I finally got my Income Tax Refunds for year 2014 and 2015 from the Inland Revenue Board Malaysia (IRBM), also known as Lembaga Hasil Dalam Negeri (LHDN) last week, and I am excited to share my experiences on how I managed to get my excess tax payments refunded to me. Hopefully this will be useful to those who are in the same situation as me.
Please note that all the information that I have shared in this post are solely based on my personal experience and are subject to change in accordance with any amendments to any rules and regulations made by IRBM. Although I am not a tax expert, I will still do my best to help as much as I could.
Determining The Tax Resident Status
In Malaysia, an individual's tax liability is determined by his tax resident status. The tax residence status is determined by the physical presence of an individual in Malaysia and not by his nationality or citizenship. As such, please note that the citizens of Malaysia are not automatically tax resident. The following rules governing the determination of tax residence of an individual will still apply even when you are a citizen of Malaysia.
In general, an individual is not considered a non-tax resident if his duration of stay in Malaysia is not more than 182 days in the calendar year. As a non-tax resident, he will be taxed at a flat rate of 26% (reduced to 25% for assessment year of 2015 onward) and will not enjoy any tax incentives and rebates offered by the government.
Tax-residents, on the other hand, are taxed at a lower rate of 0% to 26% and are able to enjoy various tax incentives that will reduce their net taxable income considerably. Generally, the question of determining an individual's tax status would not arise if he has resided in Malaysia permanently.
Filing My Income Tax Returns Form
I moved to Malaysia in September 2013, where I managed to secure my first employment in December 2013. Having only been in Malaysia for 3 months (which was less than 182 days), I was taxed at a flat rate of 26% and was unable enjoy any tax incentives and rebates.
I only became a tax resident in April 2014 after I continuously stayed in Malaysia for more than 182 days. Before April 2014, I was paying 26% of my monthly income to income tax. The amount of tax is automatically deducted from my monthly income through the Potongan Cukai Berjadual (PCB), also known as the Monthly Tax Deduction (MTD) system by my employer. The employer will then remit the sum deducted from my monthly income to Inland Revenue Board Malaysia (IRBM) the following month.
I am taxed at a lower resident rate of 0% to 26% only after I became a tax resident in April 2014. Becoming a tax resident has significantly reduced the amount of monthly tax deductions from my income. In year 2015, I received two EA forms from my employers (I worked in two different companies in year 2014). From the EA forms that I have received from my employers, I added up my total amount of income in year 2014 and filed my Income Tax Returns via the e-filing system in April 2015. You may want to check up my How To Do E-Filling For Income Tax Returns In Malaysia blog post if you do not how to file your Income Tax Returns in Malaysia.
Although taxpayers who are subjected to MTD are not required to file their Income Tax Returns Form (ITRF) if such monthly tax deductions constitute their final tax, it is recommended for them to still file their tax if they would like to reduce their taxable income through various tax reliefs and rebates. Usually, you will find that you have actually overpaid their taxes after taking in all the incentives and rebates offered by the government.
Do not worry if you have paid your income tax payment in excess via the MTD as the excess amount will be reimbursed to you via the bank account details you have provided in the Income Tax Returns Form. Although it can be a very difficult and tedious process, this is the only way where you can get your excess tax payments back.
Being a tax resident, I am able to enjoy tax incentives including personal and family rebates. After taking advantage of all the deductions that are available to me, I am expected to get a significant amount of my tax payments back for the year 2014. So I waited excitedly for my Tax Refund to be transferred to my bank account. However, I did not my Tax Returns within the stipulated 30-day time frame.
In May 2015, I received a letter from IRBM informing me that they will hold my 2014 Tax Refund for the time being. In addition to that, I was also asked to clarify whether my taxes are paid by my employer or me, and if I would like to have my Tax Returns back, I would have to contact IRBM.
I tried to call LHDN several times but could get through, so I gave up eventually and decided to see how things will go next year. Unfortunately, the same thing happens again this year 2016. I did not receive my excess tax payments for year 2015 after filing my tax in April 2016.
Most taxpayers should get their Tax Refunds credited directly into their bank account within 30 days after filing their income tax returns via e-filing. Please ensure that the bank account details provided in your Income Tax Returns are correct. Your name and identification number under the bank account should match with the records that are provided in the Income Tax Return Form.
For taxpayers who refused to disclose their bank account details to the IRBM, they will be reimbursed by cheques, which will soon be replaced by the Tax Refund Voucher System (BBBC).
The Tax Refund Voucher System was recently introduced by the IRBM to reduce cost incurred in issuing cheques. It is meant to be a faster, cheaper and more effective way to refund excess tax payments to taxpayers. Through the implementation of the Tax Refund Voucher System, IRBM hopes to reduce the number of individual tax payers who do not furnish bank account details and to address the cheating cases that have occurred.
Highly secured and protected by a bio metric system, the Tax Refund Voucher can only be cashed out at a CIMB branch or banked in a CIMB account. Please note that the Vouchers cannot be used to shop or exchange any goods or services.
There is a possibility that IRBM might want to audit your tax returns if you have not received your Tax Refunds within 30 days. If you have not received your Tax Refunds and would like to enquire the status of it, you can either:
1. Forward your application to the Collection Unit of the branch where your tax file is located, or
2. Complete and submit via the Online Feedback Form, or
3.Call the IRBM toll free number 1800-88-5436
I tried to call IRBM toll free number several times in May 2015 and 2016, but could not get through. So, in June 2016, I decided to make use of the Online Feedback Form to inquire about the status of my Tax Refunds for year 2014 and 2015. I actually got know about this Online Feedback Form through a reader of mine. So thank you Patricia, for taking your time to update me with all the latest information.
For those who plan to make use of the Online Feedback Form, please ensure that the email address that you provided in the Form is correct. The IRBM customer service officers will reply your enquires through your registered email within 7 working days.
My Correspondence With IRBM Officers
I received a reply from an IRBM officer 5 working days after I submitted my enquiry via the Online Feedback Form requesting me to submit the following documents for my Tax Refunds.
For non-citizens claiming their Tax Refunds for the first time are required to submit the following documents to the respective IRBM branches in order to facilitate the refund process. You will need the assistance of your employer to prepare the following required documents.
2. EA forms for year 2014 and 2015
3. Monthly Tax Deduction Form (PCB) for year 2014 and 2015. A sample of PCB II form is attached in the email. Your employer should be able to fill this form up for you.
4. In & Out Schedule year 2014 and 2015. Attached in the email is a sample of the In & Out Schedule Form. It took me quite some time to fill this form up. I have to calculate both of the number of days I am in and out of Malaysia, and attach photocopies of my passport pages as supporting documents.
5. Confirmation on my refund payment mode
By Telegrapic Transfer (TT)
For those who prefer Telegrapic Transfer, you are required to provide the following information:
1. Bank's name
2. Bank account number
3. Bank's address
4. SWIFT code
5. Currency preferred
6. Bank account name (which should be the same as your passport name)
7. Passport number
8. Home address
Please attach copy of your bank's passbook or monthly statement as supporting documents.
For those who prefer to receive a cheque (which will be replaced by Tax Refund Voucher), please provide mailing address. Please note that this option is only available within Malaysia.
For Direct Credit to your local bank account, please provide copy of your bank's passbook or bank statement as supporting documents.
Once you have the all required documents ready, you can submit them by:
1. Walking in to the IRBM branch where you tax file is located, or
2. Mail. Make sure you mail the documents to the correct branch and attention it to Unit Pungutan (Bayaran Balik) or the Collection Department.
IRBM will determine your resident status for the year after they received the following documents from you. Any Tax Refunds will only be processed after IRBM determined and confirmed your tax resident status for the calendar years.
Tips To Consider When Sending Your Documents To IRBM
Once I have all the required documents ready, I proceeded to courier them out to the stated address using Gdex Speed-DOC service. Besides the required documents requested by IRBM, I also attached the email correspondence between the IRBM officer and me and a cover letter stating the purpose of the documents. Although delivery cost is slightly more expensive than normal mail, the Gdex Speed-DOC service allowed me to trace and track the delivery status of the documents online via the GDex Online Tracking System.
I would not recommend sending your documents over to IRBM office by normal mail because you would not know whether it will be lost in transit. If you are sending the documents by mail, I would recommend you to send only photocopies of the documents. Make sure you keep the originals just in case the documents are lost somewhere in the process.
Finally Got My Income Tax Refunds
I inquired about my Tax Refunds status via the Online Feedback Form again 2 weeks after the documents are delivered to the IRBM branch office. Please make sure that your documents has been delivered before sending in your enquiry. This is also why I actually recommended using the Gdex Speed-DOC service instead of normal mail.
Attached in my mail this time were the scanned copies of the documents that I have sent to IRBM branch office earlier on, Gdex delivery status, and previous email correspondence with the IRBM officers. But this time, it only took the IRBM officers two days to reply my enquiry.
The IRBM officer informed me that my refund case has already been forwarded to the respective Tax Branch for processing. I may contact the officer (a name and phone number was provided) from that branch after 14 days to check on the progress on my refund case.
I planned to call the officer or apply leave from work and make a trip to IRBM branch office after Hari Raya period. But unexpectedly, I noticed that there was an additional sum of money transferred to bank account when I checked my online statement earlier this month. The money was from IRBM and I have finally gotten my Tax Refunds for year 2014 and 2015!
For those of you who have received your Tax Refunds without any hiccups, please make sure you keep the following documents for at least seven years for any possible audit by IRBM. You will need to keep your:
1. EA Forms
2. Original receipts for any tax incentives and rebates
3. Any other supporting documents such as employment letters and contracts.
I am happy that I finally got my Tax Refunds for year 2014 and 2015. Well, who wouldn't be happy to get their money back. Hopefully, I will not encounter the same problems again next year.
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