While GST, also known as value-added tax, is as a whole relatively simple compared with the income and corporate tax, some of its features and rules are anything but simple.

This poses a challenge to officials who are charged with bringing on the tax – to get businesses and consumers (i.e. the public) to get to grips with or at least have a broad understanding of how the tax works.

That there are clear misconceptions amongst many can be discerned from the various letters written to the press expressing negative sentiments.

The answers to the following broad questions will assist in the basic understanding of the GST.

What is GST?

It is a tax on consumption, an indirect tax charged on imports and on the value added to goods and services sold by one business to another, or to the end consumer.

It is the buyer who pays the tax, not the seller. GST replaces the current sales and service tax but not the income tax or customs import duty or excise tax. It will be broad-based, covering a comprehensive range of business transactions.

What is value added?

It is basically the mark-up in arriving at the selling price of a product/service. The selling price is made up of the cost of materials and purchases plus profit charged to customers.

How will the tax be charged?

GST will be charged at 4% of the value added to goods/services at each stage of production/ distribution. This rate, indicated by the Finance Minister, is known as the standard rate.

How does GST differ from the sales tax which it will replace?

Sales tax is a single stage tax whereas GST is multi-stage (i.e. the latter is levied at every value added stage in the distribution chain). Unlike the sales tax, GST has no cascading effect and does not lead to price distortion.

What are the benefits from changing to the GST system?

It is widely considered as a more efficient system. More tax can be collected with a lower rate because it is broad based. The system of issuing invoice for input tax credit operates as an auto control which could reduce tax evasion and thus increase income tax collection.

Who can charge GST?

A business with sales in one year amounting to RM500,000, as indicated by the Finance Minister, must register to charge GST. A business with sales amounting to less than this threshold may volunteer to register to charge GST and claim input tax credit (see paragraph below).

GST on imports

Businesses which import goods and services will have to pay GST at the time of importation.

GST on domestic products

Businesses supplying goods and services will pay GST within one month following the end of the taxable period. This taxable period can be one, three or six months depending on how the business is “classified” by the GST authorities.

Final consumers will pay the tax upon purchasing the taxable goods and services. Not all goods and services will be charged to tax. They will be classified into three main categories viz: taxable, zero-rated and exempt.

Taxable goods and services

Consumers will be charged GST at the established rate of 4%. A GST registered business will charge GST at the same rate on the sale of taxable goods and services and pay GST on its purchases.

Zero-rated goods and services

The final consumer will pay GST at a rate of 0%. This essentially means that no tax is charged on consumers on the item. A GST registered business will be able to claim a credit for any GST paid on its inputs.

Exempt goods and services

No tax is charged on the consumer. Unlike the zero-rated goods, the GST registered business is not entitled to claim any input tax credit on purchases.

How will GST affect you, the consumer?

Since the current sales and service tax are at rates exceeding the GST proposed rate of 4%, the final prices of these goods and services are not expected to see an increase.

The prices of goods and services which currently have little or no taxes will increase slightly. Some goods and services will be exempted from GST and others taxed at a zero rate.

The latter category will cover essential goods and services; the measure is to shelter the lower income group from the effect of the tax. The list of exempt and zero- rated items has yet to be released.

Businesses in general need to understand the detailed rules and consider how these would apply to their own business operations.

Failure to do so may result in the loss of the set-off or credit for input taxes suffered and/or being exposed to onerous penalties for non-compliance with the law.

■ Kang Beng Hoe is executive director of Taxand Malaysia Sdn Bhd.

http://biz.thestar.com.my/news/story.asp?file=/2010/2/25/business/5663013&sec=business

Before clicking the button to complete the e-filing, take a second look at the figures keyed in. Is the amount of tax calculated the lowest it can be? Here are some tips on saving tax that would not get you in trouble with the law.

1. Know your income: What is taxable and what is not.

Gone are the days when you agonise over the delay in receiving your Form EA from your employer. It is now a law for employers to issue the Form EA to their employees no later than the end of February. The key point to note is not all income in your Form EA is taxable! Scrutinise all the items in Form EA to see if there is any which should be tax-free. For example:

Travelling allowances

If you receive travelling allowance, up to RM2,400 for your travels from home to office is tax-free. What this means is if you receive an allowance of RM12,000 for such travel, you can deduct RM2,400 and only RM9,600 is taxable. Further, travelling allowance of up to RM6,000 for official duties is tax-exempt.

Meal, parking and childcare allowances

Many employees receive these allowances, do you? You would be happy to know that you can enjoy such perks with no worries about paying tax thereon (up to RM2,400 in the case of childcare allowance).

2. Make the most of all tax-free benefits.

Medical benefits

Medical benefits for traditional medicine including ayurvedic, plus maternity benefits are also tax-free.

Interest subsidies

Your employer may have subsidised interest on your housing, car and education loans. In the past, these subsidies would be taxable on you. Now you would be glad to know such interest subsidies are tax-exempt (so long as the total loans do not exceed RM300,000).

Broadband and telephone benefits

Who can leave home without the iPhone, Blackberry or PDAs nowadays? Getting such a device from your employer plus reimbursement for broadband and telephone bills are tax-free. So take advantage and enjoy the latest gadgets and services.

3. Know your limits.

Just as in drinking and driving, stay within the limits to avoid any trouble or triggering tax.

If you have enjoyed any staff benefits like discounts on your company’s goods or services and kept within the RM1,000 a year limit, you should enjoy tax exemption thereon.

Did you receive a small token from your employer on your achievements in service excellence, innovation or productivity which brought on a smile? Don’t blame your employer if they kept the awards below RM2,000 as no tax should be levied on you. Neither is the award for your long service with the company (for more than 10 years) forgotten. As long as your employer kept the value of all awards to you within the RM2,000 limit, the smile should remain on you.

4. Look for more tax-free income.

Bank interest income

You will note a subtle difference in your bank statement nowadays as it no longer shows the amount of tax withheld. Bank interest income is now tax-exempt.

Dividends

Dividends need not be entirely taxable. Have a good look at the dividend voucher. If it states that the dividend is “tax-exempt”, then it is not taxable anymore.

5. Gain more deductions.

Purchase of sports equipment

If the slimming fad has caught on with you, keep the receipts of your purchases of any sports equipment. A claim of up to RM300 is a small incentive to shape those curves and muscles in a big way!

Have receipts or evidence to support more deductions

Medical expenses for your parents certified by a medical practitioner (restricted to RM5,000);

Medical expenses for serious diseases for self, spouse or child (up to RM5,000), including a complete medical examination for self, spouse or child limited to RM500;

Basic supporting equipment for disabled self, spouse, child or parents (ceiling of RM5,000);

Disabled person (self) (RM6,000);

Disabled husband/wife (RM3,500);

Education fee (self) up to tertiary level for the purpose of acquiring law, accounting, Islamic financing, technical, vocational, industrial, scientific or technological skills or qualifications for a masters or doctorate level, undertaken for the purpose of acquiring any skill or qualification (limited to RM5,000);

Purchase of books/journals/magazines/similar publications for self, spouse or child (up to RM1,000);

Net deposit in National Education Savings Scheme (ceiling of RM3,000);

Purchase of personal computer for individual (maximum deduction of RM3,000 allowed once every three years);

Premiums on life insurance plus EPF and other approved fund contributions (subject to RM6,000 restriction);

Premiums for education or medical insurance (restricted to RM3,000);

Relief of up to RM10,000 on the housing loan interest paid (conditions apply);

Payment of alimony to former wife (maximum total deduction for wife and alimony payment is RM3,000);

Zakat other than monthly zakat deduction from salary; and

Fees/levy paid by a holder of an employment pass, visit pass (temporary employment) or work pass.

The rule of the “game” of keeping your tax liability to the minimum when preparing your tax return Form e-BE is to do it right within the law. For a start, make the website of the Inland Revenue Board, www.hasil.gov.my, one of your favourites from now until April 30 to access its easy to read guides. Happy e-filing!

● Ang Weina is executive director and global employer services leader with the tax practice of Deloitte Malaysia.
http://biz.thestar.com.my/news/story.asp?file=/2010/2/22/business/5708847&sec=business

I really like the article below…remind me to always on guard…

In Sunday school I was taught the parable of the pharaoh of Egypt and his dream of seven fat cows being eaten by seven skinny cows. Deeply disturbed, the pharaoh sought the interpretation of his dream. A young slave boy interpreted the dream to mean Egypt would have seven years of plenty to be followed by seven years of famine. The message: Prepare for the lean years during the years of plenty. The pharaoh prepared Egypt for the lean years and led it into an era of prosperity.

My rich dad used the story of the three little pigs to make a similar point. As you know, one pig built his house out of straw, the other of sticks. Once the first two pigs finished their houses they began to party, taunting and laughing at the third pig who was taking longer, building his house of bricks. After the house of bricks was finished, a big bad wolf appeared and blew down the houses of straw and sticks. If not for the shelter of the house of bricks, the first two pigs would have been pork dinner.

In 2007 a big bad wolf known as the ‘subprime crisis’ blew down financial houses made of straw and sticks, houses known as Lehman Brothers, Bear Stearns, AIG, Merrill Lynch, Washington Mutual, Fannie Mae, and Countrywide — as well as the homes and businesses of people who built their lives on straw and sticks.

Lessons of the Pharaoh

Last month’s column was about reasons why people should prepare for the worst. This article is about how to prepare for the worst. Preparation begins with understanding the lessons of the pharaoh and the three little pigs: Prepare for the worst even when times are good.

For me, it was not easy to follow these lessons, especially during the boom years. It was tough preparing for bad times while my friends were enjoying the good times. It was tough not to climb the corporate ladder seeking higher pay and job security or chasing financial fads such as flipping real estate, day trading stocks, gambling on dotcom companies, investing in mutual funds, or using my home as an ATM to pay off my credit cards. Today, many of my fellow baby boomers who enjoyed the boom years are concerned about survival in the lean years.

In 1973, returning from the Vietnam War, I found my dad, in his fifties and in the prime of his life, unemployed. Although a highly educated, honest, hard-working man — and former superintendent of education for the state of Hawaii and Republican Party candidate for Lt. governor of the state – he was sitting at home, looking for work. My dad’s situation, combined with my experience of the war, was my wake-up call. I knew something was wrong, but I did not know what was wrong.

The stories of the pharaoh and the three little pigs danced in my head. I knew I had to prepare, but for what I did not know. I just knew I could not follow my dad’s advice, which was to fly for the airlines or go back to school and get my PhD. My instincts, sharpened by the war, knew his advice was not right for me. I decided to follow in my rich dad’s footsteps, not my poor dad’s.

One Path to Take

The following are some of the steps I took to prepare for the worst. I do not recommend my path; I will simply state why I did what I did and what benefits were gained.

1. I became an entrepreneur, not an employee. This was a tough choice. I did not have the skills, experience, or financial backing to support me through the lean years and my mistakes…and there were many lean years and mistakes. Many of the businesses I started failed.

Thirty-six years later, I own a number of businesses and employ hundreds of people all over the world. Some of the benefits: A) I make more money and pay less in taxes because I provide jobs, and that is what this economy needs — more jobs. When President Obama speaks about raising taxes on the rich, he speaks about high-income employees and small business owners, not entrepreneurs who build big businesses. As you know today, many big businesses are doing better as small businesses crumble. B) I can start new businesses as the economy changes and new opportunities appear. C) I can start businesses in different countries when new opportunities appear. D) I am not afraid of losing my job. E) My income goes up as my business grows.

The good news is that it is easier to be an entrepreneur today. The Web and new technology offer more opportunities to reach a world market at a lower price. Today a person can start a business at home and reach the world market.

2. I invest for cash flow, not capital gains. Most people invest for capital gains. These are the people who have lost a lot of money or are afraid of losing more money. When a person says, “My house has appreciated in value” or “The stock market is going up,” they are investing for capital gains. Investing for capital gains is like building a house of straw or sticks.

In 1973 I took a real estate course to learn how to invest for cash flow. Even though the real estate market crashed in 2007, my rental properties continue to produce cash flow. Even though banks are not lending money to many homeowners, the government continues to loan millions, via the FHA, to investors who provide housing. This means we receive tax breaks and use debt — other people’s money — to increase income.

The good news is, when prices crash, cash flow investments become more affordable. For example, stocks such as Johnson & Johnson, a company that pays a steady dividend (cash flow), become more affordable. If you want to start your real estate career, now is the time to invest for cash flow.

3. I invest for inflation. In 1971 President Nixon took the world off the gold standard, which means the world’s central banks can print as much money as they want. I was in Vietnam in 1972 and saw what happens when people do not trust paper money. Rather than try to live below my means and save money, I invest in gold, silver, and oil — commodities that go up in price as the government prints more money.

When investing for inflation, I am not investing for cash flow. In this case, I am investing to protect my wealth from the predatory practices of the Federal Reserve Bank, the U.S. Treasury, and the ultra rich manipulating the world economy.
China does not trust the U.S. dollar. Today China is using U.S. dollars to buy commodities such as oil, copper, gold, and silver. The good news is silver is still inexpensive. In 2007 gold was approximately 50 times more expensive than silver. In 2009 the gap is 70 times — which means silver is a bargain.

Silver is used in the electronics industry and is consumed daily; stock piles of silver are dwindling. On top of that, for the first time in modern history, there is more gold in the world than silver. In other words, silver is more valuable than gold. The good news is, at less than $20 an ounce, almost anyone can afford to start preparing for the worst and building their own house of silver.

In conclusion: My mom and dad lived through the last depression. They knew lean years. The baby boom generation is about to have their fat cows eaten by skinny cows. The good news is, if you can thrive when times are bad, these are the best of times.

http://finance.yahoo.com/expert/article/richricher/192575

1) Bring a full set copy of  S&P

2) Bring a copy of your IC

3) Settle all the outstandings

4) RM100 as deposit

5) Check also which Syabas branch you need to go

If you want to cut the water for what so ever reasons:-

1) RM50 to cut & connect back the water

2) Formal letter signed by the owner stating reasons

Hmmm…i forgot to ask how long they will take to cut the water.

You can confirm with Syabas by calling PUSPEL 1800 – 88 – 5252

For the first time, I purchased Kijang Emas. I purchase gold to hedge on my property investment in case BLR goes up. For this month net worth, I don’t include the recent acquired property net worth as it is still in legal process.

I already sold most of my shares with 12% annualized return. I expect the shares will go down in near future so I have to lock in my profit now.

For this month also, I spent money a lot due to Raya, balik kampung & car repair. If not my net worth would be much more higher.

THE subject matter has become a common scenario among credit card debtors. Taking a personal loan to settle credit card sales method has also been adopted by banks in pushing their personal loan product. But is that wise? Key question – is the total sum paid to settle the personal loan actually less than the sum which would otherwise be paid to settle the credit card debts?

For that, a few factors need to considered. Firstly, the tenor; while credit cards have an indefinite tenor with a minimum of 5% of outstanding balance to be paid, a personal loan offers a range of between 1-7 years for repayment. This sounds better. Secondly, and more importantly, what is the actual annual interest rate of the personal loan (which differs from the nominal fixed rate quoted for personal loan) as compared to the annual interest rate of the credit card, which is about 18%?

The nominal fixed interest rate that are usually quoted for personal loans (which ranges from 7.5% to 12%) is not an apple to apple comparison to the 18% annual interest rate charged for credit card debts. So, you’re dead wrong if you assume that a 12% nominal fixed interest rate for personal loan is better than a 18% per annum credit card interest rate.

To get a better understanding of the two types of interest rates, let’s look at their difference. Nominal fixed interest rate is similar to a hire purchase interest rate, whereby a fixed rate is charged against principal, and levied over the period of the payment. There is no consideration given towards the reducing principal balance as the repayments take place. Whereas, the credit card annual interest rate is a reducing balance interest charge, therefore interest is charged monthly on the reduced principal balance. This is similar to a housing loan interest calculation.

Let us now look at some examples of interest calculations whereby we derive the similar annual interest rate for the personal loan so that we can compare apple to apple with the credit card annual interest rate. The following assumptions have been adopted:

* Personal loan sum: RM10,000

* Repayment period: 3 years on 36 equal monthly instalments

* Nominal fixed interest rates (NFIR): 8%, 9%, 10%, 11% and 12%

For the different NFIRs, I have come up with a schedule (Table 1) to show the monthly and annual interest rates for the personal loan.What Table 1 shows is that for a given NFIR, there is a substantially higher annual interest rate. The 18% annual interest rate for credit cards sits between the 10% and 11% NFIRs. With some banks now reducing the credit card annual interest rates to 16%, the equivalent for personal loan sits between the 8% and 9% NFIR.

Let us now try different tenors for the loan repayment compared to the fixed 3 years and see the difference in the annual interest rates as per Table 2.

Therefore, annual interest rates are lower with longer tenors, but do bear in mind that longer tenors will entail bigger absolute sum being payable.

Another issue that is equally important but which is usually disregarded by borrowers is the fact that the personal loan is not paid net, but comes after deducting the cost of processing and handling fees. The fee usually comprises a fixed and a percentage rate. Going back again to our RM10,000 personal loan, let us assume that we only get paid RM9,650 after deducting RM350 for fees, how does this affect the annual interest rate? Refer to Table 3.

You will note that the annual interest rate has increased about 2.6% with the introduction of loan processing fees.

Now, let us go back to our main question – if I have a credit card debt that carries an annual interest rate of 18%, do I take a lower NFIR rate personal loan to settle it? The answer is ONLY if the personal loan offers a NFIR of lower than 8.53% (recomputed to 2 decimals based on assumptions in Table 3)

Having said that, for anyone considering converting credit card debts, the better option would be to do a transfer balance, whereby another bank undertakes to settle the credit card balance on your behalf and sets up a reducing balance loan account, albeit certain conditions of course.

Be an informed borrower; ask your banker for annualised interest rates or effective interest rates of any loan product. If the banker uses bombastic words, try making reference to hire purchase and home loans, whereby you understand how these interest mechanisms work.

> Raymond Roy Tiruchelvam is former senior manager, economics and investment analysis, from an oil and gas company.

http://biz.thestar.com.my/news/story.asp?file=/2009/10/3/business/4731618&sec=business

I purchased one unit at Palma Puteri, Kota Damansara.

My net worth for June 2009 is RM104,718  increased by 3.0%.

Thanks to increase in share price and income from my auto saving. I spent around RM1,000 to repair the paquet of my rental apartment. If not my net worth would be RM105,718.

1) my own properties: RM65,993 – 63.02%

2) my rental properties: RM18, 044 – 17.23%

3) my shares – RM10,724 – 10.24%

4) my savings – RM9,957 – 9.51%

I reached the RM100k of net worth. Now I must get RM155k of net worth to get out from Under Accumulator of Wealth category.