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Employment income- part 3 - Coggle Diagram
Employment income- part 3
BIK
Benefits not convertible into money even though they have monetary value
Def of some words used in the public ruling
Members of immediate family
Wife/wives or husband and their children
Child
Legitimate
Step child of their husband/wife
Child proved to the satisfaction of the DG to have been adopted by the individual or their husband/wife in accordance with any law
New in relation to a motorcar
Including a reconditioned motorcar at the time when it was first registered in Malaysia
Motorcar
Motor vehicles other than licensed by the appropriate authority for commercial transportation of goods or passengers
Actual cost of the motorcar inclusive of accessories but excluding financial charges, insurance premium, road tax at the time when it was new
Cost of leave passage
Cost of fares
What are BIK
All BIK are taxable except
Medical, dental or child care benefit
Leave passage, only for the employee and their immediate family
Three times for within Malaysia
One time for outside Malaysia, up to rm1000
Benefits used solely for the performance of duties
Food and drink provided FOC
Free transportation between pick-up points or home and the place of work (to and from)
Insurance premiums that are obligatory for foreign workers as a replacement of SOCSO
Group insurance premium to cover workers in the event of an accident
Computation of BIK
The amount that needs to be taken is the amount that is just and reasonable in the circumstances
Two methods
The formula method
Cost of the asset / Prescribed average life span of the asset = annual value of the benefit
Pls refer to page 62 for the prescribed years for assets
The average life span of the assets is 10 years regardless of whether the asset is new or old
The amount can be abated if the BIK is
Provided for less than a year, or/and
Shared with another employee, or/and
Used for purpose of the business of the employer
The prescribed value method
Pls refer to page 63 for prescribed value of a motorcar and its related benefits
In 2009, the Ministry of Finance agreed to allow a taxpayer to continue with the above taxable prescribed benefits if it is lower than the taxable benefits after the rm6000 exemption
Candidates are required to compare and take the lower of the above taxable prescribed value of petrol with the net amount (after the exemption of rm6000) of petrol benefits given by his employer
The amount can be abated if the BIK is
Provided for less than a year
Shared with another employee
There is no abatement for business usage on the BIK provided to the employee
Consistency
Whichever method is used in determining the value of the benefit provided, the basis of computing the benefit must be consistently applied throughout the period of the provision of the benefit
Motorcar and other related benefits
The benefits to be assessed is the private usage of that motorcar and the period provided
It is regarded to be used privately if
It is used for travelling between the office and the employee's home
It is kept at the employee's home where the motorcar can be used by the employee or their family at any time
Toll fees paid by the employer are regarded as inclusive in the value of BIK on the motorcar
Maintenance costs such as servicing, repairs, annual road tax and annual insurance premium are not regarded as part of the benefit of the employee
The prescribed value of the motorcar will be based on the cost at the time when it was new, the treatment is also applicable to a secondhand/ leased/rented motorcar
The motorcar is not provided throughout the calendar period, the value should be adjusted in accordance to the period provided- pro rate
Where it is shared with another employee, the value of the BIK in respect of the motorcar and petrol will be reduced proportionately
Motorcar petrol is exempted up to rm6000
Where diff cars are provided during a calendar year, the appropriate values for the respective periods should be ascertained in arriving at the annual value of the benefit
Where the prescribed method is used, and where the car is more than 5 years old, the annual value of the BIK in respect of that motorcar can be reduced to half of the prescribed value. However, the petrol remain unchanged
Petrol provided without a car less rm6000
Driver is taxable at rm600 per month. In the case where the driver is not specifically provided to any employee but hey come from a pool of drivers provided by the employer, no benefits are taxable
Households furnishings, apparatus and appliances
Two methods
Prescribed value method
There will be no deduction for any expense incurred by the employee in acquiring the benefit
Pls refer to page 65
The categories shall be deducted where not used
The amount shall be pro rate where applicable
The amount need to be adjusted where shared with other employees
Fans and water heaters are regarded as they are treated as forming part of the residential premises
Other assets
For entertainment, recreation or other purposes such as piano, organ, tv, stereo set, swimming pool and others will constitute additional benefits and should be separately assessed based on the formula
Other benefits
Refer to page 66
Other benefits not listed should be valued based on the formula
Cost of asset not listed/ prescribed average life span =annual value of the benefit
Every employer is required to report annually, the employee's Statement of remuneration and in the form E for the employer
All the values of BIK provided to the employees, including the benefits provided to their family or their any other persons.
Failure to comply with this will render the employer liable to prosecution
A claim for a deduction can only be made in respect of the formula method
Any claim for the deduction in respect of official use of any BIK must be made by the employee themselves in the annual return
Records pertaining to the claims must be kept for a period of 7 years for the purpose of audit
Section 13(1)(c)
Computation of value of living accommodation
Three categories
Living accommodation provided for employees other than officers of Government/ Statutory bodies or service director
Whichever is lesser between
Defined value of living accommodation
30% of the gross income from employment under 13(1)(a)
Gross income in respect of the right to acquire shares in a company is excluded
Living accommodation provided for directors of controlled companies by the employer
Defined value of the living accommodation
The computation is made without any
Comparison with 30% of 13(1)(a)
Adjustment on the defined value of the premises in either of the following circumstances
The premises is larger than the director would otherwise need
The director is required to reside in the particular premises
The value can be adjusted if shared with other employees
Living accommodation for employees/ service director government or statutory officers (except a service director of a controlled company)
Consists of
Any premises in a plantation or in a forest
Any premises that, although in a rateable area, are not subject to rates
A hotel, hostel, similar premises
An amount = to 3% of the gross income from 13(1)(a)
Government officers
For government officers, there will be no deduction for rent charged by the Government
Where officers occupying quarters have to pay economic rent based on the Government ruling, the value of such quarters will not be included in the gross income
Any allowance receive by the officers will be included as gross income
Statutory body
Where the premises is owned by the statutory body and it is being provided to the employee either rent free at a nominal rent, the amount to be taken into account as living accommodation benefit is 3% of section 13(1)(a)
Where the premises is owned by the statutory body, and the employee occupying it has to pay economic rent based on the statutory body's ruling, the value of accommodation on the premises provided will not be included as gross income from employment under C
Where living accommodation is provided in premises that are rented by the statutory body and the employee is not charged rent or charged nominal rent for occupying it, the value of such accommodation is 3% of 13(1)(a)
Expenses related to living accommodation provided by the employer that are deductible and method of computation
Expenses paid by employer that are allowed to be deducted
Rent
Any public rates or insurance premiums
Expenses on repair or maintenance of premises
Where furniture is included, rent paid for the furniture are allowed for deduction
The deduction for rent paid for the accommodation are calculated separately
For accommodation which are furnished, and is held on lease by the employer, if the rent applicable to the furniture is to be regarded
A proportion of the rent payable is allowed as a deduction in computing the adjusted income from employment
The deduction allowable is calculated as follows
Rent payable by employee / Rent payable by or on behalf of employer X economic rent
The deduction for payment made by an employee to his employer in respect of the living accommodation and furniture must not exceed the value of the living accommodation and furniture taken into account in computing the gross income from employment
Section 13(1)(d)
Unapproved fund/scheme
Where the employer has contributed for the benefit of their employee to an unapproved fund or scheme
The amount received by an employee from such a fund during the basis shall be assessed only on the amount contributed by the employer under d
The employee's share received need not be included as the amount has already been taxed in the relevant year of assessment earlier
Compensation for loss of employment- section 13(1)(e)- exempted from this paper
Exempted
Compensation for loss of employment
Consideration for any covenant entered into by the employee restricting their right to take up employment of the same or similar kind
Conditions
The DG is satisfied that the payment is made on account of loss of employment due to ill health
In the case of payment in relation to a period of employment with the same employer or with companies with the same group
Exemption is limited to rm10000 per year, multiplied by the number of completed years of service with that employer or group of companies
This exemption is not applied to a director of a controlled company who is not a full-time service director
Payment received by an employee from an employer pursuant to a separation scheme will be given exemption. It is provided that if the scheme provides for re-employment by the same employer or other employer, then the exemption shall not apply.