Dr. Tan Thai Soon (Managing Director of TST Consulting Group) shared about the tax exemption on benefit and amenity S13(1)(b). In this video explanation and examples are given for leave passage tax treatment.

If your company pay for your domestic travel and vacation, or your oversea trips, are you required to pay tax? If yes, how is it calculated? Watch this video for the thorough elaboration.

Let’s talk about the Tax Exemption on Benefit and Amenity regarding the Leave-passage. “Leave passage” can be categorized into the Local Leave Passage and the Overseas Leave Passage. Leave Passage is about an employee traveling during a period of vacation from employment.

Local Leave Passage

For Local Leave Passage, in Malaysia, an employee is entitled to a tax exemption of three times the amount spent on the cost of airfares, meals, and accommodations per year. This includes the employee and his/her immediate family.
So, assuming your family will travel to Sabah three times within a year and spend about RM10,000 each time amounting to RM30,000, this RM30,000 will be exempted. The company will pay for your airfare, meals, hotel accommodation – everything. They can pay you direct or via reimbursement.

Assuming per trip is RM10,000, and three times per year is RM30,000, this RM30,000 will be exempted and does not have to go in to your EA form. So, from the company’s point of view, it’s deductible. It’s under the so-called Staff Benefit and Amenity so it’s deductible for tax purposes for company accounting.

Overseas Leave Passage

Overseas Leave Passage, on the other hand, is slightly different from local leave passage. With Overseas Leave Passage, the company will not be entitled to a tax deduction. At the same time, the maximum tax exemption per employee is RM3,000/year.

Assuming you’re a sales manager who will travel to Australia to attend a trade conference. The company will pay RM5,000 for the sales person to attend a business trip/conference which is deductible for business purposes. You then also bring along your wife to Australia. The company would have to pay an additional RM5,000 for Overseas Leave Passage.

This additional RM5,000 paid for the sales person’s wife is considered Overseas Leave Passage. So, the employee, the sales person will have to declare RM2,000 and the RM3,000 will be exempted. Out of the RM5,000, RM3,000 will be exempted and RM2,000 will be taxable. The government is obviously trying to encourage more local travel.

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KCLau
KCLau

Personal finance author and trainer

    7 replies to "Tax Exemption on Leave Passage (Vacation) for Staff Benefit"

    • Tiffany Tan

      “Assuming you’re a sales manager who will travel to Australia to attend a trade conference. The company will pay RM5,000 for the sales person to attend a business trip/conference which is deductible for business purposes. You then also bring along your wife to Australia. The company would have to pay an additional RM5,000 for Overseas Leave Passage.

      This additional RM5,000 paid for the sales person’s wife is considered Overseas Leave Passage. So, the employee, the sales person will have to declare RM2,000 and the RM3,000 will be exempted. Out of the RM5,000, RM3,000 will be exempted and RM2,000 will be taxable. The government is obviously trying to encourage more local travel.” As refer to the above example, for RM3,000 company should report in EA form column F tax exemption. So, where should the employer report RM2,000 in EA form?

      • KCLau

        I couldn’t answer you as I am not a practitioner of tax code. You can check with some accountants who provide tax consultation.

    • […] can’t buy them with money. Suppose you’re to go on a vacation. You can purchase the air tickets using the money. You can pay for fares. You can even buy an […]

    • HAPPY PANG

      HI ,

      Assuming leave passage expenditure incurred by a shareholder RM 1,500.00 per trip. Can i deduct tax ?

    • Alvin Saw

      Dear Mr Lau,

      I wish to seek further clarification on the below paragraph:

      “Assuming per trip is RM10,000, and three times per year is RM30,000, this RM30,000 will be exempted and does not have to go in to your EA form. So, from the company’s point of view, it’s deductible. It’s under the so-called Staff Benefit and Amenity so it’s deductible for tax purposes for company accounting.”

      When its said “…It’s under the so-called Staff Benefit and Amenity so it’s deductible for tax purposes for company accounting.”, does it mean that the Co. could benefit in ways such as obtaining Co tax rebate or reduction IF the Co. decides to reimburse an employee on the Leave Passage?

      My apologies for my ignorance question is I’m in HR field and finance/taxation is not my forte.

      Thank you Sir.

      • KCLau

        Hi Alvin, I couldn’t help you on this issue as I also seek advise from my tax advisor all the time.

    • Teh

      Is the overseas travelling for employees with tax exempted of RM3000 per year includes air fare only?

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