EMPLOYMENT INCOME , DIVIDEND , INTEREST INCOME - INTEREST INCOME
10 important questions on EMPLOYMENT INCOME , DIVIDEND , INTEREST INCOME - INTEREST INCOME
When is S140B applicable for loans or advances to directors?
What conditions define a "Director" in relation to a company?
- Is a manager
- Is remunerated out of company funds.
- Is a beneficial owner of 20% or more of the ordinary share capital.
When is S140B not applicable for loans to directors?
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What are the ways of financing loans/advances to directors?
- Internal fund: Arise from capital, retained earnings, reserves (subject to S140B).
- External fund: Arise from 3rd parties (not subject to S140B).
- Mixed fund: Both internal and external, only internal portion subject to S140B.
What is the S140B formula used for?
- Total amount of loans or advances outstanding at the end of the calendar month.
- ALR of commercial banks published by BNM.
How is the total loans or advances outstanding at the end of the calendar month calculated?
What is the interest income deemed to be received by the company based on?
How is the interest benefit from an external fund loan treated for a director?
- The interest benefit is treated as a perquisite.
- It is taxed under s.13(1)(a) as part of the director’s employment income.
What is the tax implication on the employer for loans from external funds to directors?
- For the employer, external loans mean S140B is not applicable.
- The company does not incur any cost to provide the loan/advance to the director.
What happens if a loan is from an internal fund?
- The director will not be taxed on such a benefit.
- The company would not have incurred any cost to provide the loan/advance to the director.
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