Tutorial 2: Employment Income

Question 1

(a) Explain briefly ANY FOUR differences in the tax treatments in respect of income from
employment (contract of service) and income from business (contract for service) in
Malaysia. (This is not in exam lah)
Contract of services mean that the employment in which the relationship of master
(employer) and servant (employee) exists. Section 4 (b). Employment income can be
deducted under allowance. Expenses that an be deduct are the related to the employment,
not all type. Example, the entirement of client and the subscriptions fee that related the
professional. No entitled to capital allowance

Contract for services is to be distinguished from a contract for service. The letter
involves the case of one who carries on a business which includes a profession, vocation
trade and every adventure or concern in the nature of trade. Section 4 (a). Business
income can deduct business allowance. It has unabsorbed business loss. Section 13 as
long as it has wholly excusive in business can be deducted. Entitled for capital allowance
in respect of qualifying expenditure incurred in the

Contract of services Contract for services

Loss relief No relief Business losses can be
deducted against aggregate
income
Relief for capital Not entitled for relief Entitled to claim capital
expenditure allowances
Deduction of expenses Restricted expenses Concession being given on
certain expenses
Non-resident deriving Exempted under Paragraph No exemption
Malaysia income 21 of Schedule 6
(60 days Rule)

(b) In respect of employment income, identify ANY FIVE (5) types of benefits in kind that
are exempted from income tax.
- Food and drinks or meals benefit
- Wedding gift
- Monthly broadband subscription fee registered in the name of employer.
- Gift received from employer for recognition of the personal qualities and not for services
rendered
- Telephone
- Parking benefits
- Medical benefits
- Child care benefits
- Local leave passages not excess 3 times in a basis year
- Oversea leave passages 1 time, not exceeding RM 3,000
 Question 2

Mr. Tan is under employment as a manager with AB Sdn. Bhd. His income for the year ended
31.12.2022 are as follows:

Salary (whole year) RM180,000

Bonus (two months) RM 30,000

A car was provided to Mr. Tan for the whole year. It was bought by the company 3 years ago at a
cost of RM140,000. A driver was provided for the period from 1.4.2022 to 31.12.2022.
An unfurnished house (unfurnished is under Section 13 (1)(c)) was provided for the whole year.
The rent paid by the employer (BOSS) is RM2,500 per month.

Two local leave passages for Mr. Tan and his wife were provided by his employer in the year
2022. The total cost incurred by the employer was RM8,000.

Required:

Compute the gross income from employment for Mr. Tan for the year of assessment 2022.

Mr. Tan
Gross income from employment for the year of assessment 2022
RM RM
Section 13 (1) (a)
Salary 180,000
Bonus (2 months) 30,000
210,000
Section 13 (1) (b)
Car 5,000
Driver (7,200 x 9/12) 5,400
Local leave passage Exempted
10,400
Section 13 (1) (c)
Defined value (12 months x RM 2,500 per month) 30,000
30% of Section 13 (1) (a) (210,000 x 30%) 63,000
Choose which ever is lower 30,000
250,400
 Question 3
Mr. Sunny is employed as a senior engineer with Light Sdn. Bhd. (LSB) His income for the year
ended 31.12.2022 are as follows:
Salary (whole year) RM240,000
Bonus (3 months) paid on 30.12.2022 RM 60,000
Travelling allowance RM 12,000
Entertainment allowance RM 6,000
A car was provided to Mr. Sunny for use at work since 1.7.2022. It was bought by LSB 7 years
ago at a cost of RM210,000. No fuel was provided by the employer. A domestic maid was
employed by LSB at RM700 per month and provided to Mr. Sunny for the full year.

A fully furnished house was provided for the period 1.7.2022 to 31.12.2022. LSB paid RM2,600
for the monthly rent of the house (including RM600 for full furnishing). Mr. Sunny paid RM500
per month as token rent to his employer.

Two leave passages (overseas) were provided to Mr. Sunny by LSB in the year 2022. The
employer incurred RM2,000 to provide a leave passage to and from Hong Kong, and RM6,000
was for a leave passage to and from Canada.
In the course of performing his duty in the year 2022, Mr. Sunny spent RM9,000 in travelling and
RM8,000 in entertaining clients of LSB. He paid RM2,000 as a subscription to the Board of
Engineers (an approved professional body) on 1.2.2022.
Required:
Compute the adjusted income from employment for Mr. Sunny for the year of assessment 2022.

Mr. Sunny
Adjusted income from employment for the year of assessment 2022
RM RM
Section 13 (1) (a)
Salary 240,000
Bonus 60,000
Travelling allowance (12,000 – 6,000) (It can only exempted RM 6,000 per year) 6,000
Entertainment allowance 6,000 312,000

Section 13 (1) (b)

Car (9,000 x ½ x 6/12) 2,250
Domestic 4,800
Fully furnished house (280 x 6 months) 1,680
Oversea leave passages (6,000 – 3,000 + 2,000) 5,000 13,730
328,410
Section 13 (1) (c)
30% of Section 13 (1) (a) [RM 312,000 x 30%] 93,600
Defined value [(RM 2,600 – RM 6,000) x 12 months] 24,000
Whichever is Lower (RM 24,000 x 6/12) 12,000
Gross Employment Income 337,730

Less: Allowance Expenses

Rent paid to Employer (RM 500 x 6) 3,000
Travelling expenses (RM 9,000 – RM 6,000) 3,000
Entertainment expenses (restricted to entertainment allowance ) 6,000
Professional Subscriptions 2,000 (14,000)
323,730
 Question 4

Dennis, a civil engineer, works with Daylight Sdn Bhd since 2012 and was sent by his employer
to a subsidiary company in China from 1 January 2021 to 31 December 2022.

His overseas duties include planning, evaluation and implementation of construction projects in
China. On completion of his overseas duties, Dennis continued to work with Daylight on his
return to Malaysia.

The subsidiary company in China would be responsible for the decision making and would issue
all the instructions for Dennis’s work in China. All plans and evaluation reports will be sent to the
company in China.

The company in China would bear the remuneration of Dennis during this period in China.

Required:

Determine whether the employment in China for YA 2021 and YA2022 is incidental to the
employment in Malaysia.

It does not related to Section 13 (2) (c).

Oversea duties performed by Dennis are NOT cknsidered incidental to the employment in
Malaysia.

(a) It is not conneted to or part and parcel of his regular duties performed in Malaysia.

(b) The overseas duties are for an independent purpose and not to further the purpose of Daylight in
Malaysia, and the decision making of the work done by the subsidiary in China.

(c) The company in China would bear the remuneration of Dennis during the period he is in
China.

(d) Daylight also did not bear any of the risks or receive the benefits for the work done in
China.
Question 5
James, an Australian national, is a tax resident in Malaysia for the year of assessment 2022. He
has been employed as a marketing manager by Cooper Sdn. Bhd. since 2020. His remuneration
details for the year 2022 are as follows:

─ Salary of RM12,000 per month. (RM 144,000)

─ Entertainment allowance of RM2,500 per month. (RM30,000)
─ Travelling allowance of RM2,000 per month. (RM 24,000)
─ James is provided with a used car which was purchased by the company in 2016 (already
use more than 5 years) for RM130,000. The cost of the car when new was RM180,000.
(RM 3,500)
─ An overseas leave passage to Bali was paid for him, his wife and his mother. The
company paid RM1,400 per person for their holiday trip to Bali. (RM4,200 but only
exempted RM 3,000)
─ A fully furnished house was provided to him and the company paid a monthly rental of
RM3,800 including rental for furnishings of RM300 commencing from 1 August 2022.
(RM 3,800 – RM 300 = RM 3,500) [RM 3,360 x 5/12]

─ Reimbursement of salary in respect of a domestic maid hired by James at a monthly

salary of RM1,500 commencing from 1 October 2022. (RM 1,500 x 3) (Section 13(1)
(a))
While performing his duty in the year 2022, he spent RM33,000 on entertaining clients and
incurred RM20,000 for travelling expenses. He also paid a professional subscription fee of
RM1,500 to the Chartered Institute of Marketing.

Required:
Calculate the statutory employment income of James for the year of assessment 2022.

RM RM
Section 13 (1) (a)
Salary 144,000
Entertainment allowance 30,000
Travelling allowance (RM 2,000 x 12) (Exempted RM 6,000) 18,000
Reimbursement salary of domestic (RM 1,500 x 3) 4,500 196,500

Section 13 (1) (b)

Car (7,000 x 1/2) 3,500
Leave passage – Oversea (2,800 – 3,000) (Mother should be exclude because it is 1,400
not immediate family member)
Fully furnished house (3,360 x 5/12) 1,400 6,300

Section 13 (1) (c)

Unfurnished house – Whichever is lower (RM 42,000 x 5/12) 17,500
[(RM 3,800 - 300) x 12 = 42,000] OR [30% x 196,500 = 58,950] 17,500
Gross income from employment 220,300

(-) Deducted expenses

Travelling expenses (RM 20,000 – RM 6,000 exempted) 14,000
Entertainment expenses (RM 33,000 he spent, but it only can deduct RM 30,000) 30,000
Subscription fee 1,500 (45,500)
178,500