to file quarterly tax returns. The Employer has 1 month
after the end of each quarter to file the returns. Additionally, the Employer is required to file

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annual salary tax reconciliation outlining salaries paid to each Employee, deductions,
exemptions, tax due, and the net salary paid to each Employee.
All Employers are required to calculate the Salary and Tax on the monthly basis which need
to be remitted to the relevant tax offices within the first 15 days of the following month.
An Employee on a Temporary Residence Permit or no citizenship status will be required to
file a Tax Return on the 1st of January each year. Additionally the Employer is required to file
a quarterly tax return.
The Employer has one month after the end of each quarter to file the quarterly tax returns. At
the Year-End the Employer is required to prepare an annual reconciliation of the salary tax to
determine whether there are any disparities and to remit such tax disparities, if any, to the
competent Tax Office within January of the following year.

3.3 RESIDENCE STATUS

An individual defined as a resident of egypt for non-resident tax treatment is payments made
to non-resident individuals for employment services will be subject to the above mentioned
tax rates on Egyptian source income only.
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Individuals are residents of Egypt if they meet any of the following conditions:

Egypt is their place of habitual abode. The place of habitual abode of individuals is
defined as follows.
1. If the taxpayers is present in egypt most of the year whether in an owned or
leased residence.
2. If the taxpayer has a commercial, professional, or industrial place of business
or any other place of business.

Individuals resident in egypt for a period more than 183 days whether continuously or
non-continuously in a 12-month period.

Egyptians who perform their services overseas and receive their income from an
Egyptian treasury (public or private).

A foreigner who earns income from Egypt but does not meet any of the criteria noted earlier
would be considered as a non-resident.

3.4 TAX FILLING STATUS

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Residents and non-residents
Generally, the employer is required to compute the salary tax and withhold it at the source on
a monthly basis. They are obliged to remit it to the relevant tax office within the first 15 days
of the following month. Employees are not required to file tax returns unless the employer is
non-resident or has no permanent establishment in Egypt. In such case, the employee will be
required to file a tax return form at the first of January of each year. Additionally, the
employer is required to file a quarterly tax return. The employer has one month after the end
of each quarter to file the quarterly tax returns.
At the year-end, the employer is required to prepare an annual reconciliation of the salary tax
to determine whether there are any differences and to remit such tax differences, if any, to the
competent tax office within January of the following year.
Penalties are imposed in the case of not complying with the due dates mentioned earlier at 2
percent plus the discount rate declared by the Central Bank of Egypt discount rate is 9.75
percent approximately.
The tax authority audits the employer for individual income tax purposes and not each
individual separately.

3.5 OTHER TAX CHARGE ON INDIVIDUAL

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1. Social security contributions
Expatriate employees working in Egypt are not allowed to subscribe to the Egyptian social
insurance scheme, except in the following cases:

A reciprocal treaty between Egypt and the expatriates country allows them to join
Egypts social security program. Consequently, the expatriates will be expected to pay
the social security. This case is also applied to managers of limited liability
corporations (LLCs). In cases where an individual is a board member, there will be a
different treatment for the social insurance contributions.

The expatriates employment contract covers a period exceeding one calendar year.

2. Sales tax
The standard sales tax rate is 10% of the value of commodities (except for those referred to in
special schedules of the law) and 5% to 10% for specific services.
Currently, there's a draft new Value Added Tax (VAT) law in place, which is expected to be
enacted during the year 2016. The main objectives of the law are:

Broadening the tax base through imposing VAT on a wider range of services (than
those currently being taxed under the goods and services tax [GST] system).

Streamlining the excise tax system and separating it from the VAT law.

Eliminating all excises on goods, except for tobacco, alcohol, and petroleum products.

3. Property taxes
The real estate tax law takes into consideration the different variables that can affect the value
of a property, such as location, value of similar buildings, and the economic situation of the
district in which the property is located. This is to be updated every five years.
Real estate tax is levied annually on all constructed real estate units. This covers land and
building, excluding plant and machinery. Such tax is assessed based on the rental value of the
land and building, and these value assessments are set by the committees, after approval of
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the Minister or whomever the Minister delegates, and published in the Official Journal. Based
on the announcement, any taxpayer can appeal the rental value assessment within 60 days
following the publication date in the Official Journal.
The real estate tax rate is 10% of the rental value, and the calculation of the rental value
differs for residential units and non-residential units. Specific percentages of deductions are
provided by the law to account for all the expenses incurred by the taxpayer, including
maintenance costs. The new Real Estate / Property Tax Law is effective starting from 1 July
2013.
4. Luxury and excise taxes
The sales tax law includes an excise tax on some products, such as the tobacco, alcohols, and
medicines.

3.6 PENALTIES
The penalty of 1% per month is added for the late submission and payment of Tax and Social
Security Contributions. For residence and non-residence penalties are obligatory in the case
of not complying with the due dates at 2% plus the discount rate declared by the Central
Bank of Egypt (discount rate currently is 11% approximately).

4.0 CONCLUSION
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TAXATION
Many people often view that paying a tax is a burden. However, tax is important since it is
one of governments resources to obtain the revenues. With money collected from the tax,
government is able to boost up the economy, develop or improve infrastructure and public
transport and other things for the citizens. From this research, I can found out that individuals
or citizens need to pay 29 percent of their accumulated income per year to the government in
this current economic. Also there are several taxes that individuals need to pay such as
service tax which is 5 percent and many more to the government. It will be better if the
government accumulates all the tax rates to lump sum rates which will be easier for citizens
to pay their taxes and indirectly it will save cost and time.
By looking at the Australian tax, Australian government includes 1.5 percent for medical levy
to their citizen where their total individual tax is zero until 45 percent. Malaysian government
can also implement tax like the Australian government. Maybe Malaysian government could
include medical levy (1percent) and education levy (1.5 percent) in this lump sum tax. With
this action, parents do not need to worry about their childrens school fees or university fees
since they have already paid tax to the government. Based on Malaysian tax rates data for
individuals, Malaysian government imposed 40 percent of tax rates to individuals in year
1985 and was able to gain higher revenue.
This amount of tax rates can be applied to current years where this 40 percent tax must
include medical levy, service tax, education levy and other taxes. In Malaysia, a person or an
individual that has accumulated salary in one year below RM 2500 does not need to pay tax.
This people are recognised as people with lower income. Nowadays, individuals that have
been recognised as middle income and higher income are sharing the same burden where
there are paying the same rates for their taxes. It is not fair since people with higher income
earn more than the middle income. Therefore, people with higher income should pay more
than the middle income.
While in the Egypt, Egypts economic revival is underway under strong and committed
leadership. The effect from amendments to the income tax law, including increasing the limit
for personal exemption from Egypt 4,000 to 7,000 annually state-run news agency MENA
reported. According to the report, all families of the 6.2 million public sector employees will
benefit, not to mention the millions of families in the private sector.
The government relinquished these funds for the benefit of citizens, and it is expected that the
largest part of this amount will go towards local consumption and increase demand. Thus,
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this will contribute to the recovery of different markets, lead to an increase in economic
growth and create employment opportunities. The increase of the personal exemption limit is
in conformity with the government policy that aims to stimulate the national economy and
overcome the current crisis, and at the same time, adopts financial policies that protect social
justice, which is clear through the redistribution of the tax burden. It reduces the burden for
low-income individuals by widening the lowest tax brackets of the income tax structure while
increasing the burden on high-income individuals this statement from president of the
Egyptian tax authority Mamdouh Amr.
The increase of the personal exemption limit is in conformity with the government policy that
aims to stimulate the national economy and overcome the current crisis, and at the same time,
adopts financial policies that protect social justice, which is clear through the redistribution of
the tax burden. It reduces the burden for low-income individuals by widening the lowest tax
brackets of the income tax structure while increasing the burden on high-income individuals.
From this assignment i can find out that the first EGP 12,000 earned by all workers within the
bureaucracy is not subject to income taxes. Workers with a salary of up to EGP 5,000 would
benefit from the first income bracket exemption. The second bracket, from EGP 5,000 to
30,000, is subject to a 10% income tax rate. The third bracket, from EGP 30,000 to 45,000 is
subject to a 15% tax. The fourth bracket, EGP 45,000 to 250,000 is subject to a 20% tax. The
fifth bracket, more than EGP 250,000 is subject to a 25% tax.
The government of Egypt country is determined to achieve social justice. Its emphasised that
the alleviation of the tax burden for individuals with the lowest income, the implementation
of a higher minimum wage of EGP 1,200 by next January, improvement of education and
health services and pumping of investments to provide employment opportunities all confirm
the governments commitment to the programme that it set initially. And the governments
commitment to care for the poor would continue despite its simultaneous commitment to
reduce the budget deficit to 10% of GP.

5.0 RECOMMENDATIONS

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TAXATION
The analysis of this assignment, the impact of income tax structures on economic growth and
income inequality. First, it is important to develop a modest design into the tax system
because countries that are able to mobilize tax resources through broad based tax structures
with efficient administration and enforcement will be likely to enjoy faster growth rates than
countries with lower efficiency.
Generally, an efficient tax system is one that reduces the disincentive effects of taxation to
work, save and invest by using broad based income tax structures. Therefore, a broad base of
corporate income tax in conjunction with lower administrative costs is often seen as fairer
than a narrow based system because of horizontal and vertical equity considerations. Hence,
tax reform in Asia and Europe should thereby focus on enhancing tax enforcement and
broadening their tax base by minimizing tax incentives, exemptions and allowances, which
would reduce the administrative costs of taxation and lead to an increase in tax revenue.
Increases in tax revenue would allow greater government benefits to achieve more equal
distributions of wealth and income.
Second, since the personal tax rate does not have a significant impact on growth and on
income inequality, the government should focus to reduce tax evasion, which is believed
happen in the highest income group that could distort the horizontal and vertical equity in
redistributing the income. Finally, very high earners or the highest income group should
Be subject to high and rising marginal tax rates, especially in the statutory top corporate tax
rate.

REFFERENCE

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AlBorsa. (2013, october 23). daily news egypt. Retrieved november 5, 2016, from
Ministry of Finance begins implementation of income tax amendments:
http://www.dailynewsegypt.com/2013/10/22/ministry-of-finance-beginsimplementation-of-income-tax-amendments/
liew, h. (2016, march 31). ringgit plus. Retrieved november 4, 2016, from
Malaysia Income Tax Guide 2016: https://ringgitplus.com/en/blog/PersonalFinance-News/Malaysia-Income-Tax-Guide-2016.html
Hoyle, M. S. (1986). Taxation in Egypt. egypt: Brill Publisher.
LHDNM. (n.d.). Retrieved november 4, 2016, from Lembaga Hasil Dalam Negeri
Malaysia: http://www.hasil.gov.my/
malaysiasalary.com. (2014, august 18). Retrieved november 5, 2016, from
income tax rate: http://www1.malaysiasalary.com/income-tax/income-taxrate-for-2015-in-malaysia.html
tradingeconomy. (2014). Retrieved november 3, 2016, from personal income tax
rate: http://www.tradingeconomics.com/egypt/personal-income-tax-rate

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