2015 Employer’s Income Tax Reporting

Deemed employerConsiderations:a)Trainees/Interns (including non Malaysian citizen)b)Temporary staffc)Contract workersd)Employees from head office/subsidiary on temporary assignment/ frequentbusiness travelerse)Vendors (especially if they are non Malaysian citizen)@ 2016 Deloitte Tax Services Sdn Bhd32

Employer’s TaxReporting Obligations 2016 Deloitte Tax Services Sdn Bhd33

Employer’s Tax Reporting Obligations Notification of Commencement of an Employment (Form CP22). Return Form of an Employer (Form E) Statement of Remuneration (Form EA). Monthly Tax Deduction (MTD). Notification of Departure from Malaysia for Period Exceeding Three (3) Months(Form CP21) / Notification of Cessation of An Employment (Form CP22A). Withholding Monies (ie last month’s remuneration) from individuals who areceasing Malaysian employment and leaving Malaysia for more than 3 months. 2016 Deloitte Tax Services Sdn Bhd34

Employer’s Tax Reporting Obligations Section 83(1) – Return Form of an Employer (Form E) Every employer shall, for each year, furnish to the Director General annuallya return in the prescribed Form E not later than 31st March. Section 83(1A) – Statement of Remuneration (Form EA) Every employer shall, for each year, furnish to their employees a statementof remuneration in Form CP 8A (Form EA) or 8C (Form EC) not later thanon or before the last day of February.For expatriates where remuneration is paid partially from home country, aletter from the payer of the home country to confirm on the compensationdetails is required. Section 83(2) – Notification of Commencement of an Employment (Form CP22) To submit the Form CP 22 within 30 days of the commencement / recommencement of employment in Malaysia. 2016 Deloitte Tax Services Sdn Bhd35

Employer’s Tax Reporting Obligations Section 83(3) – Notification of Cessation of An Employment (Form CP22A) Section 83(4) – Notification of Departure from Malaysia for Period ExceedingThree (3) Months (Form CP21) To submit the Form CP 22A at least one (1) month before the cessation date. To submit the Form CP 21 at least 1 month before the expected date ofdeparture of employment in Malaysia. Section 83(5) – Withholding Monies To withhold monies due to an employee who is about to leave Malaysia for aperiod of more than 3 months with no intention of returning to Malaysia. To withhold such monies until 90 days after submitting the Form CP21 to theMIRB or upon issuance of the tax clearance letter, whichever is earlier. Section 83(6) – Deemed Employer Deemed employer is benefits from a service rendered or performed byanother person whether or not he employs that other person or isresponsible for paying remuneration to the other person. 2016 Deloitte Tax Services Sdn Bhd36

Employer’s Tax Reporting Obligations Income Tax (Deduction From Remuneration) Rules 1994 To deduct in each month the monthly deduction in accordance with theSchedule of Monthly Tax Deduction 2016 in respect of employee’sremuneration. Due date for payment is the 15th of the following month Definition of remuneration - income in respect of gains and profits from anemployment. Benefits in kind and accommodation under paragraphs 13(1)(b)and 13(1)(c) of the Act are also included. 2016 Deloitte Tax Services Sdn Bhd37

Penalties and OffencesMonthly Tax Deduction (MTD) Prosecution under Rule 17, Income Tax (Deduction from Remuneration) Rules1994 [“The Rules”] Fine of not less than RM200 not more than RM 20,000 or to imprisonment for aterm not exceeding 6 months or to both Type of offences:-Failure to remit by the15th of the following month-Failure to deduct or deduct less-Failure to remit or remit less-Failure to give complete and accurate information 2016 Deloitte Tax Services Sdn Bhd38

Penalties and Offences Non compliance with Section 83(1),(1A),(2),(3),(4),(5) i.e. Forms E, EA, CP21, CP22, CP22A Section 120 Upon conviction Fine of not less than RM200 and not more than RM20,000Or Imprisonment not exceeding 6 monthsor both 2016 Deloitte Tax Services Sdn Bhd39

Updates The IRB has issued new Forms CP 21 and Forms CP 22A in year 2015. The IRB has announced that the older versions of Forms CP 21 and CP22A may no longer be used. 2016 Deloitte Tax Services Sdn Bhd40

Preparing theForm E 2016 Deloitte Tax Services Sdn Bhd41

Form EC.P.8D – Pin 2015Statement of Remuneration from Employment for the year ended 31 December2015 and information in relation to the Monthly Tax Deduction pursuant to theIncome Tax (Deduction from Remuneration) Rules 1994To complete the required information on the form for employees where either of thefollowing conditions are met :a)b)Annual gross remuneration is more than RM34,000 ;orWhere (a) above is not met, the monthly gross remuneration is more thanRM2,800. 2016 Deloitte Tax Services Sdn Bhd42

Preparing the Form EPart A: Number of employees for the year ended31 December 2015 2016 Deloitte Tax Services Sdn Bhd43

Preparing the Form EPart B: Declaration 2016 Deloitte Tax Services Sdn Bhd44

Form EC.P.8D – Pin 2015Form E : Form C.P. 8DPart E : Total GrossRemuneration(including benefits-in-kindand value of livingaccommodation benefitprovided but excludingremuneration in arrears inrespect of preceding years) 2016 Deloitte Tax Services Sdn Bhd45

Form EC.P.8D – Pin 2015Form EAForm E : Form C.P. 8DPart F : Tax ExemptAllowances /Perquisites / Gifts /Benefits 2016 Deloitte Tax Services Sdn Bhd46

Form EC.P.8D – Pin 2015Form EAForm E : Form C.P. 8DPart G and H: Total TaxDeduction- MTD- CP38 2016 Deloitte Tax Services Sdn Bhd47

Preparing theForm EA 2016 Deloitte Tax Services Sdn Bhd48

Form EA Annual statement prepared by the employer that discloses the remunerationdetails of an employee. Includes remuneration where cost is borne by the local entity. Where remuneration is borne (partly / fully) by the home country, a letter ofconfirmation of compensation details is required from the home country entity. 2016 Deloitte Tax Services Sdn Bhd49

Preparing the Form EAPart A: Particulars of the employee Full name of the employee Job designation Staff number / payroll number New Identity Card number / Passport number EPF number Where the period of employment is less than one year Date of commencement Date of cessation 2016 Deloitte Tax Services Sdn Bhd50

Preparing the Form EAPart B: Employment income, benefits and livingaccommodation 2016 Deloitte Tax Services Sdn Bhd51

Preparing the Form EAPart B: Item 1 Section 13(1)(a) of the Income Tax Act, 1967 (the Act) Wages, gross salary, leave pay (including overtime pay) Fee (including director’s fees*), commission or bonus* Gross tips, perquisites, awards / rewards or other allowances Tax borne by employerNote: Declaration excludes allowances / perquisites / gifts / benefits which aretax exempt 2016 Deloitte Tax Services Sdn Bhd52

Preparing the Form EA Section 13(1)(a) of the Act“ gross income of an employee in respect of gains or profits from anemployment includes any wages, salary, remuneration, leave pay, fee,commission, bonus, gratuity, perquisite or allowance (whether in money orotherwise) in respect of having or exercising the employment ” 2016 Deloitte Tax Services Sdn Bhd53

Preparing the Form EA Common question / clarification needed onPerquisites Not properly defined in the Act / Subjected to many interpretations Non-declaration of taxable perquisites Confusion between Perquisites and Benefits-in-Kind (BIK) Issuance of Public Rulings (PR) to provide clarity 2016 Deloitte Tax Services Sdn Bhd54

Preparing the Form EAPerquisitesBenefits-in-kind Benefits in cash or in kindconvertible into money Benefits not convertible into moneyeven though they have monetaryvalue Received from employer or thirdparties Gross income from employment Taxable under Section13(1)(a) ‘Not convertible into money’ meansbenefit cannot be sold, assigned orexchanged for cash Gross income from employment Taxable under Section 13(1)(b) 2016 Deloitte Tax Services Sdn Bhd55

Preparing the Form EATypes of perquisites Pecuniary liability of employees paid by employer, such as income tax payment,electricity bills, water and telephone bills, car insurance premium, road tax,parking fees and car maintenance charges Recreational club membership Tuition of school fees of child Life insurance premiums Gardener, driver, domestic help or guard Assets given free of charge or sold at a discount Gift vouchers Professional subscriptions Equity award 2016 Deloitte Tax Services Sdn Bhd56

Preparing the Form EA Employee’s pecuniary liabilities Paid by employer contractually or voluntarily irrespective whether thepayment Is made directly to the person who should receive amount owing Given to the employee to settle his pecuniary liability Given to the employee as a reimbursement Amount chargeable to tax as perquisites may be reduced if amenities areused for official duties (which can be substantiated with certification by theemployer) 2016 Deloitte Tax Services Sdn Bhd57

Preparing the Form EA Recreational club membership Individual membership What is taxable? Entrance fee Monthly / annual subscription fee Gardener, Driver, Domestic Helper, Guard Hired by employee Reimbursed by employer 2016 Deloitte Tax Services Sdn Bhd58

Preparing the Form EA Assets provided free of charge or sold at discounted price The difference between the market price of such assets and the amount paidby employee (if any) is perquisite to the employee Gift voucher Not taxable unless they are of a recurring nature and where employeeexpects such gifts as part of his remuneration Gift vouchers given on festive occasions based on the employee’s length ofservice is this taxable? 2016 Deloitte Tax Services Sdn Bhd59

Preparing the Form EA Service Excellence and Long Service Awards Perquisites on awards to be extended to innovation, productivity andefficiency awards such as Six Sigma Award Exemption of RM2,000 per year.RESTRICTIONS Service Award- cannot be disguised as wages;- must be awarded as part of a meaningful contribution to theorganisation; and- is not provided frequently to the same employee Long Service Award – additional condition- Has served more than 10 years service with the same employer. 2016 Deloitte Tax Services Sdn Bhd60

Preparing the Form EA Professional subscriptions Not taxable if membership to that professional body is essential to businessof employer Travelling allowance Taxable as perquisite. Petrol card or petrol allowance or travel allowance andtoll card for official duties exempted up to RM6,000 per year (from YA2008) Allowances or subsidies for childcare Up to RM2,400 per year 2016 Deloitte Tax Services Sdn Bhd61

Preparing the Form EA ESOS – upon exercise of right by employee RSU – upon vesting of the RSU To report the benefit in the Form EA of the employee for the year the option isexercised/RSU vest- To submit a copy of the names of employees who have exercised their rightsunder an option to Employer’s Unit of the MIRB – Appendix C- To comply with the provisions of Section 82A – records keeping 2016 Deloitte Tax Services Sdn Bhd62

Preparing the Form EAPart B: Item 2 Section 13(1)(b) of the Act Taxable value of motorcar and petrol Driver Utilities Recreation club membership (corporate) Household furnishings, apparatus and appliances Domestic servant and gardener Leave passage (net) Other items 2016 Deloitte Tax Services Sdn Bhd63

Preparing the Form EA Benefits-in-kind (BIK) Not convertible into money, cannot be sold, assigned or exchanged for cash Provided by or on behalf of employer to be personally enjoyed by theemployee Determination of BIK Formula method Prescribed value method Basis of computing the benefit must be consistently applied 2016 Deloitte Tax Services Sdn Bhd64

Preparing the Form EA Motorcar and other related benefits Private usage – Taxable Private usage Used for travelling between the office and home Kept at employee’s home Taxable value: Formula method i.e. cost of asset / prescribed life span MIRB’s prescribed value Also applicable to secondhand and leased / rented motorcar 2016 Deloitte Tax Services Sdn Bhd65

Preparing the Form EA Driver Taxable value is RM 600 per month Pool drivers Not taxable Furniture and fittingsType of benefitAnnualprescribed value1Semi-furnished (furniture in lounge, dining room orbedroom)2Semi-furnished (furniture in column 1 plus airconditional / curtains / carpets)RM1,6803Fully furnished (furniture in column 2 plus kitchenequipment / crockery / utensils / appliances)RM3,3604Service charges & utilities 2016 Deloitte Tax Services Sdn BhdRM840Amount paid66

Preparing the Form EA Recreation club membership 2016 Deloitte Tax Services Sdn Bhd67

Preparing the Form EA Leave passage A benefit in the form of leave passage is not assessable as an employmentincome under the following conditions:i. Leave passage for travel within Malaysia not exceeding three times inany calendar year; orii. One leave passage for travel between Malaysia and any place outsideMalaysia in any calendar year, limited to a maximum value of RM 3,000. The leave passage benefit, however, is confined to only the employee andmembers of his immediate family Benefit of meals & accommodation provided to employee pursuant to localleave passage is inclusive in the exemption (from 2007 onwards). If the benefit does not fall within the above conditions, it will be subject totax under paragraph 13(1)(b) of the Act 2016 Deloitte Tax Services Sdn Bhd68

Preparing the Form EA Goods and services offered at discounted prices Value of discount of goods exceeding RM1,000 a year is taxable 2016 Deloitte Tax Services Sdn Bhd69

Preparing the Form EAPart B: Item 3 Section 13(1)(c) of the Act Value of living accommodation Value of the unfurnished accommodation Amount in respect of the use or enjoyment by the employee of livingaccommodation in Malaysia (including living accommodation in premisesoccupied by his employer) provided for the employee by or on behalf of theemployer rent free or otherwise Includes benefit for the spouse, family, servants, dependants or guests Effective year of assessment 2009, gross income in respect of the right toacquire shares in a company is excluded from the employee’s grossincome under paragraph 13(1)(a) of the Act only for the purposes ofdetermining the value of living accommodation 2016 Deloitte Tax Services Sdn Bhd70

Preparing the Form EALiving accommodation provided for employee or service director by the employer:Defined value of the living accommodationOr30% of the gross income from employment under Section 13(1)(a) of theIncome Tax ActWhichever is lesser 2016 Deloitte Tax Services Sdn Bhd71

Preparing the Form EAIf the living accommodation provided for employee or service director by theemployer is a hotel:3% of the gross income from employment under Section 13(1)(a) of theIncome Tax Act 2016 Deloitte Tax Services Sdn Bhd72

Preparing the Form EAPart B: Item 4 Section 13(1)(d) of the Act Receipts from unapproved Pension / Provident Funds 2016 Deloitte Tax Services Sdn Bhd73

Preparing the Form EAPart B: Item 5 Section 13(1)(e) of the Act Compensation for loss of employment 2016 Deloitte Tax Services Sdn Bhd74

Preparing the Form EAPart B – Item 5Exemption on compensation for loss of employmentApplicable onAmount paid: For the reason of an compensation for loss or employment; or In consideration of any covenant entered into by the employee restricting his right totake up other employment of the same or a similar kindCriteria to meet for exemptionExemption availableIf payment is made on account of loss ofemployment due to ill healthFull exemption(the health condition of the employee has to be certifiedby a Medical Board)If the employee has a period of employment withthe same employer or with companies in a group.This includes a separation scheme provided thatthe scheme did not expressly or impliedly providefor the employee to be reemployed under anyother scheme of employment by the same or anyother employmentRM10,000 for each completed yearof service with the same employeror with companies in the samegroupThe above exemption do not apply to payment by a controlled company to adirector of a company, who is not a full-time service director75 2016 Deloitte Tax Services Sdn Bhd

Preparing the Form EAPart C: Pension and others Pensions Annuities or other periodical payments 2016 Deloitte Tax Services Sdn Bhd76

Preparing the Form EAPart D: Total deductions Current year Monthly Tax Deductions* (MTD) CP 38 deductions Zakat payments*exclude MTD payments on remuneration paid in arrears in the year 2016 Deloitte Tax Services Sdn Bhd77

Preparing the Form EAPart E: Contribution to approvedpension/provident fund, scheme or society Employee’s contribution Approved fund 2016 Deloitte Tax Services Sdn Bhd78

Preparing the Form EAPart F: Payment in arrears and other payments inrespect of preceding years EPF and MTD amounts: in respect of arrears payments Excludes bonus and director fees: taxed in year of receipt 2016 Deloitte Tax Services Sdn Bhd79

Preparing the Form EA 2016 Deloitte Tax Services Sdn Bhd80

Case study 1Expatriate payroll and benefits – monthly summary for 2015Payroll 002,7502,7502,7502,7502,7502,7502,75031,750Meal Travelling -----55,000--------12,000

c) Furnish the file in Microsoft Excel on CD as per the specification in Part B of Appendix 1 (available in the IRB website); or d) Send C.P. 8D in paper form. The form has to be submitted to Jabatan Pemprosesan Maklumat Jabatan Pemprosesan Maklumat, Lembaga Hasil Dalam Negeri Malaysia Menara Hasil, No. 3, Jalan 9/10, Seksyen 9,