Restricted Stock Unit (RSU) Tax Reporting in Malaysia

If you work for the U.S. based company, you probably have heard about Restricted Stock Unit (RSU) but do you know what is the tax implication? If you're not interested in RSU, you can ignore this article...

Restricted stock unit (RSU) has been quite sometime with us as a replacement of stock option in many companies and suprisingly there are still many of us do not understand how how the tax reporting works for RSU. This article explains the RSU tax reporting in Malaysia and is applicable to rest of the countries as well since this is pretty general thing.


What is the difference between RSU and Stock Option?

A very funny statement I always heard from my colleage: "Wow! Why such a so big amount stated in my EA form?! I didn't even sell or excersise any of my stock!" Huh? Perhaps most people still do not understand the key difference between RSU and stock option:

• Stock options are taxed at the time when your stocks are exercise or sold by you.

• RSUs are taxed at the time when your stocks are vested or released to you by your employer (that's why you see such big amount in your EA form because your broker automatically sells your share to pay for the tax - see detail explanation below).

Notes: EA form is the form issued by an employer to tell how much earning of the employee and employee use this form to file for income tax annually.


What is the RSU taxable amount?


The RSU taxable amount is based on the total value of shares vested or released by your employer. For example, you're granted 400 RSUs in 2009 for 4 years to and only 100 RSUs will be vested in 2010 and the subsequent years. When the 100 RSUs are vested now at the closing price of $20, your total of RSU gain is $20 X 100 = $2000.

That means now $2000 is your taxable income.  Depends on your country tax law - In Malaysia, the Tax withholding rate is 26% (for year 2010) which means your total taxable withholding amount is $2000 X 26% = $520. Please keep in mind that this is just an estimated tax that your employer will deduct from your salary (based on the country tax withholding law).

The next thing is your brokerage (e.g. E-trade, Smith Barney and etc.) will sell enough shares to pay for this estimated tax. For example the next day, the closing price jumps to $21 and your brokerage sells 26 shares and the brokerage fee is $25. Therefore the total earning of this transaction is  $21 X 26 - $25  = $521. So now you use this money to pay for the tax withholding amount (i.e. $520) and the remaining $1 will be deposited to your account and shown in your EA form.

I know this could be confusing, so I try to summarize what happen here:

• Total RSU Gain: 100 X $20 = $2000.  It is calculated based on the vested unit and closing price of the vested date.

• Total tax withholding amount: $2000 X 26%= $520. Your employer calculates the estimated tax withholding for the vested RSUs based on the closing stock price.

• Your broker sell enough shares: ($21 X 26 - $25 = $521) at the closing price of that day (i.e. $26) to cover the amount of tax withholding and $25 brokerage fees. This earning is used to pay the estimated tax withholding amount (i.e. %520) to the Income Tax Office.

• The remaining money: ($521 - $520 = $1) will be deposited to your account and will be stated in your EA form.

Note: The closing prices is calculated based on the average of highest and lowest prices of that day. E.g. the highest price is $21 and the lowest prices is $19. Therefore, the closing price of that day is calculated as $20.

Note: The example may still subject to the currency exchange. E.g. You still need to convert the currency back to MYR. For simplicity, I just purposely ignore that...


Are you still confused? 

Some of you may still be confusing and the most frequent question that I heard is:

"Why tax me at MAX (i.e. 26%)? My tax bracket is not yet reach 26%!"

RSU Gain is the key! It really doesn't matter because the very MOST important thing here is NOT the tax BUT your RSU Gain. In this example, your RSU gain is $2K. It will be stated in your EA form. If your actual tax is less than 26%, that is perfectly okay because the tax withholding by your employer is just an ESTIMATION. This is nothing new. If your tax deduction is less than the actual, you pay back and otherwise you claim back your money.

Do you find this useful? Let me know if you have any questions to clarify.

Simple Way to Remove Gallstones Naturally - DIY

Do you realize health builds wealth? If no health, there will be no wealth. Perhaps you agree but you often neglect about it...

I came across this term in the past weeks that in fact our body has STONES!!! There are in fact 2 types of stones that we have in our body:

1. Gallstone in our Gallbladder
2. Kidney stone in our Kidney

I've heard of kidney stone but never heard of Gallstone. I learned about this from a friend who is currently pursuing his Chinese Traditional Doctor. These stones can be removed by surgery but there is a simple way to remove this stones by Do-It-Yourself (DIY) before they become too serious. I've tried the Gallstone removal DIY but not yet on the Kidney stone. So here is what I did and would like to share with you guys:

Preparation

(1) Olive Oil - Go to any grocery store and look for one. Make sure you buy the "Extra Virgin" quality of the olive oil.

(2) 7 Lemons - You can buy more just in case not enough and you can buy either Green or Yellow. I personally buy both of them.

(3) 15 Apples - You can buy either Green or Red and I personally buy 2 of them. I heard some said Green apple is better. Well, it is up to you.

(3) 20g of Epsom Salt (Magnesium Sulfate) - You need to go to any pharmacy to purchase this. Not all the pharmacy have this, so you may want to search around. 

(4) Shaker - Buy the one has measurement with (i.e. ml) indicator. If no shaker is also okay, as long as something that you can measure with 10ml, 125ml and 250ml. 

(5) Fruit Juice Squeezer - This is optional but better to have one. If no, you can just use your hand to squeeze out the juice! :)

Steps (8 Days)

1st - 4th days: 

1. Eat as usual and try to eat less meat. 
2. Please make sure you eat until 70% full will be enough.

5th - 6th day:

1.  Squeeze 1 lemon and pour the juice into 1 liter of water. Make sure you finish this 1 liter of water within a day and you can spread it out the whole day.
2. Eat at least 4-5 apples per day. I mixed both red and green apple.
3. Eat only plain porridge only for your 3 meals. It can be rice (Chinese), oat, and wheat porridge. Avoid taking oily and salty food. Plain porridge, remember? Don't add anything in the porridge to make it tasty...

7th day (fall on Friday or Saturday):

1. Repeat the same thing for 5th and 6th day. 
2. 1 PM - Completely stop eating anything after 1 PM. You can still drink but no food at all including the apple. That means you have to finish eating 4-5 apples in the morning. You still can drink water after 1 pm. However, please make sure you finish drinking the l liter water of lemon juice by 6 PM.
3. 6PM - Mix 10g of Epsom salt with 250 ml water. Drink it! :) It is better you make sure you stay at home while drinking this because you might want to go toilet every often. This depends on the person as this is vary from one to another.
4. 8PM - Mix 10g of Epsom salt with 250 ml water and drink it!
5. 10 PM - Squeeze out the lemon juice and mix with 125ml of lemon juice with 125ml of olive oil (total is 250 ml). This may taste disgusting but it is still okay for me because I really like the lemon juice. After you drink, you should go to sleep directly. Good luck!

Notes: For your information, lemon and apple is used to soften the gallstone so that it is easier to come out. Eating porridge and not eating the last day after 1pm is to make sure your colon is empty and won't block the gallstone from coming out. Drinking Epsom salt water is to force your feces to come out so that there is no blocking the path. Finally the olive oil and lemon juice is to force your gallstone to come out. Hope this explains a bit...

8th day (fall on Sunday if you work on Saturday)

1. This is the day you're releasing your gallstone from your body. Please make sure you stay at home and don't go anywhere. If you want to collect your feces as a proof in order to see the stones by yourself, you can do that too. Good luck!

Important: If you work on Saturday, please make sure your 5th day is on Thursday so that your 7th day is fall on Saturday. If you're not working on Saturday, you can choose your 5th day is Wednesday. The reason is that you need to stay at home for the 7th and 8th day and you will need the toilet a lot. (Again, this depends on person. For myself, I don't need the toilet that often - just one time in the morning)

Results 

I borrow a net (made by metal) from a friend and use this net to collect my feces during the 8th day. After that, I wash it and wow I really can see the stones! Here you go:

The biggest stone I have is around 6-7 mm. I read it somewhere that 8 mm is considered as serious. I tried to break it and the color is actually green inside the gallstone which I believe is due to the cholesterol based on the description I read on wikipedia.

Do you want to collect your own feces? This is really up to you. I want to try it is because I want to prove this method is really working and see something really come out from my body. I probably won't do it the next time as it is really troublesome. By the way, please don't do this too often as the Epsom salt is something that bad for your stomach. By right, you should continue to do this after 3 months until no more stones are coming out from your body. Well, I hope this is something worth sharing about our health and I will research more on the Kidney stone removal DIY next...

P/S: I've been sharing this to a lot of people (including my friends, my colleague, my family) and most of them are really interested. Perhaps it is cheap or free? There're few programs out there (could be direct-selling) which require you to buy their products for this Gallstones removal. However, I don't think you need to buy their products because all you can Do-It-Yourself naturally. Good luck!

Detail of gallstone in wikipedia: Gallstone

Cap and Trade Summary & Review

I work with U.S. people in my day-to-day job and one thing common that I found out about them is they like to come out solution that appears to be a real solution but in fact is not. In short, if you just listen to what they talk without further analysis, what solution that they have proposed will seems to be really making sense.

However, with further thinking and detailed technical analysis of their solution, it will usually ended up that their solution is just another hoax. It all started with the dot.com burst and follow by sub-prime mortgage crisis. Perhaps now Cap and Trade could be one of them too - a possible brand new 3 trillion dollar market by 2050?

See the video clip below  from Annie Leonard who is also the author of "The Story of Stuff":






If you have difficulty to understand the video, you can also read my following summary and discussion on this "Cap and Trade" system. I hope that will be easier to understand.


What is the Cap? 

Global warming is due the emission of Carbon Dioxide (i.e. CO2) into our atmosphere.  In order to prevent and slow down the global warming crisis in the future, the cap is invented to tackle this problem. The intention is to limit how many CO2 that you can release to our atmosphere. The goal is to reduced the current CO2 emission by 80% by year 2050. So the dotted-line in the graph below is the "Cap".

Carbon permits or CO2 emission allowances was then invented in order to accomplish the goal to stay below the cap. It is like a license or permission to pollute the air. Government issues this carbon permits to companies who would like to pollute the air. As you can see from the graph, the number of permits will be reduced every year in order to meet the goal target in 2050.

[Discussion] I think this is definitely a right thing to do and it is always good to set goal that we all know where we're heading too. Good strategy in fact to so save our world! Don't you think so?


Devil One: Cap and Giveaway

The next question how are the Carbon permits are distributed? The government in fact is giving these permits for free based on the history of a company how much they polluted the air in the past. This is  called "Cap and Giveaway". What was suggested by Annie is instead of giving permits away to them, we could sell to them and use the money for better purpose (e.g. build a clean energy economy).

[Discussion]: I do not completely agree with it. Assuming if we sell the permits to those companies. Who will be going to bare the cost of their products? Consumers? So it ends up we pay more because of they're polluting the air? So indirectly, we're actually paying the government to allow those polluter to pollute the air? I don't think selling the permits will work too.


Devil Two: Offsetting

I think the most evil about this system is probably because we make this thing "trade-able". For companies which pollute less than the allowable permits, they can sell the remaining permits (i.e. offset permits) to those companies which want to pollute more than the allowable permits. This seems pretty reasonable as long as we don't go beyond the Gap as whole.

This is the part the system gets complicated and confused. Theoretically, it should work but that is another story in reality due to the complexity of measuring the amount of pollution. How to tell how much a company is polluting? If we can't measure it, how much permits we should give? What about the transaction costs involved in buying and selling permits? Consumer bares them? How about those company pollute less in U.S. and transfer their pollution to Asia since Asia doesn't participate in this Cap and Trade?


Devil Three: Distraction


The "Devi Three - Distraction" as mentioned by Annie is not really key message as compared to Devil 1 & 2 above in my opinion. What she was really want to say is the Cap & Trade protects business as usual and have no intention of saving our world. In short, it is a scam. :)

[Discussion]: As you can see, the really evil about this Cap & Trade to made this rule trade-able, something similar like stock market. It becomes so complex that no one is really know what is going on and forget about the original intention. U.S. once again create something out of nothing (i.e. predicted a brand new 3 trillion dollar market by 2050).

So, can we conclude Cap & Trade is a scam? I think no one can prove it right and of course no one can prove it wrong too. Similar to Sub-prime Mortgage, is that a scam? What do you think?

P/S: As usual (which I find it difficult to understand) for more details about Cap & Trade, you can visit the Wikipedia: Emissions Trading.

Different Experiences for My Trip in China

This is not a financial article but a pretty standard in my blog which I talk about my travel experiences. This is my second trip to China and my first trip to China is probably 5 years ago. Some of these experiences maybe sensitive to some of you but this is only for sharing purpose. You may experience a different thing if you have visited China. Let's see what is my take away from this trip...


Wasting Food to Show Off

I think this is typical a Chinese culture especially when someone is paying for the food. During the trip, I really saw a lot of this kind cases. They order a lot of food and purposely not to eat them for the purpose of showing off (for the one who pay the bill) or giving respect (i.e. give face in Chinese) to the one who pay the bill. For example, 5 people order 15 dishes and they consume less than 10% of the food. I'm surprised with this and they don't take away to food after that. I think this defeats the purpose of the culture and simply misused it. Do you agree?


Cheap, Cheap, Cheap ...

Shanghai and probably Beijing (I guess only) is the most expensive places you can find in China. If you know how to find the loophole, you can find cheap stuff in Shanghai and Beijing too. Food is large portion and cheap. What I really enjoy is eating the seafood in Dalian and Dandong. It is really so cheap to eat a seafood like fresh abalone. You can't even find fresh abalone in Malaysia. Other stuff is also very cheap but that is only applicable to local stuff (made in China). Of course if you buy imported stuff, it will be more expensive than in Malaysia. Converting to RM is divided by 2 and to Europe currency is divided by 10!!! (maybe 8 or 9 now). So if you're business man, you will know what to do...


Eating Dog Meat is Legal

Yes, eating dog's meat is legal in China and I see a lot of restaurant selling that. However eating bird's meat is illegal in China. I'm not sure how true this is and I heard from my driver. Perhaps China is lacking of birds and too many dogs? True?


Wearing Helmet is Not Required

At least in Malaysia, wearing helmet is required for those motorbike driver. That is for safety purpose. In China and from what I see, the way they drive the motorbike is a lot more dangerous than in Malaysia and why don't they need to wear helmet? Is that because their skills are really good? How about the accident rate?


Order Food Style is Different

In Malaysia or other countries that I have visited, the waiter will usually give you sometime to think about what you want to order after giving you the food menu. In most of the restaurants that I had visited in China, the waiter will just stand there and wait for you to order after they give you the menu. I usually tell them that I will call them when I'm ready to order. Is that their culture or because they want to be fast?


Security Check at Metro?

Weird thing is, security check is at all metro station entrance. It is similar to the security check that you go through the airport. They will scan through all your luggage and hand bag as well.  I guess the reason they're doing that is to prevent people from bombing the train? Is that really preventable? I've no idea and I just feel that really troublesome to go through it every time...


No Facebook, No Youtube, No Blogger!!!

No wonder my blog has no China visitor because it has been blocked. I can't blog too in China :( and Facebook and Youtube are blocked too. The only way to bypass this in China is go through "Paid VPN" because most "Free VPN" has been blocked too. Perhaps China Government treats all their citizen like kids and not allow them to watch pornography online. The question is, when the kids will grow up? Is that a good thing to do?

 P/S: Now if you've visited China before, do you experience the same things I do?

Keep Your Broadband Receipts for Malaysian Tax Relief

This blog post is just to remind all of you (i.e. Malaysian only) to keep your broadband receipts (e.g. Streamyx, Maxis, P1-Wimax, PenangFON, and etc.) for tax relief starting from this year - 2010. This is based on one of the items (which I find them most useful) in 2010 Malaysia budget announcement.

Since this is new thing, I think many of you may still do NOT aware of this yet or may have just forgotten that you can claim up to RM500 for tax relief for 3 years - starting from 2010 to 2012.

What else receipts you should keep? Well, you probably have known already such as medical, sports, and book/magazine receipts. See my previous post for the summary: Tax Savings Tips for Malaysian.


By the way:

• Do you know you can have tax relief for buying a house too? Of course there are some conditions and the offer is until the end of this year, 2010.  However, it doesn't mean you must go for it which I discussed in my previous post - Tax Deduction for Property Purchase

• Do you know 60% of your premium of critical illness life insurance can have tax relief under the medical insurance policy? Of course for life insurance policy you can claim up to 100%. Many people do not aware this and for more detail, you can read my previous post - Tax Relief Tips for 36 Critical Illness Insurance.

Safest Way to Invest in Forex in Malaysia

In my previous post, I talked about whether one should invest in Renminbi (RMB) and one of the readers recommended us to buy AUD instead. Well, all these recommendations are good but always keep in mind that no investment is 100% guarantee. However, the purpose of this post is not going to tell whether you should invest in AUD, NZD or GBP but rather to share with you the safest and easiest way to invest in Forex in Malaysia.

The fact is there are so many Forex scams out there especially those offer the Forex trading. The funniest comment that I heard from a friend (I'm not sure if that is true) is when he wanted to sell, the system doesn't sell immediately but the rather delays it until the price is dropped. This happens almost every time we wanted to sell. At the end, he was always selling at lower prices and made a lost.

"Foreign Currency Fixed Deposit"

To me, the easiest and safest way to invest Forex in Malaysia is to open a "Foreign Currency Fixed Deposit" account from the local banks in Malaysia. I"m not sure if other banks offer this service (I assume yes - you can clarify that if I"m wrong) but Public Bank in Malaysia does offer this service. Yeah, I'm the fan of Public Bank...
 

Steps to Open a Foreign Currency Fixed Deposit Account in Public Bank

1. Go to "Public Bank" Office
2. Press "Customer Services" button and wait for your turn.
3. Once you're at the customer services desk, tell the banker that you would like to open a "Foreign Currency Fixed Deposit" account. Of course you need to tell her what currency you're interested in.
4. After that, the banker will ask you to queue at one of the front counters (e.g. counter 8) so that they can issue the foreign fixed deposit statement to you.
5. You will get something like this once everything is done:

Note: I choose auto reinvest the interest and auto renew the FD. You may also want to ask them whether there are any promotion before you decide. Sometimes they have promotion of putting 1 month of FD has higher rate than 12 months.  In that case, putting your FD in 1 month will earn more. By the way, minimum amount of investment is RM10K.

Summary

I think investing in Foreign Currency Fixed Deposit is the safest and easiest way to invest in Forex in Malaysia because it goes through official bank (although sometimes bank does play some tricks that seem to be like a scam). Another benefit of investing in Foreign FD is you will earn some interests out of your investment too.

So, wondering the easiest and safest way to invest in Forex in Malaysia? Just go to Public Bank...

Should I Invest or Buy Renminbi - RMB?

As you have probably known that China is one of fastest growing economic country in the world.  If not, why I want to say Chinese is the 21st century languge? So, now back to the question should you invest in Renminbi (RMB) or Chinese Yuan (CNY)?

Before we answer that, let's look at Chinese Yuan (CNY) or Renminbi (RMB) currency trend for the past 15 years. I plotted the Malaysia Ringgit (MYR) to RMB and you can plot it by yourself for your own currency. The trend should be around the same regardless of what currency you're comparing to.

Source: http://www.x-rates.com/

What you can see here from the graph is the RMB has been staying flat since 1998 until today. Now we raise another question of whether the RMB will continue to be in flat? You may also wonder why the RMB currency is flat but on the other hand China is the fastest growing economic country?


Why RMB Currency is Flat?

It is probably due to the battle between China and U.S. both economically and politically. In fact the China government wants it to be this way so that they can keep exporting their stuff at the cheapest price to U.S. as compared to other countries (because other country's currency is appreciating). This leaves no choice for U.S. to buy or import stuff from China and not from other countries.

Imagine if China let RMB currency to be appreciated and U.S. used to buy a pen for US$ 1, now they have to buy a pen for US$ 1.50 from China. U.S. may switch to buy from other countries and China will lost their income (i.e. less in exportation). China doesn't want this to happen. So, what China does is to play around or manipulate their own currency by making sure it doesn't appreciate. Now we raise another question, is RMB currency under-valued?


Is RMB currency really undervalued?

If you ask China, China will tell you that RMB/CNY is NOT undervalued. Perhaps they don't want to let you know that they're manipulating the currency? The funny things is other than China, everyone seems to think RMB/CNY currency is undervalued. One of the obvious reasons is that RMB currency does not really appreciate in-line with China's economic growth.

So now U.S. is pushing China to revalue the RMB. Do you think China will revalue the RMB? If yes, do you think RMB currency will appreciate? For me, YES!!! If no, RMB will probably stay flat but will it appreciate in future? For me, YES!!!


Conclusion

In reality to answer all these question, there are no absolute answer and what I have explained so far is in the most simplest form. It is in fact a lot more complex than what I have explained. I'm also learning in progress. :) So all the questions that you have, eventually it is still back to you to make your own call. For example, should I invest in RMB currency? It is totally up to you.

Here are my answers:

Q: Should I Invest in RMB or CNY?

A: Yes, you should because RMB or CNY currency is currently undervalued.

Q: Why RMB or CNY is undervalued?

A: Because everyone "perceives" RMB or CNY is undervalued.

Q: Why everyone "perceives" RMB or CNY is undervalued?

A: Because RMB or CNY doesn't in-line with China's economic growth.

Hope these pretty common-sensed answers satisfy you especially you're a long-term investor like me. Don't wait anymore, go ahead to invest in RMB before it appreciates! Good luck!

p/s: I don't buy RMB directly but I invest in RMB by opening a foreign fixed deposit (FD) account though local bank. I find it is the easiest way to invest in Forex especially for long term investor like me.