(Tax Update) Common mistakes in Form EA : Benefits-In-Kinds (BIK)

What is Form E?

Form E is a declaration report submitted by every employer to inform the IRB on the number of employees and the list of employee's income details every year not later than 31st March.

When filling out tax forms in Malaysia, like Form E and EA, both employers and employees often miss including some special benefits that don't show up in a regular paycheck. These benefits, like company perks and the tax your boss pays for you, add up to your total pay but are easy to overlook.

In his blog post will help you understand these hidden benefits and why it's crucial not to forget them when reporting your income

Understanding the Standard Payslip

a. Basic Salary / OT / Allowance

Agreed-upon payments are outlined in the employment contract and service agreement.

b. Commission / Bonus

Additional rewards are bestowed upon deserving employees.

c. Directors’ Fees

Fixed payments are allocated to individuals serving on a company's board.

Exploring Hidden Benefits

Beyond the apparent, there exist benefits not explicitly reflected on payslips. Let us delve into these nuanced aspects.

a. Benefit In Kind / Perquisites

Benefit In Kind – Non-convertible benefits, such as company fixed assets.
Perquisites – Convertible benefits, including expenses or gifts paid by the employer.

b. Value of Living Accommodation

Accommodations are provided by the employer for the employee’s well-being.

c. ESOS (Employee Share Option Scheme)

A unique benefit where shares are given to employees without any payment.

d. Tax Borne by Employer

Instances where employers cover taxes for employees without deducting from their income.

e. Retirement and Compensation

Additional income is designated for employee retirement and compensation.

Exemptions and Declarations:

Certain exemptions pertain to specific conditions and are not extended to directors, sole proprietors, and partnerships. Tax exemptions must be diligently declared in EA, including:

a. Petrol, Travelling, Toll Allowance

Subject to a total exemption limit of RM 6,000.00.

b. Childcare allowance

A total exemption of RM 2,000.00 for children below 12 years old.

c. Gift / Monthly bills in the name of the employee or employer

Limited to 1 unit or 1 line for each category.

d. Awards

A notable exemption of RM 2,000.00 for long services exceeding 10 years.

e. Parking or Meal Allowance

Actual expenses, with a mandatory black and white policy in the employment contract.

f. Interest on loan subsidized

Full exemption from tax if the loan amount is below RM 300,000.00 and is solely for internal funds; external funds usage would be considered a perquisite.

Exemptions Not Requiring Declaration in EA:

Certain exemptions need not be declared in EA, encompassing:

a. Consumable business products

Discounted prices totaling RM 1,000.00.

b. Service provided free or at a discount

c. Medical benefits

d. Insurance premiums

Obligatory for foreign workers as a replacement for SOCSO contributions.

e. Group insurance premiums

To cover workers’ cases of accidents.

In conclusion, companies must meticulously prepare Form E & EA, aligning with the Public Ruling stipulated by the government. This not only ensures compliance but also serves as a proactive measure to sidestep potential tax-related complications. Understanding the nuances of these declarations is paramount for both employers and employees in fostering transparency and adherence to regulatory frameworks.

PS : Authored by Mr Lim Zheng Weng and Miss Ong Swee Fang, our associates from THK, in their personal LinkedIn post.

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