According to the Inland Revenue Board of Malaysia, an EA form is a Yearly Remuneration Statement that includes your salary for the past year. In Part F of Form EA, you could file for certain tax exemptions that can reduce your overall chargeable income.
It’s important to understand the various benefits-in-kind (as well as perquisites) and whether you can apply for these tax exemptions. After all, this can reduce or entirely eliminate your obligation to pay tax!
Here are some of the values of Benefits-in-kind prescribed (value per year).
Check out more details on the infographic below!
Household furnishing, apparatus and appliances
Did you know that fans and water heaters are disregarded under Service Charges? This is because they are treated as part of the residential premises.
An adjustment on the value of the BIK may also be made if the furnishing / apparatus / appliances are:
- Shared with other employees
- According to the period provided, and
- Whether any or all of the above categories of furnishings are provided.
Has your employer ever provided you other benefits like a driver? If the answer is yes, know that this benefit’s value is part of your gross income from employment and is at RM600 per month and/or RM7,200 for the year.
However, if the driver comes from a pool of drivers provided by the employer solely for business purposes, no benefit will be taxable on the employee. Hence, you can file for said tax exemption in Part F of Form EA.
The tax exemption for this benefit is applicable not just to the employee, but to his or her immediate family as well! However, don’t be in a hurry to book a vacation for the family! These Leave Passages can only be used by the employee solely for the purposes of performing his or her employment duty.
Employers’ own goods and/or services
Let’s say your employer is a dentist who operates a private dental clinic. She typically charges RM100 for dental treatment. What if she provides you free dental treatment? Do you need to pay tax for this benefit? The good news is you don’t have to, and can file for tax exemption in Part F of Form EA!
What if your employer who owns a bank and provides free investment consultation services to his employees? In this case, you as an employee do qualify for tax exemption from the services provided him. However, you will be taxed for the services’ value when your employer provides consumer products/services that are not his, to you.
Your employers’ own goods are consumable business products. Your employer can provide you these goods as benefits to you free of charge. If they are provided at a discounted value, the value of the discount should not exceed RM1,000 per year. This is so you can qualify for full tax exemption.
What happens if the goods’ value exceeds RM1,000 per year? Let’s say your employee owns a company that sells toiletries and provides employees like you free toiletries valued at RM1,200 in the year; in this case, you have to pay tax for the excess RM200. If the toiletries that your employer provides are RM700, you can file for full tax exemption.
DISCLAIMER: Exemptions do not extend to directors of controlled companies, sole proprietorship, and partnerships.
Maternity and/or Traditional Medicines
Maternity expenses are for treatment in respect of pregnancy or childbirth. They have to be provided by:
- Certified medical doctors who practice modern medicine or
- Medical practitioners that are certified, or registered in accordance with the rules governing traditional medicine by the Ministry of Health
Traditional medicine includes Malay Traditional Medicine, Chinese Traditional Medicine, and Indian Traditional Medicine. Take for example Malay traditional massage, ayurvedic and/or acupuncture.
DISCLAIMER: Tax exemptions do not include complementary medicine; for example, aromatherapy, reflexology, spa, and Thai traditional massage.
“Motorcar” means a motor vehicle other than a motor vehicle licensed by the appropriate authority for commercial transportation of goods or passengers. The employee can keep the motorcar in his or her home where it can be used by the employee or his/her family at any time.
In addition, the toll fees paid by the employer are part of the BIK’s value. However, maintenance costs (i.e. servicing, repairs, annual road tax and annual insurance premium) are not part of the benefit.
The employer must subscribe to these utilities for the employee. This means that the bills for these utilities must be under the employer’s name. Hence, the employee can only enjoy the benefits when it is provided by the employer.
The amount to exempt includes registration cost and installation cost as well.
Overwhelmed by the work ahead this Tax Filing Season? Automate your filing.
It is taxing to manually sum up 12 months’ worth of payroll details and worry over-reporting any information incorrectly on the form. So, what if I told you could compile the relevant income for the year to automatically fill Form EA along with Form E for employees? Because you can!
Talenox is an LHDN-approved software that helps employers ease through the annual Employee Income Tax Filing submission process. But don’t take our word for it.
Automate your payroll and submit the tax forms for free.
Editor’s Note: This article was published in Feb 2020 and updated in Feb 2021.