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EMPLOYMENT INCOME , DIVIDEND , INTEREST INCOME - EMPLOYMENT INCOME

Q: What are the conditions for full exemption under Para 25 Sch 6 for gratuity?

Ill health 55 years old or any compulsory statutory retirement age Work for ≥ 10 continuous years with same employer/same group of company 50-54 years old per collective agreement/employment contract and work for ≥ 10 continuous years with same employer/same group of company

Q: What is the nature of overseas duties as per point 3?

The overseas duties are temporary as the employee resumes work with his employer in Malaysia after completion of the overseas duties.

Q: What is the exemption for gratuity if the conditions are not met?

Gratuity will be given an exemption of RM1,000 for every completed year of service for same employer (cannot be in same group of company). Gratuity = (1,000 x no of completed years of service) = taxable in YA of receipt.

34 important questions on EMPLOYMENT INCOME , DIVIDEND , INTEREST INCOME - EMPLOYMENT INCOME

What defines employment income according to the ACCA ATX-MYS notes?

There is a master and servant relationship.
There is an appointment of office, i.e., directors or chairman of a company.

What is stated in S13(2)(a) regarding employment?

Employment is exercised in Malaysia.

What does S13(2)(c) specify about employee duties?

Employee performs duties outside Malaysia.
These duties are incidental to the exercise of the employment in Malaysia.

What does S13(2)(d) say about directors?

A person is a director of a Malaysian resident company for the basis year for a year of assessment.

What happens when an employee is seconded overseas according to point 1?

Employee exercised his employment with the employer in Malaysia prior to being seconded overseas.

How are duties performed outside Malaysia connected to duties in Malaysia?

They are connected with or are part and parcel of the employee’s regular duties in Malaysia.

What are the conditions for full exemption under Para 25 Sch 6 for gratuity?

Ill health
55 years old or any compulsory statutory retirement age
Work for ≥ 10 continuous years with same employer/same group of company
50-54 years old per collective agreement/employment contract and work for ≥ 10 continuous years with same employer/same group of company

What is the nature of overseas duties as per point 3?

The overseas duties are temporary as the employee resumes work with his employer in Malaysia after completion of the overseas duties.

What is the exemption for gratuity if the conditions are not met?

Gratuity will be given an exemption of RM1,000 for every completed year of service for same employer (cannot be in same group of company). Gratuity = (1,000 x no of completed years of service) = taxable in YA of receipt.

How does the employer in Malaysia control duties outside Malaysia?

By setting standards, measuring actual performance, and taking corrective action based on reports received.

What is the condition for full exemption for compensation for loss of employment?

Full exemption is given for ill health.

What benefits does a company in Malaysia enjoy from overseas duties?

Company in Malaysia enjoys the benefits from the overseas duties as it bears the cost of the employee’s remuneration during the overseas secondment.

What is the partial exemption for compensation for loss of employment? And when is it given?

Partial exemption is RM10,000 per completed year of service with the same employer/group of company.

Given for premature termination of employment contract, i.e., Voluntary separation scheme, the employee must have the prospect of continuing employment up to retirement age. Weongful dismissal and Restrictive covenant

What types of income are included under S13(1)(a)?

Cash/cash convertible
Salary
Allowances
Gratuity
Shares scheme or ESOS

What happens if an employee works up to the full term of employment?

The employee is eligible for gratuity under S13(1)(a) employment income. This is different from compensation for loss of employment under S13(e) employment income.

What is the exemption for travelling allowance under S13(1)(a)?

Travelling allowance exemption is 6k.
Child allowance is 2,400.
Excellent service award, long service award >=10 yrs is 2,000.

What is included under non-cash convertible/BIK according to S13(1)(b)?

Car
Driver: 600pm
Maid: 400pm
Gardener: 300pm

What is the exemption for overseas leave passage under S13(1)(b)?

Overseas leave passage exemption is 3,000.
Local leave passage is 3x exemption.

What is the rule for employee/service director(<=5% shareholding control) on accomadation

DV
30% of S13(1)(a) or S13(1)(c) (excluding shares scheme).

whichever is lower

What is the rule for a director of a controlled company with shareholding >20% under S13(1)(c)?

Define value(DV)

What is the taxation rule for unapproved provident fund under S13(1)(d)?

Employer’s contribution is taxable.
Employee’s contribution is not taxable as it has been taxed as salary.
Interest is taxable.
EPF is not taxable as it is an approved fund.

What does S13(1)(e) cover?

Compensation for loss of employment (CLE).

What is the rule for hostel/hotel for employee/service dir and director of controlled co?

hostel/hotel for employee or service director: 3% x S13(1)(a).

Hostel/hotel for director of controlled co: the actual rate.

What is the rule to have control of controlled company?

Less than 50 Shareholders
Controled by 5 or less people

What is the taxable amount if a share is given free?

If a share is given free, it is taxable at MV in the YA the share award is given.

How is the taxable amount calculated if a share is given at a discount?

If a share is given at a discount, the discount (MV less purchase cost) is taxable in the YA the share award is given.

How is tax levied on the market value of shares when an option is exercised?

Tax on the market value of shares on the exercisable date or exercised date (whichever is lower) minus price paid for the shares in the YA the option is exercised.

What happens when an employee gives up rights to the ESOS for consideration?

When an employee gives up rights to the ESOS for consideration, it is taxable as S4(b) income.

What happens when a company acquires its own shares from the stock exchange?

These shares are held in treasury, representing investment in shares, which is not deductible.

How are new shares issued to employees treated in terms of cost?

Issuing new shares to employees involves just movement of accounts. There is no cost incurred wholly and exclusively in production of income, so nothing is deductible.

When are the YA shares vested to the employee, and what is deductible?

YA shares are vested to the employee in the year the employee exercises the option. The cost of investment is deductible at this point.

What is the vesting date for ESOS and share awards with vesting conditions?

For ESOS, the vesting date is when employees exercise the option. For share awards with vesting conditions, the vesting date is when shares are vested.

What costs are included in the deduction for treasury shares transferred to employees?

Brokerage charges
Interest cost
Commission
Acquiring cost
Stamp duty .

The amount paid by the employee is deducted.

What is the amount deductible for the employer in the year the ESOS is exercised?

The amount deductible for the employer in the year the ESOS is exercised is the net cost after deducting the amount paid by the employee to purchase the treasury shares.

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ATX

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