Benefit in kind is taxable under Malaysia Income Tax Acts? How to Reduced?-Part 2

Many people or taxpayer not aware of that requirement of discloses your benefit in kind in your EA form or tax return form. Sometimes many HR or Accountants in Malaysia also ignore the need of disclose such benefit in kind in their EA form. There is responsible employer to do so! Taxpayer bear in mind that if your company or employers forgot to put it into EA form, you will need to report it into your tax form and no excuses that you don’t know or employer not put into EA form.

As earlier article mention, today IRD is difference from old time, the skills and manpower of IRD improved from year to year. Please do so and remind your employers to report correctly.

How to minimized or reduced it? Here some tips which I apply through my employment time.

1. If phone provided by company, normally will register under company name and company paid the phone bill, in this case you may need to paid the RM 600 BIK. You can request your employer to use your own bills and claim the call. (now no more monthly subscription fess, all bills is calls) Both party are enjoy the benefit. Company will claim they tax deduction and you will no need borne the tax.
If hostel is provided by company, please require a empty house, because normally hostel facilities all is 2nd hand and use it for long time, no value for money to keep such facilities and paid higher tax. Better buy it yourself.


Not much idea I can think off to reduced your burden. But I am sure some body read this article must have better idea and comment what to do and need to do. You are welcome to share with us through comment section. I will also update this article from time to time if I source news tips.

Benefit in kind whether exempt or taxable under Malaysia Income Tax Acts? How to Reduced?-Part 1

Generally they are certain expenses is exempted if provided by employers

1. Leave Passage
The Act specifically excludes from tax, benefits in the form of costs of leave passages within Malaysia not exceeding three times in a calendar year and once outside Malaysia not exceeding RM3,000 in a calendar year.
The tax exempt benefit is confined to the employee and members of his immediate family.

Tax Exempt Benefits
Besides leave passage as stated above, the following are also tax exempt :
medical and dental treatment
goods and services offered at a lower price / discount
free transport
childcare facilities / benefits

Motor vehicles and related benefits
The provision of motor vehicle to an employee for his private use constitutes a taxable benefit, the value of benefits will be the value of the private use of the car and fuel provided. For simplicity and ease of application, the value of benefits will be based on the following table:

Cost of car (when new) Annual Value of BIK Fuel Per Annum

Up to RM50,000 RM1,200 RM600
RM 50,001 - RM 75,000 RM2,400 RM900
RM 75,001 - RM100,000 RM3,600 RM1,200
RM100,001 - RM150,000 RM5,000 RM1,500
RM150,001 - RM200,000 RM7,000 RM1,800
RM200,001 - RM250,000 RM9,000 RM2,100
RM250,001 - RM350,000 RM15,000 RM2,400
RM350,001 - RM500,000 RM21,250 RM2,700
RM500,001 and above RM25,000 RM3,000

• Cost refers to actual cost or market value of the car including accessories but excluding financial charges, insurance premiums and road tax.
• Toll charges borne by the employers are deemed to be included in the value of BIK assessed for cars.
• Where the car provided is more than 5 years old the value of the car benefit to be assessed will be equivalent to half the above rates but the value of fuel provided will remain unchanged.
  Where a car is not provided throughout the basis year the value should be adjusted appropriately. Employers should indicate in the individual employee's statement of remuneration the type, year and model of the car provided to the employee.
• Where a driver is provided to an employee, the value of the benefit for private use is fixed at RM300 per month.
• Where fuel is provided without motor cars, the actual value is treated as benefit received.
  

Share Options
Where share options are granted to an employee by reason of employment or office held by him, the difference between the market value of the share at the date of grant of the options and the option price constitutes a benefit assessable to tax

Other benefits
Other benefits such as the use of household furniture are valued at certain rates for inclusion as employment benefits for Malaysian tax purposes. These rates are computed in accordance with the Inland Revenue Board's guidelines applicable from the Year of Assessment 1998 and onwards.

Generally, the annual value of a given benefit-in-kind is computed by reference to the following formula:
Annual value of benefit=cost of the asset providing benefit /amenity / prescribed average life span of asset
Cost refers to the actual cost incurred by the employer or market value of the asset.
The prescribed life span of the various assets is as follows:
Motor car 8 years
Curtains, carpets 5 years
Furniture, sewing machine 15 years
Air-conditioner 8 years
Refrigerator 10 years
Kitchen Equipment (i.e. crockery, rice cooker, electric kettle, toaster, coffee-maker, gas cooker, cooker hood, oven, dish-washer, washing machine, dryer, food processor, etc) 6 years
Piano 20 years
Organ 10 years
Colour television, VCD/Dvd 7 years
Swimming pool (detachable), sauna 15 years
Mobile telephone 5 years
Household Furnishings, Appliances, etc and Others
To avoid detailed calculations, employers may, instead of using the formula, determine the values of benefits in the form of household furnishings, equipment and appliances based on the following:
Type of accommodation
Value of benefit
i. Semi-furnished with furniture in the lounge, dining room or bedrooms
RM70 per month (RM840 per annum)
ii. Semi-furnished with furniture as in (i) above and one or more of the following:
air-conditioners ,curtains carpets
RM140 per month (RM1,680 per annum)
iii. Fully furnished with benefits as in (i) and (ii) above plus one or more of kitchen equipment, crockery, utensils and appliances
RM280 per month (RM3,360 per annum)
iv. Service charges and other bills such as for water, electricity and telephone
Service charges and bills paid by the employer

Valuation of other benefits-in-kind
Types of BIK
Annual Value of BIK
i. Mobile telephone (rental and charges) RM600
ii. Gardener RM3,600
iii. Domestic servant RM4,800
iv. Interest free loan Value of interest paid by employer
v. Subsidised loan/interest below the market value rate Subsidised loan interest paid by employer
vi. Insurance Annual insurance premium paid by employer
vii. School/tuition fees Actual school/tuition fees paid by employer
Viii. Membership in recreation clubs Membership fees paid by employer

Any Problem on tax? or any Comment

After creating this blogs 10 day ago, I received encouraging people/reader viewing this pages, I just wonder any body got any problem regarding tax in malaysia.

Please leave it at comments section on each of the article. I will try my best to looking for infor on that to answer you! Or any topic you are interests on that I will try my best too to looking or research the answer on that?

Waiting for you!

Investing in Stock market & Tax benefit from investment return?

Under Malaysia content, Dividend income is something taxable, even thought tax exemption may be issued for certain company but overall still taxable for long term.
In Malaysia content, Capital gain tax from shares investment is tax empted.

So how to reduce our obligation to paid tax or reduced tax payable? I noticed in Bursa Malaysia very little company given high dividend yields. Namely, DUTCHLADY , BATT,Shell Malaysia and also Public Bank (see other posting for future). Those company consistently given 8% to 10% to the investor, just for example Shell is given RM1.00 for each 1 share (market value at around RM10.20). Almost for sure given around 10% return for investor. Sound attractive, but remember out of RM1.00 dividend received, you need paid tax for 28% or 28 cent for that sum receive, you only received 72 cent.

How to recover the 28% given to government or tax authority? The answer is through tax payment system.

If you are taxpayer with marginal tax rates of 13%, you will able to recover the 15% from that portion through reduced your tax payment. Obviously, Listed Company now trying to declare high dividend to attract investor’s attention. But remember only concentrate to those traditional high dividend yield counters to enjoy such benefit.


Lastly but not less, it is good point to consider invest in those company with high yield. The benefit include high return on dividend (FD only 4%). But remember to declared it and keep the dividend voucher for tax purpose.

Buy Computer this year or Next year? Any tax implication?

If you are higher income groups said you annual income 70K above you will be benefit under the change in rebate system for buying news computer. If you are normal guy like me. Annual income less than 70 k, you will be better off to buy computer this year to enjoy the benefit.

The following is example to describe:

Both my husband’s and my income are assessed separately. My husband is taxed at the marginal income tax rate of 13% while I am being taxed at the marginal income tax rate of 28%. We are considering buying a new computer for the house worth RM3,000 and would like to understand the impact of the proposed budget changes.

Before the proposed changes take effect, a tax rebate amounting to RM500 was granted to either the husband or wife. Therefore, it would have had a similar tax impact whoever claims it. However, based on the proposed budget changes, it would be more tax advantageous if you purchase and claim the expense as a relief in your tax return as it will result in tax savings at 28% (RM3,000 at 28% = RM840) versus 13% (RM3,000 at 13% = RM390) for your husband.

Additional consideration
1. That is only example that you marginal tax rates at 13% or 28%. If your income
level is lower, then the less benefit you will enjoy!
2. Now in Market , many computer will cost you less than 2000 per unit so the
benefit you granted will be less than the example above.

Just for another example, if i buy a computer 2006, at costs RM 1,500.00 and I enjoy the RM500 rebate or 33% tax rebate of my computer costs. if i buy at 2007, i will only enjoy RM1,500.00 X Marginal tax rates

Conclusion:

If you want to buy PC at near term better buy it at 2006, instead of waiting to 2007. The only exception when your marginal tax rates exceeds 17% and you are willing to buy a computer costs more than RM3,000.00

Allowance for Computer! Benefit increase or reduce?

Under the latest budget, The allowance for purchase of computer already amend from one off RM 500 deduct to tax payer( once per 5 year) to RM3,000.00 as aggregate income (3 year once). I am thinking of buying computer, just wonder better off to buy or not? Better benefit?? or less??????

think of that... next parts will be the anwer!

oo Costly! To paid tax consultants fees

Everyone of us is tax payer, Do u heard the name of Tax evasion / abolition, This illegal in Malaysian contenting will imposed heavy penalty on that .The rule apply to prehensile and company as well.

when 2004, the government change the system to current year system, many of us facing fear and uncertainty, we not accountant or tax consultant.... Many ruling we donno... Any deduction.... Or ..... Many question mark ????????

In view of government employ more and more man power in inland revenue, expected the tax audit imposed currently imposed to corporate and soon will imposed to us. If you are just small business units or an employee of the company. Can you imagine one day the officer sit down at your shop, informs of waiting hall of your company and waiting you.,,, many many question marks?????/
Many of us reluctant to look for tax consultant! May be too costly !! And keep our fear continuousness this blog is place to share , to be smarts tax payer and tax saving on our hard earn money and without again the law.

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