Tutorial 2: Employment Income
Question 1
(a) Explain briefly ANY FOUR differences in the tax treatments in respect of income from
employment (contract of service) and income from business (contract for service) in
Malaysia.
Contract of service (Employment) Contract for service (Business)
Entitled for capital allowances in respect of
1 Not entitled to capital allowances qualifying expenditure incurred on
purchases of PPE.
Business losses can be deducted against
2 No loss relief
aggregate income (all sources)
Unabsorded business losses can be carried
forward and to be allowed against the
3 No adjusted loss from an employment
aggregate income (all business sources) in
the subsequent year(s) of assessment.
Employment income may be exempt
from tax in the case of a non-resident
who exercises an employment in Business income is assessable to tax for
4 Malaysia for a period or periods not whatever length of period if it is derived
exceeding 60 days in the basis year or from Malaysia.
two successive basis years under certain
conditions
Various tax incentives are not available Such tax incentives are available only for
5
for employment income business income.
Compensation for loss of employment is
exempt at the rate of RM10,000 per No such exemption from tax for business
6
completed year of services under Para income.
15 Sch 6 ITA 1967
Tax payment for employment income Tax payment for individual business
will be made by employer through owners, they will settle it tax thru 6 bi-
7
Schedular Tax Deduction Scheme monthly installmet scheme (CP500) that
(STD). issued by the IRB
Deduction of expenses for employment Deduction of expenses under Section 33 of
8 income will be more strict and rigid as the ITA 1967 for business income is more
compared to business income flexible
(b) In respect of employment income, identify ANY FIVE (5) types of benefits in kind that are
exempted from income tax.
1. Medical and dental benefits (oneself & members od immediate family)
2. Local leave passages not exceeding three in a basis year (inclusive of food and lodging) for
the employee and members of immediate family
3. One overseas leave passage, but not exceeding RM3,000
4. Child care benefit
5. Goods sold to employee at a discount but restricted to RM1,000 or services at a discount
6. Food and drink or meals
7. Interest-free loan (restricted to RM300,00) given to an employee for purchase of house or car
or education and it is not from surplus fund of the company
8. Re-imbursement of expenses (travelling claims)
Question 2
Mr. Tan is under employment as a manager with AB Sdn. Bhd. His income for the year ended
31.12.2021 are as follows:
Salary (whole year) RM180,000
Bonus (two months) RM 30,000
A car was provided to Mr. Tan for the whole year. It was bought by the company 3 years ago
at a cost of RM140,000. A driver was provided for the period from 1.4.2021 to 31.12.2021.
An unfurnished house was provided for the whole year. The rent paid by the employer is
RM2,500 per month.
Two local leave passages for Mr. Tan and his wife were provided by his employer in the year
2021. The total cost incurred by the employer was RM8,000.
Required:
Compute the gross income from employment for Mr. Tan for the Year of Assessment 2021.
Mr. Tan's tax computation for YA 2021
Employment income
Section 13(1)(a) RM RM
Salary 180,000
Bonus 30,000
210,000
Section 13(1)(b)
Car 5,000
Driver (RM600*9 months) 5,400
Local leave passage (exempted , not exceeding 3 times) exempted
10,400
Section 13(1)(c)
Unfurnished house
-Defined value (RM2,500*12 months) 30,000
-30% x S13(1)(a) 63,000
whichever is lower 30,000
Gross income from employment 250,400
Question 3
Mr. Sunny is employed as a senior engineer with Light Sdn. Bhd. (LSB) His income for the
year ended 31.12.2021 are as follows:
Salary (whole year) RM240,000
Bonus (3 months) paid on 30.12.2021 RM 60,000
Travelling allowance RM 12,000
Entertainment allowance RM 6,000
A car was provided to Mr. Sunny for use in work since 1.7.2021. It was bought by LSB 7 years
ago at a cost of RM210,000. No fuel was provided by the employer. A domestic maid was
employed by LSB at RM700 per month and provided to Mr. Sunny for the full year.
A fully furnished house was provided for the period 1.7.2021 to 31.12.2021. LSB paid
RM2,600 for the monthly rent of the house (including RM600 for full furnishing). Mr. Sunny
paid RM500 per month as token rent to his employer.
Two leave passages (overseas) were provided to Mr. Sunny by LSB in the year 2021. The
employer incurred RM2,000 to provide a leave passage to and for Hong Kong, and RM6,000
was for a leave passage to and fro Canada.
In the course of performing his duty in the year 2021, Mr. Sunny spent RM9,000 in travelling
and RM8,000 in entertaining clients of LSB. He paid RM2,000 as subscription to the Board of
Engineers (an approved professional body) on 1.2.2021.
Required:
Compute the adjusted income from employment for Mr. Sunny for the Year of Assessment 2021.
Mr. Sunny's tax computation for YA 2021
Employment income
Section 13(1)(a) RM RM
Salary 240,000
Bonus 60,000
Travelling allowance (RM12,000-RM6,000) 6,000
Entertainment allowance 6,000
312,000
Section 13(1)(b)
Car (RM9,000/2*6/12) 2,250
Domestic maid 4,800
Fully - furnished house (RM280*6 months) 1,680
Oversea leave passage (RM6,000-3,000)+2,000 5,000
13,730
Section 13(1)(c)
Fully - furnished house
-Defined value (RM2,600-600)*12 24,000
-30% x S13(1)(a) 93,600
whichever is lower (RM24,000*6/12) 12,000
Gross income from employment 337,730
Less: Allowance expenses
Travelling expense (RM9,000-6,000) 3,000
Entertainment expense 6,000
Subscription to professional body 2,000
Token paid to LSB (RM500*6 months) 3,000
14,000
Statutory employment income / Total income 323,730
Question 4
Dennis, a civil engineer，works with Daylight Sdn Bhd since 2012, was sent by his employer
to a subsidiary company in China from 1 January 2020 to 31 December 2021.
His overseas duties include planning, evaluation and implementation of construction projects
in China. On completion of his overseas duties, Dennis continued to work with Daylight on
his return to Malaysia.
The subsidiary company in China would be responsible for the decision making and would
issue all the instruction for Dennis’s work in China. All plans and evaluation reports will be
sent to the company in China.
The company in China would bear the remuneration of Dennis during this period in China.
Required:
Determine whether the employment in China for YA 2020 and YA2021 is incidental to the
employment in Malaysia.
Overseas duties performed by Dennis are NOT considered incidental to the employment in
Malaysia.
- It is not connected to or part and parcel of his regular duties performed in Malaysia.
- The overseas duties are dor an independent purpose and not to further the purpose of
Daylight in Malaysia, and the decision making of the work done by the subsidiary in
China.
- The company in China would bear the remuneration of Dennis during the period he is in
China.
- Daylight also did not bear any of the risks or receive the benefits for the work done in
China.
Question 5
James, an Australian national, is a tax resident in Malaysia for the year of assessment 2021. He
has been employed as a marketing manager by Cooper Sdn. Bhd. since 2019. His
remuneration details for the year 2021 are as follows:
─ Salary of RM12,000 per month.
─ Entertainment allowance of RM2,500 per month.
─ Travelling allowance of RM2,000 per month.
─ James is provided with a used car which was purchased by the company in 2015 for
RM130,000. The cost of the car when new was RM180,000.
─ An overseas leave passage to Bali was paid for him, his wife and his mother. The company
paid RM1,400 per person for their holiday trip in Bali.
─ A fully furnished house was provided to him where the company paid a monthly rental of
RM3,800 including rental for furnishings of RM300 commencing from 1 August 2021.
─ Reimbursement of salary in respect of a domestic maid hired by James at a monthly salary of
RM1,500 commencing from 1 October 2021.
While performing his duty in the year 2021, he spent RM33,000 in entertaining clients and
incurred RM20,000 for travelling expenses. He also paid professional subscription fee of
RM1,500 to the Chartered Institute of Marketing.
Required:
Calculate the statutory employment income of James for the year of assessment 2021.
James's tax computation for YA 2021
Employment income
Section 13(1)(a) RM RM
Salary (RM12,000*12) 144,000
Entertainment allowance (RM2,500*12) 30,000
Travelling allowance (RM2,000*12-6,000) 18,000
Domestic maid ((RM1,500*3) 4,500
196,500
Section 13(1)(b)
Car (RM7,000/2) 3,500
Overseas leave passage (Mother) 1,400
Fully furnished house (RM280*5) 1,400
6,300
Section 13(1)(c)
Fully - furnished house
-Defined value (RM3,800-300)*12 42,000
-30% x S13(1)(a) 58,950
whichever is lower (RM42,000*5/12) 17,500
Gross income from employment 220,300
Less: Allowance expenses
Entertainment expense 30,000
Travelling expense (RM20,000-6,000) 14,000
Subscription to professional body 1,500
45,500
Statutory employment income 174,800
