Planit:Income Tax Report

• Interest and dividends are taxed as ordinary income. Although there is an alternate treatment on dividends until 2011 where they are taxed like capital gains, for long term planning we assume they will revert to being taxed like interest.
• Capital gains have a variety of tax treatments, most common of which is a 15% flat rate. We have used a 50% taxable assumption

• Contributions to Qualifying Savings programs are deductible from income
• Contributions to ROTH IRAs are not deductible
• There is a Married Amount of $2,650 per annum (automatically applied)
• There is a Child Allowance of $3,650 per annum (automatically applied)
• There is a Basic Personal Amount of $9350 per annum (automatically applied)
• Withdrawals from ROTH IRAs are not taxed whereas withdrawals from Traditional and Qualifying Accounts (Traditional IRA, 401K, Keough are fully taxed)

• Tax bands for Single or Married Filing Separately are:
  • 0 to 8350 @ 10%
  • 8351 to 33950 @ 15%
  • 33951 to 68525 @ 25%
  • 68526 to 104425 @ 28%
  • 104426 to 178850 @ 33%
  • 178851 and above @ 35%

• Withdrawals from a pension program - In the lifegoals, at the point of retirement 25% of money in a pension program is removed tax free. The balance is fully taxable.

• There are deductions for taxable income for:
  • Personal Allowance (automatically included)
    • Personal Allowance (Standard) of £6,475
    • Personal Allowance for people aged 65-74 of £9,490
    • Personal Allowance for people aged 75 and over of £9,640
    • Income limit for age related Allowances is £22,900 (The personal allowance is an amount that is deducted from the annual income of the resident and is considered tax free. The age allowances reduce where the income is above the income limit – by £1 for every £2 of income above the limit.)
  • Self-employed expenses (tax deductible)
  • Charitable contributions

• Interest income and net rental income is fully taxable
• Dividend income is subject to a 11.11% (1/0.9) gross-up. If you receive a dividend of £9,000 divide by 0.9 and the grossed up income is £10,000. The grossed up amount flows through as personal income and is taxed at the relevant income tax band. To offset the difference between personal income tax rates and dividend tax rates, 10% of the grossed-up amount is added back as a credit. The difference between the dividend tax rate and personal income tax rate is also added back as a tax deduction. In this example, the grossed-up dividend of £10,000 would be taxed at the personal income tax rate of 20%, resulting in £2,000 of tax. The effective tax rate for dividends in this band is 0%, so we add back 10% of the grossed-up £10,000 as well as the difference in tax rates, 10% here, multiplied by the grossed-up value, which sums to £2,000 and cancels out the net tax.
• As another example, we have £72,000 in dividends, bringing us to the next income tax band. The grossed-up amount is £80,000 which is taxed at 40%, for £32,000 of tax. Adding back the 10% credit and the difference in tax rates, 7.5% in this case, we end up with a tax credit + reduction of 17.5% x £80,000 = £14,000. Removing this from the taxes payable, we end up with £18,000 in taxes, for an average tax rate of £18,000/£72,000 = 25% on the dividends.
• Capital gains are not included in taxable income, but subject to a separate tax of 18% on any gains above £10,100 in a year.
• As of 2010, taxes are calculated at the following rates:

National Insurance Contribution

• In addition to normal income taxes, UK residents must pay contributions to the National Insurance program. To simplify the calculation, all clients are considered Class 4 contributors.
  • £0 to £5,714 @ 0%
  • £5,715 to £43,875 @ 8%
  • £43,876 and above @ 1%

• Interest income is withheld at source and rates in the system are the net return to the investor;
• Dividends and Capital Gains are not subject to income tax;
• There is a Basic Personal Deduction of 8000 MR that is applied automatically
• Contribution to the EPF Employee Provident Fund are deductible up to (document the limit). Employees usually contribute 11% of salary and employers match 12%. There can be exceptions so this needs to be entered by the advisor.

• Withdrawals from EPF occur after age 55 and are not subject to taxation

• Tax bands in Malaysia are:
  • 0 to 2500 @ 0%
  • 2501 to 5000 @ 1%
  • 5001 to 20000 @ 3%
  • 20001 to 35000 @ 7%
  • 35001 to 50000 @ 12%
  • 50001 to 70000 @ 19%
  • 70001 to 100000 @ 24%
  • 100001 and above at 27%

• Interest and dividends are fully taxable
• Capital gains are not taxed
• Income from the CFP withdrawn in retirement are are not taxed

• There is a Basic Personal Deduction of 1000 SGD (automatically applied)
• There is a Child Allowance Deduction of 9000 (automatically applied)
• Contributions to the CPF Central Provident Fund are deductible from income.

• Tax rates are progressive
  • 0 to 20000 @ 0%
  • 20001 to 30000 @ 3.5%
  • 30001 to 40000 @ 5.5%
  • 40001 to 80000 @ 8.5%
  • 80001 to 160000 @ 14%
  • 160001 to 320000 @ 17%
  • 320001 and above @ 20%

• Withdrawals from the MFP during retirement are not subject to taxation.

• There is a Basic Deduction for 108,000 HKD which is automatically included
• There is a Child Allowance Deduction of 50,000 HKD which is automatically included based on the number of children entered on the Personal Information screen.
• Contributions to MPF Mandatory Provident Fund are deductible from taxable income on up to 20000 per month of salary. Contributions are 5% of salary by the employee and a matching 5% by the employer.

• Tax bands for 2010 are:
  • 0 to 40000 @ 2%
  • 40001 to 80000 @ 7%
  • 80001 to 120000 @ 12%
  • 120001 and above @ 17%

• Interest is subject to a flat 20% tax rate
• Dividends are not taxable
• Capital gains from the sale of long term negotiable securities on the Indian Stock Exchange are tax exempt. This is the assumption in Planit as the sales of business would be done manually by the user.

• An employer is obligated to deduct tax at source on a monthly basis from a salaried employee and to make additional contributions to a provident fund and insurance. (We need the rates)
• The employer's contribution to national insurance in India for an insurance plan is 4.75% of the salary. The employee's contribution is 1.75% of his salary.
• The Indian employer's contribution to provident fund is 10-12%.

• For 2010 the taxes are:
  • 0 to 150000 @ 0%
  • 150001 to 300000 @ 10%
  • 300001 to 500000 @ 20%
  • 500001 and above @ 30%

• A 10% surcharge is imposed on the tax, subject to legally specified limits and an education tax (CESS) of 3%. (PlanPlus needs to implement this into an India tax object. In the meantime users must add this is a tax adjustment).