Have you been surprised by your credit card statement at the end of the month after purchasing something from an international online store? Does it seem that the total charged to your credit card was not the same as the amount you saw during checkout?
Online shopping has become more popular in recent years because it enables us to purchase various items with just a few clicks from our electronic devices. However, many Malaysians remain susceptible to hidden fees and unfair charges when making international purchases, travelling, and transferring funds.
This is where having a multi-currency account can help streamline how you send, spend or receive money. Whether you are using it personally or for business purposes, a global currency account provides added freedom and removes borders.
Here are a few ways on how a multi-currency account and card can help make your life easier.
1. Spend in local currency while shopping internationally
We all know that Malaysians love to shop. When the pandemic hit, many Malaysians transitioned from shopping in malls to online stores, both locally and internationally.
The transition to online shopping was spurred out of necessity but it helped many Malaysians to purchase their favourite items even from the comfort and safety of their homes. However, it can be frustrating when dealing with uncertain conversion rates and hidden fees.
Hence, a great way to navigate this is by choosing to pay in the currency of the country you are buying from – here’s where your multi-currency account comes in. Pay like a local to save on extra fees and get a better exchange rate!
2. Be in control of your finances when travelling abroad
With countries opening their borders after the pandemic, many Malaysians have been hit with the travel bug and are planning their vacations meticulously. As such, if you are looking to travel overseas, owning a multi-currency card will help you to spend in multiple currencies whichever country you are in, with better exchange rates that are often lower than your traditional bank.
You don’t have to worry about fraud as you are always in control when using a multi-currency account, with instant transaction notifications and the ability to freeze your card instantly. You can also spend like a local as you can use your card to withdraw money from your multi-currency account at ATMs worldwide.
3. Get paid like a local even from overseas clients
Top view of woman using laptop computer
Freelancing is a great way to support a lifestyle outside of the traditional office job. For many, it is also an opportunity to work with exciting companies in different countries. It also means having the liberty to go about your day, but at the end of the day, you are responsible for maintaining a continuous flow of work.
Expanding your horizon to regional or global clientele could yield better results and maybe even better pay. But it brings up the question of how do you actually get paid? Most companies seek to pay their freelancers in their local currency.
So that’s where a multi-currency account comes in, allowing you to receive your salary and invoice payments in their local currency, which can then be converted to your local currency for use. No more hefty bank fees or unfair exchange rates on both sides!
4. Manage your overseas property remotely
Once you purchase properties abroad, you may find yourself thinking about the most convenient way to pay utilities, taxes, and other mandatory fees. It is often stressful trying to decipher the uncertain and hidden charges that come from doing a bank money transfer.
After all, no one wants to pay more than necessary, as it would only result in loss of money. This is especially true if you bought the property as an investment and turned it into an Airbnb or event rental space.
A great option to manage these properties is with a multi-currency account, where you can pay in local currency and receive money locally as well, and then convert it into your desired currency when the rates are right. Make it simple and take the hassle out of property management — and save money in the process.
It is important to select a multi-currency account which allows you to hold, receive or convert various different currencies at the lowest rates possible. With Wise, you will be able to enjoy the mid-market exchange rate for transfers, conversions and more without hidden fees. Another
feature to look out for is 3-D secure authentication, which ensures every transaction is safe. So, if you want to make international transactions from the comfort of your home or travel the world to see for yourself, it would be wise to own a multi-currency account.
The month of October is that time of the year where the financial planning profession come together to raise awareness of financial literacy and financial planning in Malaysia among the public.
Vincent Kwo, President of the Malaysian Financial Planning Council (MFPC), weighs in on the state of financial literacy and financial planning in Malaysia, why one should engage a financial planner and what MFPC is doing to uphold the best standards of practices in the industry.
Vincent Kwo, President of the Malaysian Financial Planning Council (MFPC)
Smart Investor: Are there any recent initiatives, campaigns or events by MFPC to promote financial literacy and financial planningin Malaysia this year?
Vincent Kwo: The Malaysian Financial Planning Council’s objectives include promoting the development and enhancement of the financial planning profession in the country, as well as elevating financial literacy and financial planning in Malaysia.
To meet the first objective, we conduct professional financial planning programmes that lead to qualifications recognized by the Securities Commission (SC) and Bank Negara Malaysia (BNM). This ensures Malaysians access to the highest quality of financial planning services provided by qualified and knowledgeable financial planners.
As for meeting our second objective, we continually embark on various initiatives, conduct programmes and events for the Malaysian public at absolutely no cost to promote financial education. The aim of these initiatives – all of which are devoid of any commercialization – is to stay in the forefront to raise the financial literacy and financial planning in Malaysia for the rakyat, which is at a worryingly low level.
We are immensely proud that our initiatives have reached out to and benefitted thousands of Malaysians, empowering them with financial knowledge for their and their families’ financial well-being.
The first half of 2022 saw us hold four of our award-winning My Money & Me workshops virtually for youths in KL, the east coast zone, the northern zone and the southern zone. These programmes are a regular feature in our itinerary, which are evidence of our efforts in contributing to the rakyat’s financial well-being and ultimately advancing the development of the nation.
The workshops are cross-collaborative programmes with Bank Negara Malaysia, SC, OFS and SIDREC, EPF, AKPK, LIAM, MTA, FIMM, LHDN and MFPC.
The topics at our basic financial literacy My Money & Me workshops include asset protection, asset accumulation, asset management and asset distribution, vesting Malaysian youths with financial knowledge. The workshops will also empower youths to practise positive financial behaviour and gain strong financial capability well into adulthood and their retirement years, ensuring their financial and emotional wellbeing.
During the My Money & Me workshop in March, we launched an e-learning portal https://mymoney.mfpc.org.my/ with free access for the public. The self-paced learning available will ensure resources are available to build the financial knowledge of the public. The portal comprises of subjects related to conventional and Shariah financial planning.
In addition, we conducted numerous series of Pocket Talks covering financial planning topics, free for the public. These aim to raise public awareness of the importance of financial education and planning.
Raising Awareness Of Financial Literacy And Financial Planning In Malaysia
We have conducted 20 talks to date in conjunction with our MFPC Industry Talk with local universities. The talks are conducted in collaboration with financial planning firms, financial institutions and trade associations to promote the importance of financial planning, and to instil interest in financial planning as a profession in young adults.
In the pipeline are three more My Money &Me workshops for the year, for Sabah, Sarawak and Selangor.
Other programmes in the pipeline include an e-Tournament 2022 in October 2022 entitled Game for Money. 20 universities will participate in the event. The aim of the tournament in to provide financial education as well as to instil interest in financial planning among undergraduates.
We will also participate in Bersama InvestSmart® in Sarawak, in September. This is an event initiated by SC that seeks to create more informed investors who are self-reliant and able to make investment decisions that are right for themselves.
MFPC is confident that our numerous financial education programmes have made and will make a difference in the lives of Malaysians, enhancing their upward mobility and creating lasting and positive changes.
SI: What is your take on the state of financial literacy and financial planning in Malaysia, especially given the past couple of pandemic-fuelled years?
VK: The recent pandemic drove home the fact that financial planning and literacy are essentials, not options. Many people lost their income unexpectedly and matters were made worse for those who did not have a comprehensive financial plan.
Unfortunately, financial literacy and financial planning is very low among Malaysians, which worsened the financial problems brought on by the pandemic. MFPC’s various free financial education programmes to raise public awareness and literacy aim to aid the public to improve their situation.
We plan to continue working to this end, so many more Malaysians understand the importance of financial planning and education, and will be better equipped to withstand any similar circumstances that may arise. We look forward to working with our partners in the effort to improve the financial well-being and lives of the rakyat.
SI: Why does one need a licensed financial planner in their life?
VK: Various studies, including the Capital Market Development Fund (CMDF) report on Financial Literacy and Utilisation of Financial Advisory Services in Malaysia, reveal that Malaysians generally have a worrying low financial capability, do not know how to manage their money, and do not plan ahead. This does not bode well for their financial sustainability and makes them prone to falling into the bankruptcy trap, and become prey to loan sharks and get-rich-quick scams.
We recommend that one should have a complete financial plan for oneself, and if you don’t have a plan, to seek assistance from a licensed financial planner to develop a plan.
A licensed financial planner can help one to establish a personal financial plan, give measurable goals to work toward, track progress, reduce doubt about decision and make better financial decisions. This will help one to manage cash flow and manage debt efficiently.
Planning can be tailored to suit every personality type and meet different needs at different times of one’s life stages. A licensed financial planner can provide the necessary advice on changes and adjustments to support one’s lifestyle, resulting in peace of mind and general well-being.
SI: What should a person look for in a financial planner?
VK: It is most important that we seek the services of a licensed financial planner. A financial planner with the Registered Financial Planner (RFP) or Shariah RFP designation is licensed with Bank Negara Malaysia and the SC, and holds the Financial Adviser’s Representative (FAR) and Capital Markets Services Licence (CMSL) respectively. We can also check against the list of licence holders provided by Bank Negara and SC.
As for the other qualities, the following should be considered: trustworthiness, ability to provide evidence of a good track record of success, ability to provide independent advice, compatibility with the client, the ability to provide up-to-date information and the ability to refer to other specialists if required.
In short, one should look for professionalism in a financial planner. MFPC provides an evolving set of Best Practice Standards and Code of Ethics for adherence by our RFP and Shariah RFP designees. This is to ensure professionalism in financial planning services providers, prevent exploitation of clients, and to preserve the integrity of the profession.
This is also to ensure Malaysians will benefit from the highest quality of financial planning services. It demonstrates clearly the importance we place on ethical behaviour in the profession. At the same time, this will help in raising awareness of financial literacy in Malaysia.
The following story is based on an actual series of events with some names and circumstances fictionalised and any similarity to the name, character or history of any person is entirely coincidental and unintentional. Hope that this will help you understand the hard facts about the executor of a will in Malaysia.
Janet hates her husband! In a moment of anger out of frustration, the thought “why didn’t I die before you…” raced through her mind.
Tired and annoyed, Janet just couldn’t help taking it out on her late husband for the torture she underwent. For the umpteenth time this week she has been given the run-around from one Government department to another, to the bank, to EPF, to… only to be told that she doesn’t have the necessary documents or sorry, wrong department!
The Hard Facts About The Executor Of A Will In Malaysia
“Didn’t you know that the job of an executor of a will in Malaysia is that difficult?” she lashed out as if husband Keat was in front of her.
“How could you put me through this, you Mr Know All? You knew very well I’m useless in dealing with such stuff? Why? Why? Why are you so irresponsible…” her voice trailed off as she started to sob, shielding her face with her hands outside the Employees Provident Fund office.
Just slightly more than a month back, she lost her pillar of strength. It was cruel that Covid-19 had so suddenly taken Keat away and left her with their two little ones.
She recalled that she was numb with disbelief when she had to unceremoniously send-off Keat without a proper burial. She was allowed to watch only from a distance and say her last farewell as the casket was rolled into the furnace at the crematorium.
She was alone then and she had been alone mourning her loss after that as no one could visit her home as she and her kids were on home quarantine.
Janet didn’t know where she found the strength in those moments of grief. But now, as time heals, she felt like being dealt with another cruel blow.
The Pain Of Losing Loved Ones And Executing The Will
Little did she know what she had to go through as she started the process of executing Keat’s will. It was only after having a taste of it that she realised the folly of Keat in insisting that they keep things within the family and appoint each other as Executor of their respective wills.
It was torture which she as the surviving spouse would want to be spared. The question before her is would she be able muster any more strength to go through this while taking care of the children’s needs…?
The role of an Executor of a will in Malaysia is to carry out instructions in the will and ultimately distribute the assets to beneficiaries.
The process before assets can be distributed to the beneficiaries involves settling debts and liabilities, for example loans, credit card dues, and taxes, efficiently and without bias.
This can be an onerous task – complex and time consuming especially for the uninitiated as it involves legal, taxation, accounting and administrative matters such as tracing of assets, application for probate and attending court hearings as well.
Local government agencies and statutory bodies such as land office, EPF office, Inland Revenue will have to be dealt with depending on the assets left behind by the deceased. Then there are the banks, the credit card issuers, insurance companies, debtors, creditors, stockbroking firms, company secretary, accountants… the list goes on.
Huge Burden On The Executor
The person appointed as Executor of a will in Malaysia as such needs to have a wide knowledge in legal, accounting, tax and administration work to ensure that the process of applying for Grant of Probate, administration and distribution of assets is carried out smoothly.
Any undue delay in the distribution of the assets may be to the detriment of the beneficiaries who, due to the demise of their sole breadwinner, for example, may be in difficult financial situation with sudden loss of income.
As individuals with the necessary capabilities may be hard to come by, a prudent consideration is to appoint a trust company like Rockwills Trustee Bhd that have specialised in estate administration matters for decades.
The professional company will have experienced and skilled personnel with the time and resources on hand to administer to one’s estate and Trust. Unlike the individual executor, the company will exist in perpetuity thus averting any possibility of untimely death before or in the midst of carrying out duties of an executor.
Now you know what the executor of a will in Malaysia have to face?
About Rockwills International Group
Rockwills International Group, now in its 27th year, pioneered professional will writing in 1995 and has since evolved into the leading estate planning specialist in the country. It is today the largest provider of solutions and support services in the areas of trusts, succession, management and distribution of wealth. It has shareholders’ funds exceeding RM50 million. It has done over 280,000 wills and 15,000 trusts and hold more than RM25 billion in assets under trust.
Smart Investor recently have the honor to interview Yang Berhormat Syed Saddiq bin Syed Abdul Rahman, the Member of Parliament for Muar. There were lots of very insightful and powerful thoughts that are outside of the box which can be used to power Malaysia into the future.
Among other things, he also shares with us 3 tips for the youths in Malaysia.
3 Powerful Tips for the Youths in Malaysia
1. Don’t Be Afraid To Make Mistakes
“Young people today are expected to work two or three different jobs to earn a decent living as the average wage has stagnated for the past ten to 20 years, while inflation has only gone up.”
– Syed Saddiq
We will be making a huge mistake if we stand still, whereas others are making progress by leaps and bounds.
“The fear to even begin doing something because you are afraid to make mistakes, makes you suffer from paralysis analysis,” stresses Saddiq.
We can afford to make mistakes when we are young, as there is ample time to learn from them.
2. Invest In A Good Mentor
Mentor is an experienced person who has gone through lots of trials and tribulations. By having a mentor, we can take a shortcut and learn the tips and tricks, while avoiding the mistakes.
A mentor will be able to hand-hold you through the journey, mingle and learn from their networks, and learn directly from their experience which is invaluable. By investing in a good mentor, you can accelerate your progress by 10 to 20 years, as compared to earning a high salary.
3. Think Outside The Box
Being young doesn’t mean you have to follow the steps of previous generations that makes them successful. You will have to compete with others who have more experience and stronger capital, which inevitably causes you to be more creative to take on the giants in the industry.
This is where you need to be disruptive and use ways that were unimaginable previously. Even though the journey is hard, this is an important recipe of success.
“It is about using unconventional methods to achieve conventional outcomes,” quips Saddiq.
There you have it, 3 tips for the youths in Malaysia. It is our hope that Malaysia will improve by leaps and bounds, powered by the younger generation.
This is one of the most heated debate in the financial industry, saving vs investing. Before we get into it, let’s first take a look at the definition of saving and investing.
“Saving is income not spent, or deferred consumption. Methods of saving include putting money aside in, for example, a deposit account, a pension account, an investment fund, or as cash. Saving also involves reducing expenditures, such as recurring costs.”
-Wikipedia
Saving is your income, either from your monthly salary or sales commission, being put aside somewhere. This could be in your savings account or cash.
“Investment is the dedication of an asset to attain an increase in value over a period of time. Investment requires a sacrifice of some present asset, such as time, money, or effort.”
-Wikipedia
Whereas investing is putting in your money in an instrument where you can watch it grow. The longer you invest, the bigger returns from your investment.
Saving vs Investing
As you can see from the above, you won’t be able to invest if you don’t have money in the first place. Which also means that if you don’t have any savings, then you can’t invest.
And did you know that according to statistics, 75% of Malaysians can’t even come out with RM1,000 for any emergency? The culture of saving is sorely missing in our community.
In case anything untoward happens such as meeting with an accident, car repairs, or dengue fever which requires hospitalization, then you may have to resort to borrowing money from family members or friends. Worse if there’s no one to help, then you turn to ‘ah long’ and be trapped in a vicious cycle.
So in the case of saving vs investing, make sure you have sufficient savings first.
RM5.2 Billion Lost To Scammers
According to the Inspector-General of Police, Tan Sri Acryl Sani Abdullah Sani, there were 71,833 fraud cases recorded since 2020 until May 2022, with a loss amounting to RM5.2 billion.
Hang on a minute, but didn’t you say that Malaysians don’t save but they have tons of money to invest, and ultimately gets scammed in the process?
It goes to show how poor we are in managing our finances. We don’t have savings, and we invest in investment that is not legitimate or scams. When we lose it all to scammers, then we don’t have anything to fall back on – because we don’t have any savings.
Of course everyone wants the fastest way to getting rich, myself included. But bear in mind that investment should be a long-term game. For example you want to build up your retirement fund, and you have 30 years until you hit the retirement age of 60. That means you have time on your side, and still can afford to make mistakes.
Compared with someone in his 50’s and have less than 10 years to retire, he/she needs to invest for a shorter time period and take lesser risk.
So again, get your priorities right when it comes to saving vs investing.
Save Before Invest
That’s why you need to get your priorities right. Save at least 3-6 months of your monthly salary. If your salary is RM5,000 per month, have at least RM15,000 in an emergency fund for rainy days ahead. Best if you can have RM30,000, to better prepare for any emergencies.
If there’s anything that the pandemic has shown us, is that no plan can prepare us for something of that magnitude. Even if you have done the necessary preparation, you should still feel the effects of it.
Let alone those who didn’t have any savings. Thankfully the government came out with many schemes to help us out.
Now you know what to do when faced with the dilemma of saving vs investing?
Invest In A Diversified Portfolio
I’m sure we all have heard of the phrase, “High risk high return”. Which literally means that in order to get a high return, you need to take a high risk.
And I’m also pretty sure that you have heard of “Don’t put all your eggs in one basket”.
Combine the two of them, and you should be investing in a diversified portfolio – some in low-risk instruments (with low returns) such as fixed deposits or money market funds, some in medium-risk instruments (with medium returns) such as unit trust or property, and some in high-risk instruments (with high returns) such as stocks and crypto.
By having a diversified portfolio, should any ‘basket’ were to fall and break all the eggs inside it, you will still have other basket of eggs that can compensate for your loss.
But in the case of saving vs investing – make sure you have some savings first before deciding to invest.
What About The Upcoming Recession Next Year?
In a recent survey on saving vs investing that was carried out by Palindrome Communications, 40 percent of respondents said that they thought that investing is more important in a recession than holding on to cash. 60 percent of the respondents said that holding on to cash is more important than investing.
The data displayed a cautious sentiment among professionals in Malaysia as we head into what might possibly be an upcoming recession. Respondents were made up completely of professionals in the fintech and tech sectors.
Palindrome helps finance companies communicate more effectively in the market. More info here.
Over the years, Malaysian corporations have grown and expanded their business footprint, not only to neighbouring countries, but also to other continents in many parts of the world. It is not uncommon to see many Malaysian companies receiving income from their business and investment ventures in foreign countries, hence we need to understand about the issue of tax on foreign income.
These income sources include sales from exports of goods and services, dividends and interest income from foreign investments, royalty fees from licensing of intangible assets, rental from properties located overseas, and commission from acting as agents.
Generally, income received from out of Malaysia has been exempted from tax. However, in the Budget 2022, the Government announced removal of the tax exemptions on such income.
The rationale quoted for the removal, other than a measure by the Government to raise revenue collection, is that it is a step taken by the country to comply with the global tax standards on harmful tax practices.
Tax On Foreign Income
Malaysia adopts a territorial principle of taxation in that only income accruing in or derived from or received in Malaysia from outside Malaysia, is subject to income tax in Malaysia pursuant to Section 3 of the Income Tax Act, 1967 (ITA). Nevertheless, Malaysian tax residents enjoy tax exemption on the “income received in Malaysia, from outside Malaysia”, also called foreign sourced income (FSI), under Paragraph 28, Schedule 6 of the ITA (Para 8).
In short, while the FSI received by Malaysian tax residents are taxable under the Section 3 of ITA, the amount are exempted under Para 28. (Note: the exemption excludes those engaged in banking, insurance or sea or air transport businesses)
However, not all FSI income received are exempted as it has to be truly “sourced from outside Malaysia”.
Generally, whether the income is sourced within or outside Malaysia would depend on the location where the related income-generating activities had taken place. For example, export sales of goods by a trader are not exempted because the personnel who carried out the various business functions are located in Malaysia.
In contrast, it is argued that interest income from investment funds placed and managed outside the country is foreign sourced and thus, exempt under Para 28.
Tax Treatment On FSI From 1 January 2022
Effective 1 January 2022, the tax exemption for FSI received by Malaysian residents provided for under Para 28 was removed, following the Budget 2022 made on 29 October 2021. The implementation of the legislation is staggered into two remittance timeline of FSI into Malaysia:
January to June 2022 @ 3%:
Taxpayers are given this 6-months transitional period to remit their foreign sourced income in order to enjoy the lower tax on foreign income rate of 3% calculated on the gross income remitted (Part XX, Schedule 1 of the ITA)
Subsequent to 30 June 2022:
Remittance will be subjected to the normal tax rates.
In summary, the tax treatments for the income of a person residing in Malaysia are depicted as follows:
Special Remittance Programme Terminated
In November 2021, the Inland Revenue Board of Malaysia (IRBM) introduced the Special Income Remittance Programme (Program Khas Peremitan Pendapatan or PKPP) to help taxpayers in the transition to the new FSI regime.
The FSI remitted during the PKPP period (between 1 January 2022 and 30 June 2022) would be accepted in good faith by the IRB without any audit nor investigation be conducted on the taxpayer. In addition, there will be no penalties imposed for the remittance during the PKPP period.
However, this programme is shortlived and was revoked on 11 March 2022, as it is deemed not relevant, after the Ministry of Finance (MOF) announced in December 2021 on a concession to exempt certain categories of FSI for a period of five years from 2022 to 2026.
Concession: 1 January 2022 – 31 December 2026
The removal of exemption under Para 28 has been highly debated and criticised with regard to, among others, its timeliness of implementation, vagueness on the scope of FSI, and lack of clarity on claiming of double tax relief if the income had suffered foreign tax.
It is also seen as a stumbling block to attract foreign direct investment (FDI) in Malaysia, thus affecting Malaysia’s competitive position in the global trade map.
On 30 December 2021, MOF made an announcement to defer the full implementation of the new Para 28 to 1 January 2027. The official rules were issued by the Government by way of exemption orders dated 19 July 2022, in the Income Tax (Exemption) (No.5) Order 2022 and Income Tax (Exemption) (No.6) Order 2022 (“Exemption Orders”), applicable to individuals, partners in conventional partnerships, limited liability partnerships (LLP) and companies.
The exemption period granted is from 1 January 2022 to 31 December 2026.
Individuals are exempted on all categories of income including income from employment, dividend, rental and interest. Meanwhile companies and LLPs are exempted on foreign dividend income only.
However, there are the preconditions set in the Exemption Orders to qualify for the exemption during the fi ve years concession period, whereby:
FSIs received by individuals, LLPs and companies “shall have been subjected to tax of a similar character to income tax under the law of the territory which the income arises”.
For foreign dividends received by individuals from conventional partnerships, LLPs and companies, the added condition is that “the highest rate of tax of a similar character to income tax charged under the law of the territory which the income arises at that time is not less than 15%”.
IRBM is to issue the relevant guidelines on the applicable tax treatments, which are yet available at the time of writing. Clearly, taxpayers will need to meet certain conditions to enjoy the tax exemption during the five years concession period as it may not be as straight forward to qualify.
The limelight is now on the IRBM to expedite the issuance of the relevant guidelines, which are expected to provide the much-needed administrative details surrounding the reporting of FSI, including documents required to provide evidence for exemption of FSI, tax calculations of non-exempt FSI, the claiming of double taxation relief on FSI, especially foreign dividends, etc.
Tax Exemption Of FSI From 1 January 2022 To 31 December 2026
Taxable FSI Received By Corporate Investors
For now, FSI other than dividend income received by Malaysian corporate tax residents will be subject to tax in Malaysia. Notably, where the foreign dividends are received by a legal corporate structure other than a company incorporated under the Companies Act 2016, there is no exemption provided during the 5 years period on the income.
A list of the more common situations of tax on foreign income is set out below:
Common Situation Of Taxable FSI
Double Tax Relief On Foreign Tax Suffered
The tax on foreign income received in Malaysia may be reduced by the foreign tax credit paid. Where a Malaysia tax resident has suffered foreign tax on the FSI, the taxpayer is given bilateral or unilateral tax credit relief against the Malaysian tax payable on the same FSI.
Bilateral relief is given under Section 132 of the ITA when the foreign country has a double tax agreement with Malaysia eg Singapore, Indonesia, Japan, China, Australia, South Africa, United Kingdom, France, etc. Under a double tax agreement, a full relief may be possible based on the calculation of a prescribed formula, but the relief amount is only up to the Malaysian tax suffered.
On the other hand, unilateral relief is given under Section 133 of the ITA when there is no or limited double tax agreement by Malaysia with the foreign country eg British Virgin Islands, Taiwan, United States of America, etc. For such relief, the foreign tax recognised is automatically halved.
One is required to substantiate the amount of tax paid overseas with the relevant supporting documents from the tax authorities in the foreign countries, in order to claim the aforementioned tax relief in their tax return.
Capital Receipts Are Non-Taxable
The tax on foreign income will only affect gains that are “income” in nature. Receipts that are “capital” in nature (also known as capital gains) will not be subject to Malaysian tax. Capital gains include proceeds from the disposal of foreign stocks, foreign properties, foreign assets, foreign currencies, and foreign investment papers. However, these assets have been held as long-term investments.
Whether the gains are “income” or “capital” in nature, the onus of proof lies with the taxpayers. If the remittances are found to be income in nature instead of capital as claimed by the taxpayers, the same shall be subject to income tax.
Action Plan
The year 2022 marks an impact on investors with foreign asset holdings, in navigating a new tax landscape going forward with the removal of tax exemption under Para 28. The imminent measures include evaluation of the financial returns on their existing overseas investments, net of all tax costs. In sourcing new investment opportunities overseas, such investors shall need to factor in the additional tax costs in Malaysia.
Here are a few suggestions on the action that affected investors should look into:
1) Review the Malaysian tax impacts on all taxable FSI from investments outside Malaysia- tax simulations may be useful for the investment selection process.
2) Maintain proper records of the foreign assets, including tracking of the funds retained in foreign bank accounts vis-à-vis those repatriated to Malaysia. On the amount remitted into Malaysia, ascertain the nature as to whether they belong to “income” or “capital”, which will have different tax implications.
3) Where the funds are mixed, distinguish between foreign source income and domestic source income for proper reporting of taxable income for Malaysian tax purposes.
4) Conduct a comprehensive review of the current investment structure and strategise the most optimal approach to undertake future investments. This review may involve international tax planning to mitigate tax exposure involving multiple countries.
5) Examine the existing intercompany loans and undertake possible steps, including debt restructuring exercises, or rescheduling repayments to reduce the tax impact on remittance of interest income into Malaysia. On this note, any proposed changes will need to include transfer pricing considerations to avoid tax pitfalls in the future.
If guidance is required on the issue of tax on foreign income, consider seeking professional advice from a tax consultant. This would help you avoid stepping into potential tax landmines that could be uncovered in the future, when the company is audited by the IRBM.
Each year in October, the global financial planning profession comes together to help raise awareness of financial literacy, the importance of having a financial plan, and working with a trusted financial planner to formulate plans towards one’s long and short-term financial goals for financial stability.
Smart Investor takes a look at the current state of financial literacy in Malaysia, how the past two pandemic-fueled years have impacted Malaysians, and why a financial planner is an invaluable ally in working towards your financial goals.
Tough Times Called For Financial Stability
Vincent Kwo, President of the Malaysian Financial Planning Council (MFPC)
“The recent pandemic drove home the fact that financial planning and literacy are essentials, not options. This came about as many people lost their income unexpectedly and matters were made worse for those who did not have a comprehensive financial plan. Unfortunately, financial literacy is very low among Malaysians,” says Vincent Kwo, President of the Malaysian Financial Planning Council (MFPC).
Furthermore, Kwo reveals that, “Various studies, including the Capital Market Development Fund (CMDF) report on Financial Literacy and Utilisation of Financial Advisory Services in Malaysia, reveal that Malaysians generally have a worrying low financial capability, do not know how to manage their money, and do not plan ahead. This does not bode well for their financial sustainability, making them prone to falling into the bankruptcy trap, and becoming prey to loan sharks and get-rich-quick scams. The problems arising from the low level of financial literacy have been magnified by the recent pandemic, which greatly affected the financial well-being of many Malaysians.”
As the body representing financial planning and service providers, MFPC’s objectives – along with developing and enhancing the financial planning profession in the country – include elevating financial literacy among Malaysians with various initiatives for the public at no cost.
One of the initiatives of note to promote financial planning and literacy, observed globally on 6 October each year, is World Financial Planning Day (WFPD). This year’s theme, ‘Live Your Today, Plan Your Tomorrow’, is very relevant to Malaysians as we continue to face various challenges requiring better financial literacy and planning for a better financial stability.
Ooi Beng Cheang, Financial Literacy Manager at the Financial Planning Association of Malaysia (FPAM)
“As we live with post-COVID challenges, many are now faced with uncertainties as they might have drained their EPF savings, facing difficulty in servicing their loans again after the end of the moratoriums, dealing with rising healthcare costs, and overall inflation causing cost of living to rise. Adjustments must be made to our current personal finances to adapt to these challenges for us to achieve our future goals,” explains Ooi Beng Cheang, Financial Literacy Manager at the Financial Planning Association of Malaysia (FPAM).
As an affiliate of the Financial Planning Standards Board (FPSB), the global organizer of WFPD, FPAM has rallied its stakeholders and financial planners to take part in this year’s WFPD2022 to promote financial literacy and the financial planning industry.
Licensed Financial Planners Are Here To Help
In the forest of questions about money, a licensed financial planner is an invaluable guide in finding the best path for your life’s journey. No one path is alike, and a financial planner will be able to chart the best roadmap for each individual as they aim for financial stability.
“Malaysians are dealing with many pressing issues related to inflation that may derail their life goals. Plans for retirement or their child’s education fund may not seem feasible anymore. Will they have to push back their retirement age by working longer? Will their child still be able to afford tertiary education overseas? These are pertinent questions that one should sit down with a financial planner to hash out a plan together,” says Ooi.
He further adds that, “Financial literacy is a life skill that if not picked up early on, may result in personal finance mistakes that may have lifelong repercussions. The earlier one engages a financial planner in their life, the better, as they will have a proper financial road map of where they are headed in life. With a proper financial plan, one is much more prepared in facing the variables and uncertainties of the future as opposed to someone stumbling along, making knee-jerk reactions to major changes in their life. Should they encounter adversity, the financial planner will be there to guide them through the storm.”
Kwo concurs, saying, “A licensed financial planner can help one establish a personal financial plan, set measurable goals to work towards, track progress, reduce doubt and make better financial decisions. This will help one manage cash flow and debt efficiently. Planning can be tailored to suit every personality type and meet different needs, at different times of one’s life stages. A licensed financial planner can provide the necessary advice on changes and adjustments to support one’s lifestyle, resulting in peace of mind and general wellbeing.”
If one is looking to engage a financial planner soon, make sure that the financial planner is licensed under Securities Commissions Malaysia (SC) to practice as a Licensed Financial Planner (LFP). This can easily be done by going to SC’s website (https://easy.seccom.com.my:8222) and searching for the full name of the LFP under Licensed and Registered Persons.
The result should show their license number and the name of their financial planning firm. As for the other qualities in a financial planner, Kwo suggests the following should be considered: trustworthiness, ability to provide evidence of a good track record of success, ability to provide independent advice, compatibility with the client, the ability to provide up-to-date information, and the ability to refer to other specialists if required.
“In short, one should look for professionalism in a financial planner,” he concludes.
It won’t be easy to achieve financial stability, but it is also not impossible to do so.
World Financial Planning Day (WFPD) on 5 October 2022 is a global event organized by the Financial Planning Standards Board (FPSB). The Financial Planning Association of Malaysia (FPAM) as an FPSB affiliate, has rallied its stakeholders and financial planners to take part in this year’s WFPD2022 to promote financial literacy and the financial planning industry.
Ooi Beng Cheang, Financial Literacy Manager at the Financial Planning Association of Malaysia (FPAM), answers some questions regarding financial literacy and planning, and what it means to ‘Live your today, plan your tomorrow’.
Smart Investor: This year’s theme for WFPD is ‘Live your today, plan your tomorrow’. Who does it pertain to the most, and why the message is more relevant at this point in time?
Ooi Beng Cheang: It is a relevant theme for Malaysians as we continue to face various challenges requiring better financial literacy. With the rising cost of living, adjustments must be made to our current personal finances for us to achieve our future goals. Malaysians are faced with many pertinent questions today such as:
How do we setup a realistic monthly and yearly budget?
How will inflation affect my retirement plan?
How do I deal with rising healthcare cost?
There are many other questions with no easy answers.
In the forest of questions about money, many will need a licensed financial planner to serve as a guide to find the best path through life’s journey. No one path is alike, and a financial planner will be able to chart the best roadmap for each individual.
SI: What is FPAM’s plan to promote financial planning and financial literacy this year and how the public can make the most of it?
OBC: FPAM has organized a much larger campaign for WFPD this year compared to last year. This year, FPAM has engaged with its corporate and chartered members, financial planners, and the media to help promote financial literacy since July 2022. We realize it is important to get the financial planning firms and financial planners involved early so that they will be seen as a source of authority for financial literacy in Malaysia.
Financial Planners were encouraged to post financial literacy content on social media from 31 August to 5 October and use the hashtag #wfpd2022 and #MYwfpd2022 to increase visibility of the campaign. Postings were also shared by the financial literacy website SmartFinance.my on Facebook and Twitter.
To ensure that the campaign reaches as many people as possible, financial planners were also encouraged to post content in a variety of languages.
Besides the promotional campaign, FPAM is also working with the Securities Commission Malaysia (SC) on making #FinPlan4u a success this year. The yearly event allows the public to speak to a licensed financial planner in a one-to-one financial consultation session.
As the time is limited to one-hour for #FinPlan4U, one should prepare some talking points ready on what they want to address with the financial planner. This could be questions about their life goals like retirement or children’s education fund. In the session, the financial planner is not allowed to sell products and will advise the public in general about personal finance.
This year’s #FinPlan4u kicks off in Kuching, Sarawak on 17 to 18 September. After that, the event will continue with online sessions from 11 to 13 October. It will then continue on ground at KLCC from 14-16 October. FPAM is working with the state chapters, corporate and chartered members to rally our financial planners to take part in #FinPlan4u.
SI: Tell us more about smartfinance.my. Specifically, what function does it serve and how can those seeking the help of a licensed financial planner can make the most of it?
OBC: Besides the #FinPlan4U sessions for this year in September and October mentioned earlier, the public can also arrange to meet other financial planners by searching for one on smartfinance.my. The website list licensed financial planners that have been vetted to ensure they have the proper credentials. The public can search for a financial planner based on location of specialty area and then arrange for a free one-hour consultation to see if the financial planner is a good fit for them. This way, the public can screen several financial planners and only work with the one that best suits them.
The public can also read articles and watch videos about financial literacy. These will give them a good basic understanding if they are on the right path. These articles and videos will also give the public some talking points with the financial planner if they notice some areas of concerns.
SI: Why does one need a financial planner in their life and how can one go about looking for the right professional?
OBC: Financial Literacy is a life skill that if not picked up early in life, may results in personal finance mistakes that may have lifelong repercussions. For example, going into credit card debts and not paying it off in time will affect one’s credit rating. A financial planner will work with their client to help set a disciplined payment schedule, putting their client on the right path again.
The earlier one engages a financial planner in their life, the better as they will have a proper financial road map of where they want to go in life. If they should encounter any costly adversity, the financial planner will be there to guide them through the storm.
To be a licensed financial planner, the person must hold either of these credentials – CFP, IFP, ChFC, RFP, or Syariah RFP. The public should ensure that the financial planner is licensed under SC to practice as a Licensed Financial Planner (LFP). This can easily be done by going to SC’s website (https://easy.seccom.com.my:8222) and searching for the full name of the LFP under Licensed and Registered Persons. The result should show their license number and the name of their financial planning firm.
Ooi Beng Cheang, Financial Literacy Manager at the Financial Planning Association of Malaysia (FPAM)
The following story is based on an actual series of events with some names and circumstances fictionalised and any similarity to the name, character or history of any person is entirely coincidental and unintentional. It can’t be emphasized enough on the importance of estate planning.
The woman lunged forward, grabbed the hair of the man and screamed: “You influenced daddy to keep me out of the will!” That shattered the solemn atmosphere at the wake of the head of the family.
What started with three sisters huddled together next to the casket listening to their brother-in-law holding court, turned chaotic. Their murmurs grew louder and louder as it turned into a heated argument.
All eyes at the Funeral Parlour were now on the mourners. Daughter No 1, Cheng, held back by relatives from attacking her brother-in-law, continued berating the man. “I was in daddy’s will. He showed me…” she said in between sobs.
Daughter No 2 countered for her shocked husband saying, “You deserve it! It’s all your own doing!”
From a corner, a voice commanded: “Enough! We’ve not sent off daddy yet and you’re already fighting…”
The voice trailed off. Tears streamed down her cheek as she watched unbelievably at how the family was starting to break apart.
She was soon lost in her own thoughts as the altercation stopped. “Have we raised our children right?” she questioned herself.
She looked at Cheng, who was now crying quietly. She was more of a problem among her three children. Probably being first born, and the apple of Daddy Hock’s eyes, she was spoilt. Her gambling habit and getting into debts were what got her father angry most of the time in the past one year.
So, was disappointed Daddy Hock right in rewriting his will? Was Cheng right in saying Beng influenced Daddy Hock to leave her out of the will, she wondered.
“Ah, that Beng, he likes to show off that he knows-it-all! How much of an influence did he have over my Hock?” her thoughts went racing. Out of the corner of her eye, she could see Beng smirking.
She wondered why Hock ended up with making Beng the executor of his will and also letting Beng keep the will. The matriarch of the family was at a loss as to restoring the bonds between the daughters.
This is crucial why we need to understand the importance of estate planning.
The Importance Of Estate Planning
This family drama at the wake highlighted several pertinent issues which are valuable pointers to note for in the importance of estate planning.
Re-writing of Wills
The Last Will and Testament is an important legal document giving clear instructions for wealth distribution.
While the will can be re-written as many times as one wishes according to change in circumstances, it is nevertheless important that the document be kept private and confidential to avoid occurrences of tampering or being damaged and rendering the will invalid.
In the case of Hock, he has divulged the contents to his Daughter No 1, giving rise to possibility of squabbles among family members even before he is gone.
It is also prudent that the reading of the will be held at a conducive place and time. In the family drama above, Beng, a related party, who was appointed Executor and Custodian of the will, had – whether by design or coincidence – divulged the contents of the will at the wake. Stemming from this, things could get ugly.
Executor
Appointing the right Executor is crucial to ensure that the estate is administered professionally and efficiently to carry out the wishes of the deceased and avoid the bereaved family members and dependents having to deal with issues arising from the estate such as creditors chasing for payment and tedious administrative matters such as preparation of accounts and filing taxes.
With the right Executor in place, the administration can be carried out efficiently where the beneficiaries would have fast and easy access to their inheritance.
It is a common practice for testators to appoint, out of convenience, their spouses or children or trusted friends as executors to handle their estate administration. This is not wrong or prohibited but it could be counter-productive for the effective administration of the testator’s estate if the appointed executor is unfamiliar and inexperienced with the tasks at hand.
A trust company is a recommended option as unlike the individual, the company will exist in perpetuity and has experienced and dedicated skilled staff with the time, capability and resources on hand to perform the function of the Executor.
Custody
It must be the borne in mind that equally as important in having a will is the safe custody of the will. A will that cannot be found is as good as not having a will. Safe custody from possibility of being tampered or damaged is also essential.
Keeping the will in a Will Custody Centre is a recommended option to being in one’s locked cabinet or safe. Worse if the will is kept in a bank safe deposit box because it cannot be retrieved without probate, which cannot be obtained without the deposition of the will in court.
A dedicated Will Custody Centre can ensure that the will is easily located and retrieved; is in safe storage in a humidity-controlled environment that ensures the document’s good condition over time; and is in secure vault with appropriate tight security system in place.
It is hoped that we now understand the importance of estate planning and to avoid any last rites drama.
About Rockwills International Group
Rockwills International Group, now in its 27th year, pioneered professional will writing in 1995 and has since evolved into the leading estate planning specialist in the country. It is today the largest provider of solutions and support services in the areas of trusts, succession, management and distribution of wealth. It has shareholders’ funds exceeding RM50 million. It has done over 280,000 wills and 15,000 trusts and hold more than RM25 billion in assets under trust.
The 2022 Budget was short on outlining any initiatives to enable Malaysia to build a more sustainable tax revenue base. The review of the tax incentives regime has yet to be finalised and hopefully, some progress will be announced in the coming Budget.
We expect the 2023 Budget to outline a more structured mid to long term reform of the tax system, so that we can have a more sustainable tax system. Malaysia needs to, in the medium term, broaden the scope of the existing Sales and Service Tax (SST), and ultimately make it a broad-based consumption tax with added features such as tax invoicing similar to a Value-Added Tax.
We should also have a more inclusive capital gains tax and move quickly on an efficient integrated national tax agency, in order to have a more sustainable tax.
Tax Treatments To Review
Currently, fees paid to tax advisers and company secretaries for the various services rendered on tax and corporate compliance matters are subject to restriction. Furthermore, the Inland Revenue Board of Malaysia (IRBM) recently issued the Corporate Tax Governance Framework (Framework) to enhance companies’ processes and governance on income tax matters.
The Framework expects the involvement from the board of directors, audit committee and senior management to set up appropriate checks and balances on tax reporting.
However, the IRBM states that costs incurred for advice and assistance to develop the Framework are considered to be capital in nature and therefore not tax deductible. This further irks businesses as such expenses are incurred to encourage corporate governance.
For a more sustainable tax, another area to review is the exclusion of Intangible Assets from the definition of the term “Plant” in the 2021 Budget. This has resulted in cost incurred such as computer software, licences, trademarks, patents, films, copyrights etc are no longer eligible for capital allowances or tax depreciation, despite these being assets utilised in the production of taxable income.
This is truly surprising, given the Government is leading the push from brick-and-mortar businesses to a digitalised and knowledge-intensive economy. Engagements have been held among various parties and it is hoped that in the upcoming Budget, the IRBM would review those tax treatments.
A More Sustainable Tax Structure
As a country, we cannot keep on borrowing and servicing debt. We should remove unnecessary exemptions and deductions, and simplify things to enable all to be part of the tax net. There is a need to push on towards a reliance on consumption taxes, in order to achieve a more sustainable tax.
The Ministry of Finance (MOF) has stated in the Pre-Budget Statement in June that tax reform initiatives with the objective of broadening the tax base, as proposed by Tax Reform Committee, will continue to be implemented.
The initiatives include:
a) Undertaking a review of broad-based incentives, reliefs and deductions
b) Improving tax administration through comprehensive registration of taxpayers
c) Better training of tax personnel
d) Improved registration of cross-border trade
e) Strengthening the tax audit and investigation
f) Enhancing legal certainty for taxpayers
Necessary details on the aforementioned will need to be spelt out in the 2023 Budget.
On the international front, Malaysia has committed to implement several agreed upon tax standards to create a competitive business environment for investors and to counteract cross-border tax evasion activities. To date, we have implemented four minimum standards of the Base Erosion and Profit Shifting (BEPS) Action Plans, while continuing to review the rest of the Action Plans under our domestic tax law.
Domestically, the tax net can be widened by tracking down those who should be within the tax net. That means curtailing tax evasion, curtailing smuggling, registering those who should be registered as taxpayers, and devising strategies using the tonnes of data that various agencies accumulate to ensure that all who should be taxable are indeed taxed.
In the Budget 2022, several initiatives were introduced to manage revenue leakages, including:
a) Removal of tax exemption on foreign-sourced income received in Malaysia by a Malaysian tax resident
b) Introduction of the Tax Compliance Certificate as a precondition for tenderers to participate in Government procurement
c) Implementation of a Tax Identification Number (TIN)
It was a surprise when a five-year exemption of the tax on foreign income was announced subsequently. Even Singapore and Hong Kong, which have similar tax systems to Malaysia do not have such a time-based exemption period.
However, the implementation of Tax Compliance Certificate and the TIN are very good compliance initiatives to reduce leakages, but more details are needed.
In line with the 12th Malaysia Plan to strengthen digital services infrastructure, the digitalisation of the tax function will be implemented with e-Invoicing to be done in stages. This will enhance the efficiency of the country’s tax administration, reduce compliance costs to taxpayers, and increase the efficiency of business operations. E-Invoicing will also support the use of TIN as a measure to expand the income tax net.
The Auditor General’s report has stated time and time again about losses and waste in the public sector. Greater accountability on where our tax ringgit goes and how it is utilised is essential to further narrow the trust deficit that exists, which is a factor why some are reluctant to pay their taxes.
A more sustainable tax structure for the future is probably in the pipeline. But such matters can be excruciatingly slow in coming into fruition, due to the lack of political will and vested interests.
All said, the 2023 Budget may turn out to be an election budget, with a slew of populist measures to score brownie points that may damage the country’s rather fragile fiscal momentum. Against this backdrop, debt and inevitably debt service charges, will rise.
Given that Malaysia’s narrow tax base means high concentration revenue risk to the overall economy, its fiscal vulnerability could increasingly become a trigger factor for sovereign rating downgrades by international credit rating agencies. Here’s to a more sustainable tax structure for a better Malaysia.
About the Author
Dr Veerinderjeet Singh is a tax observer who is the Non-Executive Chairman of Tricor Malaysia. He is the Immediate Past President of the MIA and MICPA, and a Past President of CTIM. He is a strong advocate of tax reforms and sits on the boards of a few public entities. He is also an Adjunct Professor at Monash University Malaysia, as well as a Vice Chair of the Global Tax Commission at the International Chamber of Commerce based in Paris.
