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Wednesday, April 6, 2011

Comparison between Malaysia Income Tax and Singapore Income Tax 5 --- Tax Payment

After filing your incomes and reliefs via e-filing in both countries, it is time to make your payment...sad.gif

In Malaysia, you have multiple ways to pay your income tax, via Internet Banking, Over-the Counter, via ATM, via Tele-banking, via Cheque, etc...it seems to be very convenient...actually most of us opts for MTD (Monthly Tax Deduction Scheme or PCB, Potongan Cukai Bulanan in Malay laguage) by our Malaysian companies...

Please don't get me wrong, it is a easy way as part of your salary was used to pay for the tax monthly, it shall cushion the impact of having to pay a large chunk of money in April every year, you can pay in by instalments. The only thing is that the way our LHDN is calculating the amount to be deducted every month. I found that it is based on a table, "supposed" to take into account your monthly salary, whether you are married, how many kids you have, whether your spouse is working or not. Sometimes, it is very confusing...even for most of the companies' HR. As a result, at the begining of every year, after you have your annual increment, it may takes one month to one quarter for your HR to settle down with the new MTD amount. You may need to adjust your monthly budget accordingly for a few months to reflect your net income.

If your company practice paying performance bonus in a particular month of the year, you shall be deducted with a huge amount of MTD as they assume your monthly income is that with the addition of bonus. So we need to declare these deduction when we perform our e-filing. It normally shall results in over-deduction if you have a huge deduction during bonus. Although the money shall be returned to you, it may take some time (you get your bonus in December, deducted MTD, but get your refund only after you perform e-filing in April). But I heard now the process of tax refund is very fast, within a week (after you submitted your e-filing) you can get the cheque...

In Singapore, with a relatively simpler tax filing process, the payment process also is almost similar. You can pay it via Internet Banking, AXS Station, or via GIRO. GIRO is the linkage of the Association of Banks in Singapore (ABS). Singapore's IRAS offers the tax payer to pay their tax via 12 months instalments similar to Malaysia's LHDN. But it is an interest free instalment after you have declare your income and file your tax return...in other words, you are paying your last year tax by instalment this year, interest-free... 

It makes an real advantage and encouragement for tax payer, as you can spend or invest your money first and enjoy the interest free tax payment in Singapore. But in Malaysia, you have to pay your estimated tax, but normally estimated more monthly first for that assessment year, you are lossing the opportunity cost as well as the time value of money...shakehead.gif

In conclusion, my comparion of the tax processes between Malaysia and Singapore is completed. It seems Singapore tax structure is better in term of the tax rate, rebate, filing process and payment scheme. The only advantage of Malaysia's tax structure is only more type of reliefs.

(I may do a numerical comparison on my next post)



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