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FORM EA

FORM EA. PART B: I tem 1 - S13(1)(a). Form EA. Purpose of Form EA Enable the employee to complete and submit his tax return. Part B : Item 1. Gross salary, wages and leave pay Fees( including director’s fees), commission or bonus Gross tips, perquisites, other gratuity or allowances.

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FORM EA

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  1. FORM EA PART B: Item 1 - S13(1)(a)

  2. Form EA • Purpose of Form EA • Enable the employee to complete and submit his tax return.

  3. Part B : Item 1 • Gross salary, wages and leave pay • Fees( including director’s fees), commission or bonus • Gross tips, perquisites, other gratuity or allowances

  4. Part B : Item 1 Bonus for Relevant Period • Bonus payment for past year service (say 2005) which is received in 2006 should be taxed in YA 2005. Section 25(2) apply. • However in practice, if bonus payment for the past year service (say 2004) has consistently been treated as income in following YA (YA 2005), then IRB would allowed the bonus for the year 2005 to be treated as income in the YA 2006.

  5. Part B : Item 1 Perquisites PUBLIC RULING 1/2006 wef YA 2005 Is a benefit provided? What is the taxable value? When is this perquisite taxable?

  6. PerquisitesPara 5.2 PR 1/2006 Characteristics are: • Received regularly or casually • Benefit in cash or convertible into money: • Items provided can be sold, assigned transferred or convertible into cash • Benefits received are from employer or third party. • Benefit arises in respect of employment • Caused by the employment (Perquisite provided by reason of employment not as an individual)

  7. Are these perquisites? • Shares provided to employee • Tips • Individual club membership • Watch awarded for long service award • Cash gifts for securing an important contract for his employer • Wedding gift • Passing exams with excellent results • Swimming across English Channel • Climbing the highest mountain

  8. Employee’s Pecuniary LiabilitiesPara 6.3 PR 1/2006 • Perquisite : Expense payment Expense (pecuniary liabilities) of the employee paid by employer. • Taxable value: Amount of pecuniary liabilities paid less employee’s contribution • Reduced taxable value: The amenities are used for official duty. • Must be substantiated with a certification from employer.

  9. Electricity, Water, Telephone BillsPara 6.3.2 PR1/2006 • Perquisite : Expense payment (s .13(1)(a)) • Facilities provided by employer (s .13(1)(b)) • Bills under employer’s name etc • Taxable value: amount paid less employee’s contribution • Taxable period : perquisite is received (s 25(1))

  10. Car Insurance Premium, Road Tax, Parking Fee, Car Maintenance Charges • Expense payment: personal liability of employee (s .13(1)(a)) • Car provided by company (s .13(1)(b)) • Taxable value: amount paid less employee’s contribution

  11. Credit Card Facilities • Expense payment • Private purposes (s.13(1)(a)) • Solely for performing his duties (Not perquisite) • Taxable value: Amount paid less employee’s contribution

  12. Questions Are the payment made good to employees taxable benefits: • Parking fees for official meetings in KL • LRT fees to Headquarters • Travelling allowance • A doctor (employee) was reimbursed the actual expenses for performing his duties.

  13. Loan InterestPara 6.5 PR1/2006 • Expense payment • Taxable value: Depends on the sources of funds:

  14. Loan InterestPara 6.5 PR1/2006

  15. Loan Interest : Taxable ValuePara 6.5 PR1/2006 Amount of interest charged by external fund providers XX Less:- Amount of nominee interest paid XX ------------ Value of perquisite XX ------------

  16. Question • Ali took a housing loan from his employer at a subsidised interest rate of 4% per annum. The rate of bank loan obtained for this loan by the employer is 7% per annum. • The loan taken in the whole year of 2006 was RM 200,000. • What is the taxable benefit for Ali?

  17. Question • An employee took a housing loan from a bank. The company agreed to made good the interest paid by the employee. • Is there any taxable benefit?

  18. Value of Benefits on Recreational Clubs

  19. Question • Lim was provided an individual membership to an equestrian club. It comprises of membership fees of RM 10,000 and monthly subscription of RM 200 from May 2006. • What is the taxable benefit for Lim? • What section of the Income Tax Act,1967 is the income taxable?

  20. Tuition or School Fees for ChildPara 6.7 PR1/2006 • Expense payment (s.13(1)(a)) • Education Refund Plan • Plan for reimbursement of expenses on employees education • Course related to performance of duties • Purpose enhancing education & skills of employee

  21. Insurance PremiumsPara 6.8 PR1/2006 • Expense payment (s.13(1)(a)) • Taxable value:- premium paid • Tax exempt premiums: • Obligatory for foreign worker (SOSCO) • Group insurance accident policy • Aviation Travel Insurance • Contribution by employer to health care management organization for employee’s medical cost

  22. Question Lim was provided by the employer a life insurance policy. The wife is the beneficiary of the policy.The employer paid the monthly premium of RM 700 from May 2006. What is the taxable value in 2006 and the relevant section 13 applicable?

  23. Gardener, Driver, Domestic Help or GuardPara 6.9 PR1/2006 • Expense payment: (s.13(1)(a)) (Employed by employee) • Taxable value: Amount paid • Gardener, drivers etc. provided by employers: s 13(1)(b)

  24. Question • Mr. Wong received a salary of RM 60,000. • He was provided with a servant who is employed and paid by the company. • What is the gross income under s 13(1)(a)?

  25. ScholarshipPara 6.10 PR1/2006 • Tax exempt benefit: Para 24 Schedule 6 of the ITA • Salary paid to employee is taxable

  26. Waiver of Loan or AdvancePara 6.11 PR1/2006 • Loan to employee • Employer waives the obligation to pay • Benefit arises where the loan waived is for payment of services • Taxable value: the amount is waived • Taxable period: basis period the loan is waived (e.g. 8)

  27. Assets Provided Free of charge or Sold at Discounted PricesPara 6.12 PR1/2006 • Taxable value: Difference bet. market value and amount paid by employee

  28. Question • The company sold the company’s used car (Volvo) to Mr Tan for RM6,000 in 2006. • The market value of the car at the time of disposal was RM 24,000. • What is the gross income under s 13(1)(a)?

  29. Gift VouchersPara 6.13 PR1/2006 • Benefit arises where gift vouchers are of a recurring nature and that it was expected. • Taxable value: Value of the gift vouchers.

  30. Gift of a Personal ComputerPara 6.14 PR1/2006 • Taxable value: MV of computer • Eg . Mr Siah was provided a new computer for his personal use. The MV of the computer costs RM 7,000 in 2006. Amount taxable to Mr Siah is RM 7,000.

  31. Professional Subscriptions Para 6.16 PR1/2006 • Taxable under S.13(1)(a) • Exempt benefit : Where membership of professional body is essential to business of employer

  32. Reimbursements of Expenses • Employer has made good the expenses • of employee • Expense payment made by employer for: • Personal benefit • Solely for purposes of employment

  33. Reimbursement/Benefits • Expense payment for purposes of employment. • Not taxable if expended in the course of • carrying out his employment duties. • No gain to the employee • Eg An employee travels to visit a customer and recovers the the expenses from the company. • Note: These reimbursements need not be included in Form EA

  34. Part B : Item 1 Income Tax Borne by Employer Public Ruling 2/2006WEF YA2005 TAX BORNE BY EMPLOYERS

  35. Income Tax Borne by Employers(Tax Allowance) Para 3 PR2/2006 • Income tax expense (monetary liability) paid by employer • Tax allowance is assessable as income under S.13(1)(a) • Taxable value is the employer’s contribution.

  36. Timing to Recognise Tax AllowancePara5.1 PR 2/2006 • Tax allowance for a YA is assessable as income in the basis year when actual amount of tax is ascertained. • As such, an employee would not be taxed on the benefit in the basis year when employment commences.

  37. Example 1PR 2/2006 • Tax allowance for the YA2005 (say RM38,235) is assessable as section 13(1)(a) income in YA 2006 • Tax Allowance for YA2006 (say RM62,880.80) is assessable as section 13(1)(a) income in YA2007

  38. Timing to Recognise Additional Tax Allowance arising from Additional AssessmentPara 5.2 PR2/2006 • Additional tax allowance is assessable as income in the basis year the additional assessment is made. • It does not relate back to the Year of Assessment concerned. Example: Additional assessment for YA2005 made in the Year 2007 results in additional tax allowance.The additional amount is assessable in YA 2007.

  39. Timing to Recognise Additional Tax Allowance arising from Additional AssessmentPara 5.2 PR2/2006

  40. Reduced Tax Allowance Due To Reduced Assessment in a YAPara5.3 PR2006 • Reduced tax allowance requires to relate back to the year of assessment the tax allowance is assessable as income. • The assessment for that YA where the tax allowance is assessable is reopened (recomputed) including the subsequent YA’s. Example: Reduced assessment in YA 2004 would result in a reduced tax allowance assessable in YA2005 and 2006. The YA 2005 and 2006 is recomputed .

  41. Reduced Tax Allowance Due To Reduced Assessment in a YAPara5.3 PR2006 • Eg Refer example 3 PR 2/2006

  42. Employee’s Contribution to a Portion of Tax AllowancePara 5.4 PR2/2006 • Taxable value of Tax allowance is the employers contribution only.

  43. Penalty imposed for Non-Compliant of Tax return.Para 5.5 PR2/2006 • Taxable value of tax allowance is the employers contribution including penalty.

  44. Leavers CasesPara 5.6 PR2/2006 • S.25(5): Income received in advance Income assessable in the year of receipt • S.25(6): Left Malaysia NR for the following year Ceased employment income from Malaysia Income assessable in the basis period in which he leaves Malaysia (Unless election is made)

  45. Leavers Case (cont’d) • S.25(5), S.25(6) without election apply • In the final YA, there may be 2 tax allowances.

  46. Question • An employee who was employed in Malaysia for several years leaves Malaysia on 30.09.2006, having leave pay till 31st March, 2007. His income is at follows :- • Salary 01.01.2006 – 30.09.2006 RM108,000 • Leave pay 01.10.2006 –31.12.2006 RM 36,000 01.01.2007 to 31.03.2007 RM 36,000 • What is the gross income for year of assessment 2006 if Section 25(6) election does not apply?

  47. Part B : Item 1 Perquisites PUBLIC RULING 4/2004 EMPLOYEE SHARE OPTION SCHEME BENEFIT [wef YA 2004]

  48. Employee Shares SchemePara 5.3 • Employee Share Purchase Plan • Employee Share Option Scheme (ESOS) • Warrant Scheme • Award Scheme

  49. Employee Share Purchase PlanPara 5.3 • Shares are issued in the absence of a share option scheme at less than the market value or free of charge to an employee. • Taxable Value: • The difference between market value at the date of issue and the issue price constitutes taxable employment income.

  50. Eg • Peter receives 10,000 unit of shares free of charge from the employer. The MV of the shares is RM 1.00 per unit. • The taxable gross income is RM 10,000.

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