Employment income
Intro
Contract of service
Employment
Where relationship of master(employer) & servant(employee) exists
Any appointment or office
Whether public or not
Whether or not relationship between employer and employer exists
As long as remuneration is payable
Employee
Where the relationship between master and servant exists, it is the servant
Employer
If relationship between master and servant does not exist, it is the holder of the appointment or office that constitutes the employment
The master, if the relationship between master and servant exists
If the relationship between master and servant does not exists, it is the person who pays or is responsible for the payment of any remuneration to the employee who has the employment, notwithstanding that person and the employee might be the same person acting in diff capacities
Comparison between contract of and for service
Loss relief
Relief for capital expenditure
Deduction of expenses
Non-resident deriving Malaysian income (60 days rule)
Of
For
Restricted
Concessions being given on certain expenses
Of
For
No relief for non-business source
Business losses can be deducted against aggregate income
Of
For
Not entitled for relief
Concessions being given on certain expenses
Of
For
Exempted under para 21 of sch 6 of ITA 1967
No exemption
Test to determine employment source
OF
FOR
Master and servant relationship subsists
Extent of control by the employer as to
How the work is to be performed
The manner in which it is to be done
Defined hours of work
Provision of own tools and equipment in the performance of work
Restriction to contract with other parties
Employment income deemed to be derived from Malaysia
Gross income shall be deemed to be derived from Malaysia
During which the employment is exercised in Malaysia
Of leave attributable to the exercise of the employment in Malaysia
During which the employee performs outside Malaysia duties incidental to the exercise of employment in Malaysia
During which a person it the director of a company resident in Malaysia
During which the employment is exercised abroad a ship or aircraft used in a business operated by a person resident in Malaysia
Malaysian employee seconded overseas
It does not apply to Malaysian citizen employed in the public service of a statutory authority in Malaysia who exercise their employment overseas
If the performance of service is incidental to the one exercise in Malaysia, then it is an employment income deemed derived from Malaysia under section 13(2)(c)
Incidental
Duties connected to the main employment
Constitute a necessary part of an employment
It is not to serve any independent purpose but to fulfill the purpose of the main employment
Can also be treated as incidental where
The employee has 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 by the employee overseas
The performance of duties would not be incidental to the employment in Malaysia
The duties performed overseas are not connected to or part of the regular duties in Malaysia
The overseas duties are for an independent purpose and not to further the purpose of the employer in Malaysia where the decision making of the work done overseas lies with the person overseas
The employer in Malaysia did not bear the risks and receives the benefits from the job done overseas
Double taxation arise for them who are seconded overseas to work
Certain reliefs may be claimed
Bilateral credit relief
Unilateral credit relief
Gross employment income
Includes
Any wages, salaries, remuneration, leave pay, fee, commission, bonus, gratuity, perquisite or allowance (whether in money or otherwise)
Any amount of benefits (not convertible into money)
This excludes
A benefit or amenity consisting of medical or dental treatment or child care
A benefit or amenity consisting of leave passage
Within Malaysia not exceeding three times in any calendar year, also include meals and accommodation expenses
Between Malaysia and any place outside Malaysia not exceeding one passage in any calendar year - restricted to RM3000
Living accommodation in Malaysia (including in premises provided by employer) provided for the employee by or on behalf of the employer rent-free or otherwise
Other than pension, annuity or periodical payment from above received by employee, whether before or after their employment ceases, from an unapproved fund or scheme
Compensation for loss of employment either before or after their employment ceases, including either of the following
Any amount in respect of covenant entered into by the employee restricting their right after they cease employment to engage in another employment of a similar kind
Any amount in respect of any agreement or arrangement having like effect
Output tax borne by the employer under the G&S Act 2014
Exemption of gratuity, perquisites and allowances
Effective from 2008 to 2010, now it is taxable
Petrol card or allowance or travel allowance
Allowance or fees for parking
Between the home and workplace up to rm2400 per year
For official duties up to rm6000 a year
Meal allowance
Children allowance or subsidies of rm2400 a year for a child up to 12 years of age
Telephone and mobile phone, telephone bills, pager, personal data assistant and internet subscription
Employer's own goods
Subsidies on interest on loan (existing and new) totaling up to RM30000 for housing, passenger motor vehicles and education
Provided FOC or discounted value where the value of the discount does not exceed rm1000 a year
Such benefits are not transferable
Medical benefits exempted from tax are extended to include expenses on maternity and traditional medicines such as ayurveda and acupuncture
Existing perquisite exemption of rm2000 for long service award is extended to award related to innovation, productivity and efficiency such as Six Sigma Award
The exemption does not apply to directors of controlled companies, sole proprietors and partnership
Expenses on allowance, benefit in kind and perquisites provided by employers are given full deductions even though such benefits are not stipulated in the service contract of the employee
Exemption for gratuity
Full exemption
Partial exemption
Amount deemed received by an employee
Payment to the EPF or staff provident fund under collective agreement can be assessable to tax
This is because it was held that such payment accrued to the tax payers and it was receivable at the time the payment was credited to the EPF
The DG is satisfied that the retirement was due to ill-health, or
The retirement takes place on or after reaching the age of 55, or the compulsory age of retirement from employment specified under any written law and in either case the employment has spanned at least 10 years with the same employer or with companies in the same group
Income tax exemption for retirement benefits is also given if the retirement takes place on reaching the compulsory age of retirement under a contract of employment or collective agreement at the age of 50 but before 55 and the employment lasted for 10 years
Effective from 2016, partial gratuity exemption of rm1000 per completed year is given if an individual foes not qualify for income tax exemption stated above. the amount of gratuity after exemption shall be taxed in the period it is received