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Income Tax Computation for Employees

Roopa, a Malaysian resident, received various employment income and benefits in 2019 including salary, bonus, transportation and accommodation allowances, furnished housing, reimbursed domestic help, an employer-provided vehicle, and an employee award. She also received interest income and made qualifying expenditures. She must compute her taxable income and income tax payable for the year of assessment 2019. Argan, a Canadian citizen employed in Malaysia, received various employment income and benefits in 2020 from his employer Bayu Airlines including salary, allowances, an employer-provided vehicle and driver, furnished housing, domestic help, medical expenses, and club membership until his contract was terminated in September 2020. He was also paid gratuation, compensation for loss

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Thileepan Sandiran
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93 views2 pages

Income Tax Computation for Employees

Roopa, a Malaysian resident, received various employment income and benefits in 2019 including salary, bonus, transportation and accommodation allowances, furnished housing, reimbursed domestic help, an employer-provided vehicle, and an employee award. She also received interest income and made qualifying expenditures. She must compute her taxable income and income tax payable for the year of assessment 2019. Argan, a Canadian citizen employed in Malaysia, received various employment income and benefits in 2020 from his employer Bayu Airlines including salary, allowances, an employer-provided vehicle and driver, furnished housing, domestic help, medical expenses, and club membership until his contract was terminated in September 2020. He was also paid gratuation, compensation for loss

Uploaded by

Thileepan Sandiran
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

BBAC2123 & Malaysian Taxation

Tutorial 3: Employers Income

1. (a) Roopa, a Malaysian resident, is a widow, with a one-year-old child. She is


employed as a research scientist in a local university.
Details of Roopa’s employment income, other income and expenditure for the
year 2019 are as follows:
Employment income, perquisites, and benefits-in-kind (BIK):

 A salary of RM8,000 per month of which 11% was contributed to the


employees’ provident fund (EPF).
 One month’s bonus based on her performance in 2019, which was
received on 8 February 2020.
 One local leave passage of RM2,300 and RM800 for meals and
accommodation for her and her child.
 A fully furnished living accommodation, rented by her employer at a
monthly rent of RM4,000, inclusive of RM1,000 for furniture.
 A domestic maid with a monthly salary of RM800 paid for by Roopa and
reimbursed by her employer.
 A new car purchased by the university in 2018 for RM190,000. No fuel
was provided by her employer.
 During the university’s annual dinner in 2019, an award of RM2,400 for
being the most innovative employee of the year.
Other income:

 Roopa received interest income of RM2,000 on fixed deposits from a


local bank.
Expenditure in the year 2019:

 Roopa has original receipts for the payments made for the following:
o purchase of sports equipment of RM300;
o purchase of smartphone of RM3,200;
o purchase of breast feeding equipment of RM1,200 and
o a cash donation of RM50,000 made to an approved healthcare
facility assisting kidney patients on 17 July 2019.
 Roopa paid child care fees totaling RM2,700 to her neighbor who helps
take care of her child during working hours on weekdays.

Required:
Compute the income tax payable by Roopa for the year of assessment
2019. (Ignore the highlighted part)
Note: You should indicate by the use of the word ‘nil’ any item referred to
in the question for which no adjusting entry needs to be made, including
any relief or rebate, in the tax computation.
BBAC2123 & Malaysian Taxation
Tutorial 3: Employers Income

(b) Roopa’s employer is considering offering her one of the following forms of
assistance to pursue a two-year course of study:
 a cash allowance; or
 attendance at a course in the university free of any charge.
Required:
State, with reasons, which of the two alternatives Roopa should accept
from a purely tax perspective.

(b) Roopa should accept the two-year course in the university offered free of any charge as
this will be an exempt/non-taxable benefit. Whereas the full amount of the cash
allowance will be subject to income tax as employment income.

2. Argan, 49 years old a Canadian citizen, in an engineer in Bayu Airlines Bhd since 15
September 2007, However, due to the company’s poor performance, his contract of
employment was terminated on 30 September 2020. The company paid gratuity and
compensation for loss of employment amounting RM35,000 and RM250,000
respectively. Below are the information related to his employment income in the year
2020:
- Salary of RM19,580 per month after deducting EPF 11%
- Entertainment allowances of RM800 per month and travelling allowances of
RM500 per month was provided by the company effective from 1 January
2018. Argan produced entertainment bills of RM16,000 that was fully
expensed in carrying out his official duties.
- A new car costing RM256,000 together with a driver and fuel were provided by
the company up to 31 August 2020. The company paid RM1,500 per month to
the driver.
- A fully furnished bungalow house was provided to Argan, Bayu Airlines Bhd
paid monthly rental of RM8,000 (including furniture worth RM3,500) to the
landlord until 30 September 2020.
- A gardener and a servant were provided by the employer until 20 September
2020. Bayu Airlines Bhd paid RM850 per month for each person.
- Medical expenses for him and his immediate family amounting RM7,000.
- Bayu Corporate Club monthly membership worth RM1,000 per month ceased
on 30 September 2020.
- On January 2020, he went to Turkey for a vacation. For that purpose, he was
paid RM16,500 of leave passage by the company.

You are required to compute Argan’s Statutory Employment for the year of assessment
2020.

Common questions

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The gratuity amounting to RM35,000 received on employment termination is taxable and must be included in Argan's total income, potentially increasing his tax bill. Certain exemptions may apply based on the length of service and redundancy status, but without specific rules applied, it adds to his taxable income .

The furnished accommodation rented by her employer, with monthly rent of RM4,000, inclusive of RM1,000 for furniture, and maid services reimbursed (RM800) are considered benefits-in-kind and are taxable. The value of these benefits increases her taxable income .

Roopa's receipt of a leave passage of RM2,300 and RM800 for meals and accommodation, would normally be considered taxable benefits in Malaysia, increasing her taxable income unless specific exemptions apply for such particular travel or family expenses .

Argan's entertainment and travel allowances are taxable benefits. However, he can deduct actual expenses of RM16,000 for business-related entertainment from his taxable income if justifiable, reducing tax liability against the allowances provided by his employer .

The compensation for loss of employment amounting to RM250,000 received by Argan may be subject to exemptions if he meets certain criteria such as long service or age. However, without additional knowledge of his specific exemptions under Malaysian tax law, it should be assumed this compensation increases his taxable income .

The value of non-cash benefits, such as RM3,500 worth of furniture included in the bungalow's rent paid by the employer, is treated as a benefit-in-kind, contributing to Argan's assessable income under the benefits-in-kind (BIK) taxation rules in Malaysia .

The fully furnished bungalow provided to Argan, including a monthly rental of RM8,000 with RM3,500 for furniture, must be accounted as a benefit-in-kind in his taxable income, increasing his taxable base .

The reimbursement of Roopa's domestic maid's salary (RM800 per month) by the employer is taxable as a benefit-in-kind. This would increase her overall taxable income, thereby potentially increasing her tax liability .

Roopa's expenditure on sports equipment (RM300) and breastfeeding equipment (RM1,200) may be considered for personal reliefs if they qualify under specific categories. The purchase of a smartphone (RM3,200) usually does not qualify for any specific relief. The donation to an approved healthcare facility (RM50,000) is deductible as it meets conditions for tax-deductible donations, provided it does not exceed taxable income .

Roopa should choose the free university course as it is an exempt/non-taxable benefit, unlike the cash allowance which would be fully subject to income tax as employment income .

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