Q&A with the Income Tax Department


TECHNICAL ISSUES

The following are some of the questions raised and answers given by the Lembaga Hasil Dalam Negeri (LHDN / IRB) during one of its Tax Seminars on the additional tax exemptions given to individuals. The original answer is in Bahasa Malaysia while the English translation is provided by me.

1. Does this exemption apply to petrol claim (reimbursement basis) ?

Jawapan
Penerimaan tuntutan bayaran balik bagi tugas rasmi yang dijalankan oleh pekerja bagi pihak majikannya tidak tertakluk kepada cukai pendapatan.

Answer
Reimbursements received for official purposes by an employee is not subject to tax.

2. Extend to fixed transport allowance?

Jawapan
Pengecualian diberi kepada elaun perjalanan, kad petrol atau elaun petrol

Answer
Exemption is given for travelling allowances, petrol cards or petrol allowances.

3. Extend to the BIK on petrol provided by the employer together with car?

Jawapan
Manfaat petrol dikecualikan jika majikan boleh menentukan tujuan dan amaun petrol diberi sama ada bagi tujuan perjalanan antara rumah ke pejabat (pengecualian sehingga RM2,400) atau bagi melaksanakan suatu pekerjaan (pengecualian sehingga RM6,000).
Jika majikan tidak dapat menentukan amaun bagi kedua-dua tujuan tersebut, maka pengecualian diberi sehingga RM6,000 setahun.

Answer
BIK on petrol is exempted if the employer can determine the purpose and amount of petrol given whether for travelling between home and work (exemption up to RM2,400) or for official duties (exemption up to RM6,000). If the employer is not able to determine the amount for the two purposes separately, then the exemption is given up to RM6,000 a year.

4. Travelling allowance RM8400, can it be automatically assumed RM2400 is for home to work place & RM6000 is for official duties?

Jawapan
Tidak boleh. Majikan perlu menentukan amaun dan jenis peruntukan yang diberi (sama seperti di atas).
Catatan: bagi persoalan 3 dan 4, jawapan yang diberi adalah tertakluk kepada keputusan selanjutnya (jika ada) dan akan dimasukkan dalam pindaan kepada Ketetapan Umum Manfaat Berupa Barangan dan Ketetapan Umum Perkuisit.

Answer
No. The employer has to determine the amount and type of allowance given (as explained above).
Note : for questions 3 & 4, answers given are subject to further decisions (if any) and will be included in amendments to the Public Ruling on Benefits-in-kind and Public Ruling on Perquisites.

5. Can the employee claim an abatement on the amount in excess of RM6,000 p.a? Does he need to maintain a travel log for the excess amount only or for the entire amount?

Jawapan
Bagi tuntutan elaun perjalanan yang melebihi RM6,000.00 pekerja perlu menyimpan kesemua rekod (bukan setakat lebihan sahaja) bagi tujuan audit.

Answer
For travelling allowances amounting to more than RM6,000, the employees have to keep all records (not only the excess amount only) for the purpose of auditing.

6. If the employee is given a car allowance of RM500 per month to cover petrol, road tax, insurance & maintenance costs, can the whole amount be exempted from tax?

Jawapan
Elaun kereta tidak dikecualikan

Answer
Car allowances are not exempted (i.e. they are taxable).

7. Employee received car allowance but actually he is not expected to travel for official duties qualify for exemption RM6,000?

Jawapan
Elaun kereta tidak dikecualikan

Answer
Car allowances are not exempted (i.e. they are taxable).

8. Employee change employment during the year & received RM2,400 from each employer for travel between home & office, what amount to be exempted?

Jawapan
Pengecualian diberi terhad kepada RM2,400 setahun kepada seorang pekerja tanpa melihat kepada bilangan majikan.

Answer
Tax exemption is given subject to RM2,400 a year for each individual without taking into account the number of employers .

9. Employees are given toll card (e.g. Touch n’ Go), not only for toll charged but also for other type of payment, what is the amount to be exempted?

Jawapan
Hanya kadar tol sahaja dikecualikan.
Tiada pengecualian bagi Touch n’ Go yang juga digunakan untuk lain-lain
bayaran.

Answer
Only the tolls incurred is exempted.
No exemption is given for Touch n’ Go that is used for other payments.

10. Allowance or fees for parking-exempted?

Jawapan
Elaun letak kereta atau kadar letak kereta dikecualikan bagi pekerja yang menerima peruntukan elaun tersebut sebagai sebahagian daripada penggajiannya.

Answer
Parking allowances or parking fees are exempted for employees who received these allowances as part of their remuneration from employment.

11. If exempted, does it extend to parking fee at LRT stations or limit at the office only?

Jawapan
Pengecualian diberi kepada pekerja yang diperuntukkan elaun meletak kereta dengan suatu amaun tetap oleh majikannya. Tanpa pengecualian, elaun tersebut merupakan sebahagian daripada pendapatan penggajian bagi pekerja tersebut. Pengecualian bukan merupakan satu potongan dalam menentukan pendapatan larasan/berkanun penggajian. Oleh itu, bayaran meletak kereta di kawasan pejabat atau di stesen LRT tidak menjadi isu.

Answer
Tax exemptions are given to employees who are paid a fixed amount of parking allowances by his/her employer. Without this exemption, this allowance would have been part of his/her remuneration. Exemption is not given as a deduction to arrive at the adjusted/statutory income. Therefore, payments made for parking whether at the office or at the LRT stations are not an issue.

12. What would be a reasonable amount to be paid to employee?

Jawapan
Majikan perlu menentukan suatu amaun yang munasabah.

Answer
The employers have to determine an amount which is suitable.

13. Can the employer pay the employee a daily allowance to subsidize their food costs?

Jawapan
Pengecualian hanya diberi kepada pekerja yang diperuntukkan elaun makan oleh majikan secara tetap, tanpa mengambilkira elaun tersebut diberi secara bulanan atau harian.

Answer
Tax exemption is only given to the employees who are given a fixed food allowances by their employers, without taking into account whether they are paid monthly or daily.

14. Does this exemption extended to ‘per diem’ which is paid to the employee to cover this meals while working outstation/overseas?

Jawapan
Tidak.

Answer
No.

(The IRB came out with a new Public Ruling later to exempt 'per diem'. See here.)

15. What if the per diem amount also covers laundry & phone calls?

Jawapan
Tidak berkenaan

Answer
Not applicable

16. Is there any limitation to the amount which can be paid as meal allowance?

Jawapan
Majikan perlu menentukan suatu amaun yang munasabah.

Answer
The employers have to determine an amount which is suitable.

17. What is the definition of childcare? Babysitter, kindergarten, maid etc

Jawapan
Pengecualian diberi kepada pekerja yang diperuntukkan elaun penjagaan anak oleh majikannya. Kepada siapa bayaran tersebut dibuat oleh pekerja tidak menjadi isu.

Answer
Tax exemption is given to employees who are given child care allowances by their employers. To whom these payments are eventually paid by the employees is not an issue.

18. Any age limit on the child to qualify for childcare?

Jawapan
12 tahun ke bawah

Answer
12 years and below

19. Any limitation on entitlement to exemption of childcare allowance? i.e if the husband gets an exemption on the childcare allowance received, can his wife also qualify for an exemption on the childcare allowance for the same child?

Jawapan
Pengecualian diberi secara individu terhad kepada RM2,400 setahun.

Answer
Tax exemption is given to each individual subject to RM2,400 a year.

20. Would this exemption apply to maid allowance provided by the employer?

Jawapan
Elaun Pembantu Rumah tidak dikecualikan

Answer
Maid allowance is not exempted.

21. Can a single employee with an adopted child quality for the exemption?

Jawapan
Pengecualian diberi kepada pekerja yang diperuntukkan elaun penjagaan anak oleh majikannya. Anak adalah sebagaimana ditakrifkan di bawah Seksyen 48, ACP 1967.

Answer
Tax exemption is given to an employee who is given child care allowances by his/her employer. ‘Child’ is as defined under Section 48, Income Tax Act, 1967.

22. Does this exemption extend to telephone allowance or limited to actual
bills only?


Jawapan
Pengecualian tidak terpakai kepada pekerja yang diperuntukkan elaun tetap telefon.

Answer
Tax exemption is not applicable to employees who are given fixed telephone allowance.

23. How about other related charges i.e registration, access fee, etc? Does this exemption extend to these items?

Jawapan
Ya.

Answer
Yes.

24. Does this exemption extend to goods & services of companies within a group or limited to the goods & services provided by the direct employer only?

Jawapan
Majikan tidak dipanjangkan kepada kumpulan syarikat

Answer
Employer is not extended to Group companies.

25. How to determine the loan amount? Is it based on outstanding loan balance or the original loan amount?

Jawapan
Pengecualian ke atas subsidi faedah bagi pinjaman perumahan, kenderaan bermotor dan pendidikan dikira menggunakan formula berikut:

A X B / C

Dimana;
A = perbezaan antara amaun faedah yang perlu ditanggung oleh
pekerja dengan amaun faedah yang kena bayar oleh
Pekerja dalam tempoh asas bagi suatu tahun taksiran.
B = jumlah agregat baki amaun principal pinjaman perumahan,
kenderaan bermotor dan pendidikan yang diambil oleh
pekerja atau RM300,000 dalam tempoh asas bagi suatu
tahun taksiran yang mana lebih rendah.
C = jumlah agregat amaun principal pinjaman perumahan,
kenderaan bermotor dan pendidikan yang diambil oleh
pekerja.

Answer
Tax exemption on subsidies for interest on housing loan, motor vehicles and education is calculated using the following formula :-

A X B / C


Where
A = difference between the amount of interest to be borne by the employee and the amount of interest to be payable by the employee
B = aggregate balance of loan or RM300,000, whichever is lower
C = total aggregate amount of principal loan

Note : For example,
Total loan taken = RM400,000 (Principal amount)
Balance loan = RM250,000 (Outstanding amount)
Total interest charged by bank = RM5,000
Total interest paid by employee = RM3,000
Total interest subsidised by employer = RM2,000

Tax exempt amount = (RM5,000 – RM2,000) X RM250,000 = RM1.667
RM450,000

Amount taxable = RM333 (RM2,000 – RM1,667)

26. Loan for education - for employee only or can extend for their children?

Jawapan
Untuk pekerja sahaja.

Answer
For employees only.

27. Would pickup trucks (e.g Toyota Hilux, Suzuki Equator, etc) qualify as passenger motor vehicles?

Jawapan
Pengecualian diberi kepada subsidi bagi pinjaman kenderaan selain daripada kenderaan yang dilesenkan oleh pihak berkuasa, yang berkaitan dengan pengangkutan perdagangan barangan atau penumpang bagi tujuan komersial.

Answer
Tax exemptions are given for subsidies on loans for motor vehicles other than those licensed by the relevant authorities which are related to transportation of commercial goods or passengers for commercial purposes.

28. Does traditional medicine extend to treatments by bomoh & sinseh?

Jawapan
Perubatan tradisional berhubung dengan pengecualian yang diberikan, bermaksud perubatan yang diberi oleh pengamal perubatan yang berdaftar dengan badan berikut:
a. Rawatan Tradisional Melayu
Persatuan Perubatan Tradisional Melayu Malaysia (PUTRAMAS)
b. Rawatan Tradisional India
Pertubuhan Perubatan Tradisional India Malaysia (PEPTIM)
c. Rawatan Tradisional Cina
- Federation of Chinese Physicians and Chinese-Dealers Associations of Malaysia (FCPMDM)
- Federation of Chinese Physicians & Acupuncturist Associations of Malaysia (FCPAAM)
- Chinese Physician’s Associations of Malaysia (MCPA)

Answer
Traditional medication in respect of exemptions given means medications provided by practitioners registered with the following bodies :-
a. Malay Traditional Medications
Persatuan Perubatan Tradisional Melayu Malaysia (PUTRAMAS)
b. Indian Traditional Medications
Pertubuhan Perubatan Tradisional India Malaysia (PEPTIM)
c. Chinese Traditional Medications
- Federation of Chinese Physicians and Chinese-Dealers Associations of Malaysia (FCPMDM)
- Federation of Chinese Physicians & Acupuncturist Associations of Malaysia (FCPAAM)
- Chinese Physician’s Associations of Malaysia (MCPA)

29. Pekerja menerima anugerah Pekerja Contoh bagi bulan Oktober dan juga menerima anugerah bagi Kehadiran Penuh bulan November. Adakah penerimaan anugerah secara bulanan ini boleh dikecualinan cukai sehingga RM2,000 mulai tahun 2008?

An employee receives award for “Employee of the Month” in October and also receives award for “Full Attendance” in November. Are such monthly receipts exempted from tax up to RM2,000 from 2008 ?

Jawapan
- Anugerah Pekerja Contoh, Anugerah Kehadiran Penuh (tiada cuti sakit) boleh dikategorikan sebagai Anugerah Khidmat Cemerlang bagi tujuan pengecualian di bawah perenggan 25C, Jadual 6 ACP 1967
- Pekerja layak dikecualinan cukai sehingga RM2,000 mulai tahun 2008 atas jumlah (RM) anugerah-anugerah yang diterimanya.

Answer
- Awards for “Employee of the Month” and awards for “Full Attendance” can be categorised as Service Excellence Awards for the purpose of exemption under para 25C, Schedule 6, ITA 1967
- The employee is entitled to tax exemption of up to RM2,000 with effect from 2008 on total (RM) awards received by him/her.

7 comments:

  1. this is a very good and informative blog about income tax. keep up the good work..

    ReplyDelete
  2. Thanx AttaHun for your words of encouragement. You have a very good income tax calculator at your blog too.

    ReplyDelete
  3. How to calculate house loan subsidy if the principal amount & outstanding amount change every month?

    ReplyDelete
  4. The explanation and example given by the IRB in item 3.2.5 in the Public Ruling 1/2006 issued on 25/2/09 seems to suggest that the balance as at 31 December is taken into account when calculating the principal and outstanding amount.

    ReplyDelete
  5. Dear Sir,

    My company had a Japanese expatriate staff who worked from 1993 to 2002. He paid his own income tax through PCB and we also used to help him file his tax returns annually. In 2000, he was diagnosed with a blood / liver condition and used to take short trips back Japan for treatment. On his last trip in 2002 however, he was hospitalised in Japan for a couple of months before he suddenly passed away.

    The IRB is now after us, his former employer, for the amount of tax that the deceased still owed. According to IRB, we failed to notify that he was leaving the country and do the income tax clearance before allowing him to leave and thus we are liable to pay up. We have explained that the deceased was still in employment at the time of his death and we did not foresee that he was leaving permanently. Anyway, IRB is threatening legal action against us to recover the money.

    Are we liable to pay as claimed by IRB? Your reply and perhaps some advice would be a big help.

    Thank you very much.

    Regards,

    Ridzuan J.

    ReplyDelete
  6. Hi Ridzuan,

    I don't think the IRB has a case against your company. What section of the Income Tax Act do they intend to charge your company ? I can only see Section 83(3), (4) & (5) as the relevant sections but all of them requires knowledge of the employer that the employee is going to leave Malaysia exceeding a certain period of time.

    In your case, the employer has no way of knowing that the employee was not coming back to Malaysia.

    It is interesting to follow up on your case, you need to consult your tax agent & see what they say.

    ReplyDelete
  7. is ex-gratia payment for inadequate remunerated employee on business point of view deductible?
    is it taxable on employee?

    ReplyDelete