Do you know Employment Retention Program (ERP) entitled to tax exemption?

01Do you know Employment Retention Program (ERP) entitled to tax exemption?

Overview

On 22.10.2020, The Minister issue a gazette order Income Tax (Exemption) (No. 4 & 5) Order 2020 to exempts fund received by the employer and employee under the Employment Retention Program (ERP).

Key takeaway

You will understand the:

• Employment Retention Program (ERP)
• Tax treatment
• Effect for year of assessment

Summary of learning

02The meaning of Employment Retention Program (ERP)

*    Employment Retention Program (ERP) is a program under the Economic Stimulus Package 2020 managed by Social Security Organisation that provides financial assistance of RM600 per month to an employee:

(a) who is given notice of unpaid leave by his employer for a period between 1 March 2020 until 30 June 2020

(b)  whose salary is not more than RM4,000 a month; and

(c)   who is registered and contributed to the Employment Insurance System (EIS)

03Tax treatment to Employer on ERP

*    In order to qualify for this exemption, employer shall receive ERP from Social Security Organisation on or after 20 March 2020 but not later than 15 June 2020

*    Employer shall maintain a separate account for the income exempted

04Tax Treatment to Employee on ERP

*    Any financial assistance received from his employer under the ERP are tax exempted

Effect for year of assessment

*    Effective from year of assessment 2020

Source

INCOME TAX (EXEMPTION) (NO. 4) ORDER 2020

INCOME TAX (EXEMPTION) (NO. 5) ORDER 2020TP