I despise the lottery. There’s less chance of you becoming a millionaire than there is of getting hit on the head by a passing asteroid. – Brian May, English singer and astrophysicist
Vicky, my friend must be the luckiest man on earth. He was the sole first prize partial winner in a recent Da Ma Cai 4D Jackpot draw.
The friend from Kelana Jaya, whose winnings could run into three or four million ringgit (though he didn’t want to reveal the exact amount) is now having insomnia – not because he suddenly has so much money and is not sure how to spend or save it, but probably because he is thinking he will have to surrender part of his winnings to the Inland Revenue Board (LHDN) as taxes.
His nagging wife isn’t making it any easier for him as the woman is wrongly advising him at least 25-30 percent of the money will have to go to the taxman. I am not sure how she arrived at that figure! Perhaps, she could have googled and come across stories of US winners having to pay hefty taxes.
Vicky has been religiously buying Toto, Magnum and Da Ma Cai lottery tickets, spending an average of RM250 every week for almost three decades. His biggest strike before his recent jackpot was RM125,000 a few years ago when he won the first prize in one of the 4D lotteries.
So far, I believe he must have spent some RM360,000 ringgit in the last 30 years, if his average RM250 weekly spending at the lottery outlets is taken as a yardstick.
Now that lady luck has looked his way and he has struck the jackpot partially, he is probably quite overjoyed with it.
Vicky sought my advice on the tax issue as I know a little about lottery winnings and taxes. It’s simple; cash from lottery winnings is not taxable in Malaysia!
But while there is no tax on the initial sum paid into a winner’s account, the interest earned from the winnings kept in fixed deposit accounts or other schemes will be taxed as part of the normal income tax.
LHDN will only tax any income that passes a certain threshold. And by income, it doesn’t matter if it’s a monthly salary from working as an executive, a freelance product promoter, or from selling char kway teow, goreng pisang or roti canai.
Bear in mind that the LHDN is not going for cash alone; the board also treats payment-in-kind as income.
For example, if your client gives you an Australian holiday trip for you and your family in lieu of cash, that trip is taxable since it is considered as income for a job done.
The next thing to do is to approach a tour agent to determine the market value of the trip and then declare it in your yearly tax return forms.
So, don’t think the trip is not in cash and therefore not taxable. Don’t ever dream of avoiding the taxman; he will get you somehow, someday when you least expect it. I heard from a friend that her generous towkay friend was hauled up two years ago for “avoiding taxes” on some of his income. And he is still paying the tax arrears to date.
Now, let’s return to our OKB pal. OKB? Orang kaya baru lah!
My friend is worried that his new-found wealth is taxable. But he’s worrying unnecessarily.
I assured him the LHDN people will not harass him; they will allow him to keep the whole prize money to himself and he can laugh all the way to the bank and deposit it in a fixed deposit or in whatever scheme available. Wow, that’s awesome, isn’t it? How I wish I was the one with the millions in hand!
There are quite a few countries which do not impose taxes on lottery winnings regardless of the amount. Two of the countries that come into mind are Australia and the United Kingdom.
Winners in prize draws, raffles and lotteries do not need to declare their winnings. They can have the whole prize to themselves and not pay any taxes.
Malaysian winners can consider themselves lucky because in the US, lottery winnings are subject to a hefty tax. Americans have to pay an initial federal tax of 25 percent on any winnings above $7,200. As if that’s not enough, individual states may impose up to 30 percent tax. The poor winner may eventually end up parting with almost half of his winnings.
So, Vicky should be grateful he’s living in Malaysia. He probably has to worry more about long-lost friends and relatives suddenly making their appearance from nowhere and asking for donations!
The views expressed here are those of the columnist and do not necessarily represent the views of New Sarawak Tribune.