Basic Concepts on Tax Planning for Individuals
Ways you can lessen Income Tax for Employees, Service Directors, and the Employers get full tax deduction expenses.
Since tax planning for individuals has many ways, this article will talk about using available tax benefits because of Tax Planning. One tax benefit that is available is the “benefit-in-kind” (BIK). The proper planning is described here so you can see how BIK creates tax-saving options for the employees and employers will not lose anything.
Allowance for Housing
There is an option for employees to save on taxes if the benefit is “in kind” instead of cash or salary. If it was paid directly to the employee, then the paid amount is added into the gross income of an employee.
In case it is a rent, and it was the employer who paid the landlord, then the employee has tax savings available. The same rent tax deduction rate is available for the employer. The employer will have no loss.
First example:
Allowance that is directly paid to the employee:
Gross salary p.a. RM 96,000
Housing allowance p.a. RM 36,000
Total income is RM 132,000
The allowance paid by the employer to the landlord:
Gross salary p.a. RM 96,000
BIK, accommodation RM 28,800
Total income is RM 124,800
30% @ RM 96,000
Note: Total income that is chargeable to tax is lessened by RM 7,200, with no loss from an employer and the employee is in the same house.
Other Benefits Coming from the Employer to Employee
Telephone
– If it is the employer who brought the phone and gave it to the employee, then the employer may claim the Capital Allowance and the Employees NIL BIK.
– If the employer pays the phone bill, then the employer may claim tax deductions and Employee BIK is NIL.
EPF Contributions
– Maximum EPF that the employer can have as tax deduction is 19% of the remuneration of employees.
– Instead of giving a salary increment, if the employer pays additional EPF, then the effect of tax is;
- No additional employee tax
- Full deduction of tax is given to the employer
Motor Vehicles + Petrol from the Employer to Employee
BIK is based on the car value of the prescribed motor and petrol based on the Public Rulings (PR) 3/2013
Maid Allowance + Gardener’s Allowance
BIK on the allowance mentioned can give tax savings for employees in comparison to the fixed allowance received from salary. Moreover, the employer can claim tax deductions from full expenses.
Disclaimer
This is a piece of tax information issued by malaysiataxation.com. We make no representations or guarantee about the accuracy, suitability, reliability or completeness of this information for any purpose while every care has been taken in compiling this information. Malaysia Taxation, its agents and employees accept no accountability, and disclaim all responsibility, for the consequences of anyone acting, or refraining from working, in reliance on the information contained in this book or for any conclusion based on it. Further, recipients shouldn’t act upon it without seeking specific advice tailored to your circumstances, requirements or needs.
