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FORM EA

FORM EA. PART B: BENEFITS IN KIND Item 2: S13(1)(b). Nota Penerangan E 2006 [LHDN] pg 3. Report all BIK not convertible into cash Refer to PR 2/2004 For car benefit, state: Type, year made, model and date of the car provided. PUBLIC RULING 2/2004 BENEFITS-IN-KIND [ wef YA 2004].

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FORM EA

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  1. FORM EA PART B: BENEFITS IN KIND Item 2: S13(1)(b)

  2. Nota Penerangan E 2006 [LHDN] pg 3 • Report all BIK not convertible into cash • Refer to PR 2/2004 • For car benefit, state: • Type, year made, model and date of the car provided

  3. PUBLIC RULING 2/2004 BENEFITS-IN-KIND [ wef YA 2004]

  4. THE LAW[On Benefit in Kind (BIK)] • Section 13(1)(b) An amount equal to the value of use or enjoyment by the employee of any benefit or amenity (not being a benefit or amenity convertible into money) provided by the employer or on behalf of the employer, excluding…..

  5. CHARACTER OF THE BENEFIT

  6. What is BIK?Para 4.1 PR 2/04 • No definition on the word ‘benefit’ • Source of benefit: • Provided by/on behalf of the employer - Third party might actually provide the benefit • Destination of Benefit: Used or enjoyed by the employee, his spouse, family, servants, dependents and guests. [13(4)]

  7. BIK Para 4.2 PR 2/04 • Non-cash benefits : “not convertible into cash” • Benefit cannot be sold, assigned or exchanged for cash either because ofemployment contract or due to the nature of the benefit.

  8. BIK Eg: Benefits provided by the employer: • Motor Cars and Fuel • Household Furnishings • Mobile Telephone • Gardeners/Drivers/Domestic help • Club Membership – corporate membership • Free travel

  9. TAX-EXEMPT BIKPara 4.3 & 4.4 • Food and drinks provided free of charge • Free transport bet home/pick up pt & workplace • Leave passages • Within Malaysia – 3x in a year • Outside Malaysia – once [limited to RM 3000] • For employee and members of his immediate family • Spouse and children • Legitimate or step child or legally adopted • Benefits solely for performance of duty

  10. TAX-EXEMPT BIKPara 4.3 & 4.4 • Medical, dental or child care • Insurance premiums which are obligatory for foreign workers • Group insurance premium to cover workers in the event of accident • Goods offered at a discount

  11. TAX EXEMPT BENEFITSSECOND ADDENDUM PR 2/2004 Further conditions for goods and services: • not convertible into cash • used by the ‘employee’ • provided to employee as a whole and not specifically to certain group only • consumables, product not > RM 200.

  12. VALUATION OF THE BENEFIT

  13. Calculating Taxable Value of BIK?Para 5.1 & 5.3.1 • Formula Method • Prescribed Value Method ( as concession) • Actual Value paid • Either method for valuation • If no prescribed value given, apply the ‘formula’. • Principle of consistency

  14. FormulaPara5.2.1 Cost to employer of benefit/ facility Prescribed lifespan of benefit/facility = Annual value Note: Prescribed Average Lifespan (PAL) stated in PR 2/04 Appendix 1

  15. Reduced Taxable Annual ValueFormula Method Para 5.2.4 • Provided < one year • Share with another employee • Used for business purposes • (Only for formula method)

  16. Prescribed Value Method(PVM) Value prescribed by DGIR as per Appendix 2, PR 2/2004

  17. Reduced Taxable Annual ValuePrescribed ValueMethod Para 5.3.3 • Provided < one year • Share with another employee No abatement for business usage

  18. CAR BENEFITS PART B: Item 2(a)

  19. CAR BENEFITPara 6.1.1 • Benefit arises if: • used for travelling bet home and office • kept at employee’s home. • Toll fees, maintenance charges, annual road tax and insurance are not regarded as part of BIK.

  20. CAR BENEFIT – FormulaPara 6.1.2 Special Treatment: Formula = Cost of the car x 80% 8 (PAL) Value of BIK include toll fees paid by employer. Maintenance cost not regarded as part of BIK

  21. Prescribed Value of Motorcar and Fuel (New) RM Cost of Car Annual Prescribed Annual Prescribed Benefit of Motorcar Benefit of Petrol RM RM Up to 50,000 1,200 600 50,001 -75,000 2,400 900 75,001-100,000 3,600 1,200 100,001-150,000 5,000 1,500 150,001-200,000 7,000 1,800 200,001-250,000 9,000 2,100 250,001 350,000 15,000 2,400 350,001-500,000 21,250 2,700 500,001 and above 25,000 3,000

  22. Q:Employee B is provided with a used car which was purchased by his employer for RM120,000. The cost of the car when new was RM205,000. What is the taxable value of the car based on the prescribed table? A: The taxable value in respect of the car would be RM9,000

  23. CAR BENEFIT: Eg • Cost of Car Private usage Fuel (when new) 75,000 2,400 900 90,000 3,600 1,200 210,000 9,000 2,100 550,000 25,000 3,000 Value of BIK include toll fees paid by employer. Maintenance cost not regarded as part of BIK

  24. Car Benefit : Prescribed Value Cost of car is the actual value when new irrespective that it is a secondhand or leased motorcar. ‘Actual value’ is inclusive of accessories but exclude financial charges, insurance and road tax. Reconditioned car first registered in Malaysia is considered new car.

  25. Comparison Cost of car 50,000 75,000 75,001 100,000 FM 5,000 7,500 7,500 10,000 PVM 2,400 2,400 3,600 3,600 Difference 2,600 5,100 3,900 6,400

  26. Prescribed Mthd- Reduced Taxable Value • Age of car > 5 years . PV is reduced to 50%. • [ Not applicable to formula mtd] • Car “in use” < 1 year period • Shared with other employees

  27. Formula Mthd- Reduced Taxable Value • Car “in use” < 1 year period • Shared with other employees • Used partly for business purposes. • Employee’s contribution to employer for the benefit • [ Not applicable to PV mtd]

  28. FUEL BENEFIT: PV Method • New Car Private usage Fuel ( Cost when new) (PVM) (PVM) 75,000 2,400 900 • > 5 year old car Private usage Fuel • (Cost when new) • 75,000 1,200 900

  29. FUEL BENEFIT: Formula Mtd • New Car Private usage Fuel ( Cost when new) (Formula) (Actual) 75,000/8 x 80% 7,500 6,000 • > 5 year old car 7,500 6,000 (Cost when new) (No reduction) 75,000

  30. Fuel Benefit OnlyPara 6.2 Petrol provided without car - the taxable benefit is the actual value of petrol provided to employee

  31. Driver BenefitPara 6.3 If driver is provided the value of benefit is RM 600 per month. Pool of drivers for business purposes –no taxable benefit. (para 6.9.3 PR 1/2006)

  32. Household Furnishing Benefit-PVMAppendix 2

  33. Reduced Taxable valueJust & Reasonable • Benefit provided [3] – [1] • Taxable value = 3,360 – 840 = 2,520 • Period < 1 year • Shared between employees

  34. Household Furnishing Benefit-PVMPara 6.4.1 No Reduced Value for: Employee contribution to employer for the benefit

  35. Exempt BenefitNota Penerangan pg 5 • Fans • Water heater

  36. Recreational club membership

  37. Other BIK-PVMAppendix 2 Subscription paid by the employer Recreational Club Membership

  38. Employer’s Responsibility • S 83(1) • Report in EA /Form E • Penalty S 120(1)

  39. Employee’s ResponsibilityPara 6.1.10 & 9 • Record Keeping: • Reduced taxable value Sufficient records - Official use of any BIK - Employee contribution • 7 years

  40. PUBLIC RULING 1/2003TAX TREATMENT ON LEAVE PASSAGE[wef YA 2003] PART B: Item 2(e)

  41. Character of Leave Passage • Leave passage means travelling during a period of absence or vacation from duty of employment • Leave passage cost means the cost of fares

  42. Exemption on Leave Passage • Local leave passage (within Malaysia) • Not exceeding 3 times in any calendar year • Overseas leave passage (outside Malaysia) • One leave passage overseas • Not exceeding RM 3000 • In any calendar year

  43. Exemption on Leave Passage • Include leave passage provided to the employee, spouse(s) and children • Does not apply to sole proprietorships or partners • Does not apply for official trips.

  44. Taxable Leave Passage • Local leave passage (within Malaysia) • Exceeding 3 times in any calendar year • Overseas leave passage • One leave passage exceeding the limit of RM3000 in any calendar year. • Exceeding one overseas leave passages undertaken in the same calendar year

  45. Example • In the year 2006, George an employee of MayBank was provided a trip to Mauritius for holiday. The trip cost RM3,500 • George is exempted RM3,000 while RM 500 is taxable.

  46. Example Trip RM 1.1.2006 Mauritius 4,500 1.6.2006 Kuching, Sarawak 1,600 1.7.2006 Kota Bahru 2,000 Exempted: local trips and RM 3,000 for overseas trip.

  47. Example – overseas leave passage Date Trip Cost(RM) 1.5.06 Mauritus 1,500 1.7.06 Australia 2,000 Exempted for one leave passage overseas subject to a maximum of RM 3,000

  48. Example Date Trip Cost of Fares(RM) 1.5.2003 Kota Kinabalu 1,050 2.6.2003 Melaka 500 3.7.2003 Kuala Trengganu 1,200 4.8.2004 Penang 900 What’s exempted?

  49. Local Leave Passage - YA2007 Local leave passage costs which is exempted form tax be extended to include expenses on accommodation and meals

  50. Question The following are provided by the employer to George, the employee: • Two domestic servants remunerated (at RM 700 each per month) • Driver (paid at RM500 per month) • Mobile phone • Insurance premium of RM1,600 per annum • Car (new) cost RM 90,000. What is the value of BIK?

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