Mr Mui, a Malaysian tax resident, contributed RM5,500 to an approved EPF.
This relief will be limited to RM4,000 under both separate and joint assessments.
Under joint assessment, spouse relief is available to the assessed party (as mentioned previously). Therefore, for the husband, any alimony payments to an ex-wife, or maintenance payments to a former wife (pending the grant of a divorce), or payments in pursuance of a court order, deed or written agreement, become redundant if he is already making a claim for spouse relief in respect of a current wife.
After his wife Su Mei suffered a stroke and became severely disabled, Tan Tee Lim moved out of the family home (they were separated by a court order). However, he has continued to maintain and support Su Mei, who has no other income, with an allowance of RM3,000 per month. He then entered into a relationship with Madam Yeong, who is a widow, and they are now living together without being married because Tan Tee Lim is still married to Su Mei.
All are Malaysian tax residents.
Tan claimed relief limited to RM4,000 in respect of the maintenance payments to Su Mei.
Let’s assume that Tan eventually divorced Su Mei and married Madam Yeong, but he continued to support Su Mei by way of alimony of RM3,000 per month.
Under separate assessment, Tan can still claim spouse relief of a maximum of RM4,000 for a year of assessment in respect of the alimony paid to Su Mei. However, if jointly assessed with Madam Yeong, although he will claim a spouse relief of RM4,000, there is no relief for the maintenance payments.
Entitlement to tax rebates under joint assessment
After computing the tax payable for a year of assessment, a resident individual will be entitled to a rebate provided that certain conditions are fulfilled. The rebate is given before any set-off under Section 110, or credit allowed under Sections 132 or 133. However, any amount of rebate in excess of the tax charged for that year cannot be carried forward or refunded. In such a case, the full amount eligible and the restricted amount should be shown.
Tax rebate for the individual and spouse
Under joint assessment, where the chargeable income of an individual who is the assessed party does not exceed RM35,000, and they qualify for personal relief of RM9,000 under Section 46(1)(a), a rebate of up to RM400 is granted. In addition, where that individual qualifies for spouse relief under Sections 45 or 47, a further rebate of up to RM400 is granted in respect of the spouse, making a possible total of RM800.
A rebate is also granted for any payment of zakat, fitrah or any other Islamic dues which are obligatory and paid in the basis year for a year of assessment. The payment must be evidenced by a receipt issued by an appropriate religious authority established by written law, including Pusat Pungutan Zakat and Majlis Ugama Islam Negeri.
There is no provision for payments made by a joining spouse to be taken into account, and candidates should note the clarification given in the Public Ruling No 6/2018 Taxation of a Resident Individual Part III which states that:
‘In accordance with the provisions of the ITA, where the wife elects for combined assessment in the name of the husband, or the husband elects for combined assessment in the name of the wife, only the husband or the wife who is assessed under his or her name is allowed a tax rebate for the zakat payment made by him or her. Zakat payment made by the wife or the husband who elects for a combined assessment is not allowed as a tax rebate against the total tax charged of the spouse who is assessed. Zakat payment made by the wife / husband who is unemployed or has no source of income or has no total income is not allowed as a rebate against the tax charged on the spouse.’
Under separate assessment, both husband and wife are considered separate taxpayers. Each will receive separate tax return forms and will be responsible for:
- obtaining and furnishing their own individual tax returns
- declaring income, and claiming deductions and reliefs
- computing their own taxes
- paying their own taxes
- attending to their own tax affairs.
However, in the case of joint assessment, responsibility for obtaining and declaring income, and for submitting the return form, lies with the assessed party.
Recovery of tax payable under joint assessment
Responsibility for the settlement of the tax payable under joint assessment lies with the assessed party. However, if the tax is not settled, the authorities have recourse against the joining party to the extent of the aggregated tax attributable to that party’s total income. The portion of the joining party’s tax which can be collected is calculated as follows: