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Summarised and Contributed by Ms Tai Chai Inn, Tax Department, Melaka Branch
What are the types of income which are taxable and subject to Monthly Tax Deduction (MTD)
or, in Bahasa Malaysia, Potongan Cukai Berjadual (PCB)?
Types of income under section 13(1) of the Act states that the gross income of an
employee concerning gains or profit from an employment includes:-
Exempted allowance
✓ From YA 2009, a travel allowance of RM2,400 per year would
be exempted for travelling between home and work. (Only
applicable for YA 2009 to 2010)
✓ Travelling allowance, petrol cards, petrol allowance or toll
payments which are incurred for the purpose of performing
official duties up to RM6,000 per year
✓ Child care allowance up to RM2,400 per year
✓ Parking rate and parking allowance, meal allowance, payment
for traditional medicine and maternity expenses (reasonable
amount)
✓ Meal allowances (reasonable amount) covers per diem
allowance which are only exempted if they are given based on
the rate fixed in the internal circular or written instruction of
the employer.
✓ Monthly bills for subscription of broadband, fixed line
telephone, mobile phone and pager registered under the name
of the employee or employer.
(The above exempted allowance does not apply to directors of
controlled companies, sole proprietors and partners)
➢ Section 13(1)(a) – Perquisite
❖ Perquisites are benefits in cash or in kind which can be converted
into money received by an employee from his/her employer or
from third parties in respect to having or exercising an employment.
❖ Perquisites are taxable under section 4(b) of the ITA as part of the
gross income from employment under paragraph 13(1)(a) of the
ITA.
Example:-
✓ Settlement of employee’s pecuniary obligation
✓ Share option and share incentive scheme
✓ Tips paid to the waiter
Exempted allowance
✓ Innovation or productivity award - Paragraph 25C, Schedule 6
of the ITA 1967
Limited to RM2,000 per year of assessment
Past achievement,
Service excellence award, or
Long service on condition that the employee has served
with the same employer or with companies within the
same group of companies for more than 10 years.
✓ Subsidy on interest for housing, education or car loan not
exceeding RM300,000
Tax Treatment on Share Option Prior To Year of Assessment 2006 (Before YA 2006)
RM
Less : Offer price of the shares on the date the option is offered XXXXX
Tax Treatment on Share Option w.e.f. Year of Assessment 2006 (YA 2006 onwards)
RM
XXXXX
➢ Example: But the car was acquired and provided to Marry for 7 years. What
is her gross income under section 13(1)(b)?
Answer: As per the BIK Guideline, her gross income under Section 13(1)(b)
(Using the Prescribed Value Method) is as follows:-
(a) Car: RM3,500 (RM7,000 x 50%)
(b) Fuel: RM1,800
➢ Example: The car is provided until September 2014. What is her gross
income under section 13(1)(b)?
Answer: As per the BIK Guideline, her gross income under Section 13(1)(b)
(Using the Prescribed Value Method) is as follow:-
(a) Car: RM2,625 (RM7,000 x 50% x 9/12 month)
(b) Fuel: RM1,350 (RM1,800 x 9/12 month)
Total: RM2,520
➢ Other Benefits In Kind
➢ Exempted Benefit
❖ Medical or dental treatment
❖ Benefit for child care – Child care centers provided by employers to their
employees children.
❖ Food and drink provided free of charge
❖ Free transportation between pick up points or home and the place of work
(to and from)
❖ Insurance premium which are obligatory for foreign workers as a
replacement to SOCSO contribution
❖ Group insurance premium to cover workers in the event of an accident.
❖ Benefits consisting:
✓ Leave passage in Malaysia of not more than 3 times in one calendar
year, or
✓ Overseas leave passage of not more than once in any calendar year
limited to a maximum amount RM3,000
(The exemption of this benefit is only applicable if it is provided to an
employee and members of his immediate family.)
✓ a benefit or amenity used by the employee solely in connection with
the performance of his duties; and
✓ Discounted price for consumable business products of the employer
and discounted price for services provided by the employer.
• Consumable goods exempt up to RM1,000
• Consumable services are exempt in full
✓ Benefits and monthly bills for fixed line telephone, mobile phone, pager,
personal digital assistant (PDA) and subscription of broadband
✓ Modern medicine, traditional medicine and maternity
❖ (The above tax exemption does not apply if the employee who was given BIK
by the employer has control over his employment which refers to partnership,
sole proprietor or director controlled through the holding of shares or the
possession of voting power in or in relation to that of any other company, or
by virtue of powers conferred by the articles of association. Thus, the BIK
received by that director or employee is taken to be part of his gross income
from employment and taxable under paragraph 13(1)(b) of the ITA 1967.)
➢ an amount in respect of the use or enjoyment by the employee via living
accommodation in Malaysia (Including living accommodation in premises
occupied by his employer) provided for the employee by or on behalf of the
employer rent-free or otherwise.
❖ Method of Calculating Assessable Benefits
✓ If accommodation is provided by a company to an employee / service
director, the value of unfurnished accommodation are:-
• Defined value of living accommodation OR
• 30% of the employee’s gross income under section 13(1)(a)
whichever lower
✓ If accommodation is provided by a company to a non-service director,
the value of unfurnished accommodation is:-
• The full amount of defined value of accommodation
✓ If accommodation is provided in a hotel, hostel, quarters in plantation
or forest by a company to an employee / service director, the value of
unfurnished accommodation is:-
• 3% of the employee’s gross income under section 13(1)(a)
✓ If accommodation is provided in a hotel by a company to a non-service
director, the value of unfurnished accommodation is:-
• The actual hotel bill