FORM EA PART B: Item 3 - S13(1)(c)
Part B : Item 3 • Value of living accommodation (VOLA) ( Address…………………………………) • PR 3/2005 wef YA 2005
Character of the Benefits13(1)(c) • Living accommodation provided for the employee by the employer or on behalf • Living accommodation in Malaysia • Living accommodation include premises occupied by the employer • Value of the benefit is determined on unfurnished accommodation • Benefit includes living accommodation provided to spouse, family, servants, dependants or guests.
3 Categories of EmployeesPR 3/2005 Employee or service director Director (not service director) of a controlled Co Employees / director of Government or statutory bodies.
Value of Living Accommodation (VOLA) (S13(1)(c)) Types of accommodation VOLA Hotel, hostel or similar premises, premises on plantation or forest, premises not subject to public rates Others Formula 3% of S13(1)(a)
VOLA S 32(2)(b) • Hotel/Hostel,etc • Premises in a plantation or in a forest • Any premises not subjects to public rates The value of benefit is 3% of gross income of 13(1) (a)
Form EA Value of Living Accommodation (VOLA) (S13(1)(c)) – cont’d VOLA Defined value OR 30% of S13(1)(a) Whichever is lower The benefit of living accommodation is valued at the lower of 30% of S13(1)(a) or “defined value” for unfurnished accommodation
ACCOMMODATION Defined value of unfurnished accommodation : - rental paid - rateable value - determined by local authority - economic rent
VOLA John, arrived in Malaysia and is provided with unfurnished rented house for 12 months in the YA 2006. The rental value is at RM 2,000 per month. His remuneration (salary ) is only RM 120,000 in 2006. What is the VOLA?
ACCOMMODATION S 13(1)(c) 30% of 13(1)(a) 36000 Or rent 24000 Whichever is lower The taxable benefit is RM24,000 ,being lower of RM 36,000 and RM24,000.
Question • Before Mr John was provided with an accommodation he stay in the hotel from 1.12.05 to 31.12.05. • Mr John’s income for 2005 was RM 120,000. • What is the VOLA?
Reduced VOLA • Shared accommodation with other employee • Employer requires you to reside there • Provided larger than you require because the employer expects to use it partly for business Shared accommodation • Reduced only the ‘defined value’ and not 30% of 13(1)(a) – Para 5.2.4. PR 3/2005
Example: Shared Accommodation • Petra was provided with the following: • Salary RM 119,000 • Unfurnished accommodation (rental per month) RM 2,000 The accommodation is shared by 3 employees. • VOLA S13(1)(c) : Lower of: Defined value RM 2,000 x 12/3 = 8,000 Or 30% of 119,000 = 35,700
Reduction Rules • Just and reasonable; - Time basis – number of days in the year - Floor space area
Example: Provided Larger Accommodation • Petra was provided with the following: • Salary RM 119,000 • Unfurnished accommodation (rental per month) RM 2,000 He ascertained 1/3 of the accommodation is for official used VOLA S13(1)(c) : Lower of: Defined value RM 2,000 x 12 x 2/3 = 16,000 Or 30% of 119,000 = 35,700
Further Reduction Rules- for Period < 1 year- for All Categories Living accommodation provided for < 1 year -S 32(3)(b) Apportionment on time basis on the period provided and not actual occupation. The reduction is based on the ‘value’ of 30% of s13(1)(a) and defined value in respect of the period provided
Example: • Petra was provided with the following: • Salary RM 119,000 • Unfurnished accommodation (provided on 1.4.2006) rental per month RM 2,000 S13(1)(c) : Lower of: Defined value RM 2,000 x 9 = 18,000 Or 30% of 119,000 x 9/12 = 26,775
Furnished Accommodation Furnished portion Unfurnished Portion S13(1)(b) S13(1)(c)
SERVICE DIRECTOR • Section 2 - Owns < = 5% of shares AND - Acts in a managerial / technical capacity
CONTROLLED COMPANY Section 2 < = 50 members Controlled by < = 5 persons
ACCOMMODATION S 13(1)( c) OR Defined value 30% of 13(1)(a) Director of Controlled Co ( not service director)
En Rahman, a director of a controlled company ( holding 10% of the co’s share capital) is provided the following: Salary RM 45,000 Unfurnished accommodation ( 12 months) rental value 12,000 What is the gross income? Director of a controlled Co
Salary RM 45,000 Unfurnished accommodation ( 12 months) 12,000 ----------------- GROSS INCOME 57,000 ------------------ En Rahman is a non service director. Director of a controlled Co (not service director)
Reduced VOLA • Required to reside in the premise ( live away from home) • Provided larger than otherwise need • Provided < 1 year -S 32(3)(b)
Expenses of Employee Expenses paid by employee are deductible: • Portion of rental paid • Any public rates or insurance premiums • Repairs or maintenance of premises
Receipts from Unapproved Pension / Provident Funds (S13(1)(d)) Item 4 : S13(1)(d) of the Act • Taxable on the employee whether before or after employment ceases, as a result of contribution by employer
COMPENSATION FOR LOSS OF EMPLOYMENT Part B: Item 5 Conditions for exemption: • Due to ill-health of taxpayer– fully exempt • RM 6000 (wef YA 2003) for each completed year of service with the - same employer or companies in same Group • Exemption is not applicable for a non-full-time service director in a controlled company
Example • Mr Izan, works for PWC from 1.1.2000 to 14.6.2004 and he left to joint Ernst & Young. • He was paid compensation for the loss of employment of RM 28,000 in 2004. • The gross income taxable is RM 10,000 and RM 18,000 (3x 6000) is exempted. • The employee has 3 years of complete service.
Example • Mr Izan, works for PWC from 1.1.2000 to 14.6.2004 and he left to joint Ernst & Young. He rejoined Ernst & Young on 1.5.2005 and left on 31.12.2006 receiving compensation for the loss of employment of RM 28,000 on that date. • The gross income taxable is RM 22,000 and RM 6,000 (1x 6000) is exempted. • The employee has 1 year of complete service.
Difference between Gratuity and Compensation • Compensation to an employee for loss of employment • Out of redundancy • Termination • Include employee restricting his rights of taking up future employment • Gratuity on retirement from an employment • Rewards for past services
Part C : Pensions, Annuities and Other Periodical Payments • Pensions from the Government • Pension received from a pension fund, scheme or society in Malaysia
Part D : Deductions • STD payments remitted to IRB • Deduction under CP 38 • Zakat remitted to Pusat Pungutan Zakat
Part E: Contribution to Approved Funds • Name of the Fund : EPF etc • Compulsory contribution (employee’s portion only) - maximium relief with insurance RM 6,000
Part F: Arrears • Period receivable • Type of income • Total payment • EPF contribution • STD deduction Ensure Form EA is duly completed, signed and deliver to the employee to avoid late submission penalties