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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