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EMPLOYMENT INCOME - Coggle Diagram
EMPLOYMENT INCOME
PERQUISITES FROM EMPLOYMENT
Section 13(1)(a)
benefits-in-cash or benefits-in-kind that can be convertible to money
characters
can be received regularly or casually
convertible into money
subject to tax
types of perquisite
pecuniary liabilities paid by employer
income tax borne by employer
utility bills
car insurance premiums, road tax and car maintenance charges
credit card facilities
used for private purchases and payments, perquisites
loan interest
loan given from the internal funds of the company, no benefit is taxed on employee
obtains a loan from third party, the amount of perquisite is the cost borne by employer
loan from 3rd party and employee is required to pay only nominal interest, the amount perquisite is the difference between interest charged on employer by the loan provider and nominal interest paid by employee
loan to employee given at the rate = cost paid by employer, no perquisite to be taxed
subsidies on interest on a loan, totalling up to RM300,000 for housing, passenger motor vehicles and education is exempted
recreational club membership
individual membership
owned by individual
entrance, monthly/annual membership subscription or term membership fees and other related reimbursements; perquisites
corporate membership
owned by employer
entrance fee is not a perquisite to employee
tuition or school fees of child
life insurance premiums
employer pays annual insurance premium for an insurance scheme in which the employee's family members/nominee is appointed as beneficiary to the policy, the amount of annual premium is perquisite
gardener, driver, domestic help, guard
claims for reimbursement of the salaries
waiver of loan/advance
loan or advance waived is a perquisite
scholarship
whether or not in connection with employment of that individual, exempted from income tax
salary paid to an employee during the study leave period, taxable as income from employment
assets given FOC or at discount
difference between the market prices of such assets and the amount paid by the employee (if any), is a perquisite
discount is gross income from employment
gift voucher
normally, not taxable unless it is in a recurring nature and in the circumstances where the employee expects such gifts as part of their remuneration
gift of personal computers
MV of computers is a perquisite
excellent public service award
treated as gross income
exemption up to RM2,000
in the case of long service award, exemption is given if employee has exercised their employment for more than 10 yrs with the same employer
professional subscriptions
not considered as perquisites if membership to that body is essential to business of the employer
relocation package
expenses cover transporting an employee and family members and the household goods and possession of the employee, is not taxable
consumable business products of employer
value of discount on goods exempted up to RM1,000
the excess is taxable
Section 13(1)(b)
not convertible into money
BIK received is taxable except
medical, dental or child-care benefit
leave passage
in Malaysia, not more than three times in a calendar year
overseas LP, not more than once limited to a max amount of RM3,000
benefits used by employee solely for purposes of performing employment duty
food & drink provided FOC
free transportation between home & workplace
insurance premium that are obligatory for foreign workers as a replacement to SOCSO
group insurance premium to cover workers in the event of an accident
computation of BIK
formula method
prescribed value method
motorcar & other related benefits
prescribed value of motorcar based on the cost of the motorcar at the time when it was new
motorcar provided is > 5 yrs old, can be reduced to half of the prescribed value. Value of BIK in respect of petrol remain unchanged
petrol provided without a car
amount taxable is the value of the petrol
driver provided
fixed at RM600 per month
household furnishings, apparatus and appliances
Section 13(1)(c)
three categories
provided for employee (other than officers of Govt/Statutory Bodies) or service director by the employer
WIL of defined value of the VOLA or 30% of gross income from employment under Section 13(1)(a)
provided for the director (not service director) of a controlled company
defined value of VOLA
provided for the employees/service director/officers of the Govt/Statutory Bodies
amount equal to 3% of gross income from employment under Section 13(1)(a)
expenses related that are deductible
rent paid by employee for the furniture
calculated separately
proportion of the rent payable by the employee is allowed as deduction
must not exceed the VOLA and furniture
Section 13(1)(d)
unapproved fund or scheme
assessed only on the amount contributed by the employer under Section 13(1)(d)
Exemption of employment income by the 2020 Budget
value and benefit of an educational loan (PTPTN) paid by employer on behalf of their employee who is a Malaysian citizen from 1/1/2019 to 31/12/2021 is exempted from income tax
a female taxpayer who is a citizen & tax resident in Malaysia will be exempted from payment of income tax in respect of gross income derived from an employment not exceeding 12 consecutive months for the basis year of assessment up to 2024
TEST TO DETERMINE EMPLOYMENT SOURCE
master and servant relationship subsist
extent of control by the employer as to how the work is to be performed and the manner in which it is to be done
defined hours of work
restriction to contract with other parties
BASIS OF ASSESSMENT
Section 25(1)
gross income from an employment is receivable, it shall, when received be treated as gross income for the relevant period
Section 25(2) to 25(5)
deleted by the 2016 Budget
Section 25(6)
gross income for the basis period or the basis period following the basis year of departure is deemed to be income of the basis year in which an individual departs Malaysia
the employee can make a written request to DG that Section 25(6) shall not apply when making their return of income for the year
Section 29(4) - tax treatment of employment income between relatives
transactions between relatives and controlled transaction shall be deemed obtainable on demand
persons one of whom has control over the other
individuals who are relatives of each other
persons both of whom are controlled by some other persons
relatives - parent, child (stepchild and adopted), brother, sister, uncle, aunt, nephew, niece, cousin, ancestor, lineal descendent
gross employment income first receivable, shall be deemed to be obtainable on demand in the following basis period and treated as gross income in the following period
DEFINITION
employment
where the relationship of master (employer) and servant (employee) exists
any appointment or office, whether public or not and whether or not the relationship above subsists, for which remuneration is payable
employee
where the relationship subsists; the servant
where the relationship does not subsists, the holder of the appointment or office constitutes the employment
employer
the master
where the relationship does not subsists, the person who pays or responsible for paying the remuneration to the employee who has the employment, notwithstanding that person and the employee may be the same person acting in different capacities
EMPLOYMENT INCOME DEEMED TO BE DERIVED FROM MALAYSIA
Section 13(2)
a) during which the employment is exercised in Malaysia
(b) of leave attributable to the exercise of the employment in Malaysia
(c) during which the employee performs outside Malaysia duties incidental to the exercise of the employment in Malaysia
(d) During which a person is a director of a company resident in Malaysia
(e) during which the employment is exercised aboard a ship or aircraft used in a business operated by a person resident in Malaysia
employment in public service
employee is a citizen for any period during which the employment is exercised outside Malaysia
employee is a citizen for any period of leave attributable to the exercise of the employment outside Malaysia
Malaysian employees seconded overseas
do not apply to Malaysian citizens employed in public services but exercise their employment overseas
performance of duties overseas incidental to the exercise of the employment in Malaysia, it is employment income deemed derived from Malaysia
incidental - duties connected to the main employment and constitute a necessary part of an employment
incidental to his employment in Malaysia
the employees had exercised their employment in Malaysia prior to being sent overseas
the duties performed overseas are connected to the duties in Malaysia and are part of their job responsibilities
the overseas duties are not for an independent purpose but to further the purpose of the employer in Malaysia, which is responsible for the decision making of the work done overseas
the employer in Malaysia bears all the risks and receives the benefits from the work that was carried out but the employee overseas
double taxation may arise
GROSS EMPLOYMENT INCOME
Section 13(1)
wages, salary, remuneration, leave pay, fee, commission, bonus, gratuity, perquisite or allowance (in money or otherwise)
enjoyment by the employee of any benefit excluding
medical/dental treatment or child care
leave passage within Malaysia not exceeding 3 times or between Malaysia and outside Malaysia not exceeding 1 leave passage
benefit solely used in connection with the performance of their duties
living accommodation in Malaysia
any amount (other than pension, annuity or periodical payments) received by the employee from unapproved fund or scheme
compensation for loss of employment
Exemption of benefits, perquisites and allowances
petrol card/allowance or travel allowance and toll card for official duties up to RM6,000 a year
allowance or fees for parking
meal allowance
childcare allowance or subsidies of RM2,400 a year for child up to 12 years
telephone and mobile phone, telephone bills, pager, PDA and internet subscription
Employers' own goods provided FOC or at discounted value where the value of discount does not exceed RM1,000 a year
Employers' own services provided free or at discount (not transferable)
subsidies on interest on loans totalling up to RM300,000 for housing, passenger motor vehicles and education, (new and existing loan)
medical benefits exempted include maternity and traditional medicines
existing perquisite exemption of RM2,000 for long service award (includes award relating innovation, productivity and efficiency)
exemption for gratuity
full exemption
retirement was due to ill-health
retirement takes place on or after reaching 55 y/o or on reaching compulsory age of retirement from employment specified under any written law, employment has spanned at least 10 yrs with the same employer/companies
amount deemed received by an employee
partial exemption
RM1,000 per completed year if does not qualify for full exemption
TAXABILITY OF EMPLOYMENT INCOME
receipts/gains from an employment shall be assessable if that receipts is in respect of having or exercising an employment
having an employment - employee may not be actively involved in the performance of any duties (non-service director of a company)
exercising an employment - there are duties to be performed by an employee including duties outside Malaysia (eg: extension of local employment)
CONTRACT OF SERVICE OR CONTRACT FOR SERVICES
PROFORMA
