Bonus for 2008 or 2009?

Just an update on my previous post. Besides the additional tax relief you get if you are receiving various benefits from your employer such as transport, mobile phone, etc., there is another change that may interest you.

For those of us who receive last year's performance bonus this year, there is a slight difference in the treatment from assessment year 2009 onwards (affect your tax returns next year, not this time round). In your BE Form, you will see this section called "Pendapatan Tahun Kebelakangan Yang Belum Dilaporkan". For this year, we will put in our performance bonus for 2007, which was only paid to us in early 2008. The Inland Revenue Board (IRB) will then take out your old file and recompute the tax payable for 2007.

For some reasons known only to the IRB, there is no column for PCB (Potongan Cukai Berjadual) under the "Pendapatan Tahun Kebelakangan Yang Belum Dilaporkan" section. So, IRB will only add your income to the previous year's tax computations, ignoring all tax deductions by your employer when your bonuses are paid. IRB will then send you an overstated Borang JA requesting that you pay up taxes which you had already pay.

So, every year, I am faced with the pain of having to write to IRB and explain that a huge chunk of my bonus had been deducted and repatriated to IRB under the PCB scheme.

For those of you who did not bother to dig out your old files and recompute the taxable amount to reconcile with the Borang JA, guess what? You have probably been paying double the tax every year!

Nevertheless, going forward you will not face this problem any more, at least we hope not! From assessment year 2009 onwards, all bonuses will be accounted for in the year it was paid, not in respect of which year it was paid for. To put it simply, your bonus for 2008, if paid in 2009, will not be part of your tax returns for 2008. To put it simpler still, it means as long as you receive the cash in 2009, it will taxed under assessment year 2009.

The implications? You will have a lower effective tax rate for 2008 as compared to other previous years because there will be no bonus impact (assuming, you are lucky enough to receive a bonus for 2008 and that bonus is paid in year 2009).