EMPLOYMENT INCOME

Introduction
Assessable under S4(b) of ITA 1967
The relationship between master/employer and
servant/employee must exist
* appointment of a post/holding office
* remuneration is given to servant for such
service rendered
Assessment is based on basis year regardless
of sources of employment
Derivation S13(2)-(3)
Types S13(1)(a)-(e)

Comparison

Derivation of employment income

S13(3):
S13(2)(e):
S13(2)(d):
S13(2)(c):
S13(2)(b):
S13(2)(a)

Exemption of employment income

Para 20,21, Sch 6: 60-DAYS TEST

(Page 85)
-60-days is for employment period, not days of
physically presence in Malaysia

If a NR is employed for 60 days or

less
-such period can be continuously or
not
-such period can be in one basis year
(BY) or two consecutive BYs

Types of employment income

Section 13(1)(a): cash/equivalent

Salary
Overtime
Bonus
Perquisites:Allowance

Clothing
Traveling
Entertainment
Food

Perquisites :Share option & share incentive scheme

Co. offer the employees to purchase it shares at price lower
than market price (option price)
Taxable in the year option exercised( w.e.f YA 2006)
How to compute perquisite value: section 32(1A)
The lower of market value at the time the option was granted Or
market value the option was exercised
Less: Option price

 Section 13(1)(a): cash/equivalent

Gratuity: recognition of past service
paid to employee in the course of his
employment upon resignation or
retirement from the employment
after serving along period (10 or 20
years)
Can either be fully taxable or fully
exempted

Fully Exemption of gratuity

Fully taxable of gratuity

Gratuity is fully taxable if none of the
criteria applies
The amount depends on how long an
employees has been working

Treatment of gratuity (page 140,5.2)

Section 13(1)(a): cash/equivalent (page 103)

Personal
Insurance
Internal
For
If
paid
the
computer
premium
by
employee
fund:
the employer
not
& broadband
taxable
and not
subscription:
directly contributed
exempted of its business
Professional
External
For
If
paid
employees
by
subscription
fund
the employer
: children-taxable
taxable and
for the
beneficiaries
amount of are
interest
the employee,
expense incurred
employees
by emp
fam
School/tuition
Interest subsidy
fees taxable in the amount of subsidy
Waiver of loan/advance: taxable on the amount waived
Loan to employees

Section 13(1)(a): cash/equivalent (page 103)

AssetTaxable
Credit
Scholarship
If provided
paid
card by
facilities
under
regardless
the
free
employer
PR1/2006
of charge
paid and
by
or sold
not directly
at discounted
contributed
price of its business
Excellence
Exemption
Employers
Exempted
public
ifpay
ofexclusively
service
RM2000
income
award
per
used
YA in
if itthe
is long
performance
service award
of duties
(min 10 years) , past
Excellent
Pecuniary
Taxable
service
liabilities
; on annual membership fees and amount paid for private usage

Section 13(1)(a): cash/equivalent

Income tax (exemption ) order 2009

Petrol card or petrol allowance or
travel allowance between home and
work place (max RM2400)
Petrol card or petrol allowance or
travel allowance for official duties
(max RM6000)
Allowance for parking
Meal allowance
Allowances for childcare (max
RM2400)

Section 13(1)(a): cash/equivalent

phone, telephone bills, pager, PDA and

internet subscription
Employers own good provided FOC or at
discounted value (max RM1000)
Employers own services provided free at
discounted price which such services are not
transferable
Subsidies on interest on loan for housing,
passenger MV and education (max RM300K)
(Only for employees;not for directors or
controlled companies,sole traders or
partnerships)

Section 13 (1)(b)

Benefits in kind : benefit provided by

employer and not convertible into
money
Exempted items:
Medical/dental treatment
Childcare
Food and drinks provided FOC or
subsidised by employer
Free transport
Obligatory insurance premium paid by
employer (e.g SOCSO)

Section 13 (1)(b)
Leave passage
Within Malaysia; exemption on air passage,meals,
accomodation(w.e.f YA 2007) and MAX 3 TIMES IN
MALAYSIA
Outside Malaysia; exemption of RM3000 per family for one
trip only and for leave passage for travel means restricted
to costs of passage (air fares, insurance, transit costs) but
exclude hotel accomodation

Other items are taxable according to the formula

method or the prescribed value method
-MV and related benefits
-household furniture and appliances
-utilities
-Membership of recreation clubs
-Gardener/domestic servant/guard

Section 13 (1) (c)

Living accomodation-house and

hostel/hotel
Value on house depends on:
The post that employee holds
Service director and employees= 30% S13
(1)(a) or DV (WISL)
Non service director=DV only

Duration of stay:
- apportion based on the exact
number of months and employees
occupation in the house/hotel

Section 13 (1) (c)

Dual usage or not

If used for other purpose other than
living accomodation, therefore S13(1)(C)
of the house will be apportion
accordingly
Not applicable for hotel

Number of tenant
Will be apportioned accordingly if house
is shared
Not applicable for hotel