Sunday, January 26, 2020

Malaysia - zakat

Zakat in Malaysia is run by various state level departments. It is also a common practice in Malaysia to regard income as zakatable wealth, so employers may have a system in place to allow Zakat deductions to be taken from your pay check to help in this regard.

For individuals who need to give Zakat, each state department should have a website that has online payment options. However, these sites are in Malay and from my experience with a few of them, they require a Malaysian identity card number. So foreigners with passport #'s can't pass the website validate process. Many banks will have online bill payment features that include the option to give Zakat. This will save you the hassle of not having an ID card number and not having to fill out all of the information. They will ask for the type of Zakat (so if you don't speak malay, try google translate to find the correct type). Expect a call from whichever Zakat department you donated to, trying to get your mailing details, passport information and other details (again, most likely they will want to speak in Malay, so you may get passed around the office if you don't speak the local language). Once you have given your details, in future donations, they will usually use the same old information. They do mail receipts, which are very important for taxes, but sometimes they come many months afterwards. One weird thing that you may encounter is that state Zakat departments can be competitive with each other in trying to get donations. In one case, I received a refund in the form of supermarket vouchers, which was nearly 10% of what I had given to them in the first place. So I had to go through the hassle of trying to use these in a way that still worked out as a Zakat payment.

For tax purposes, Zakat is special. Usually when you make a charitable donation it will just be subtracted from your total taxable income prior to determining how much you owe. In Malaysia, Zakat is much better than that. It is subtracted directly from what you owe in taxes. So if you owe 5000RM at the end of the year, and have 5000RM of zakat receipts, your tax payment is 0RM. If you do make a lot of donations or have a high calculated refund amount, they may try to avoid paying you or drag you through a long audit. One advantage that I can see related to Zakat payment, is that you can select the state. The federal government controls most of the funds and is very selective on who gets what. If an opposition party controls a state, they are going to get punished by lack of funds. So being able to give Zakat to such a place can help balance that out in terms of supporting the poor.

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