COMPENSATION PAYMENTS

Case 1

Shadis Bond, a foreigner, was employed by a Malaysian company in 29th August

2016 for a period of two years. His agreed salary was RM 60,500 per month.
However, his employment ended on 15th October 2016 after he had been employed
for 44days, for which period he was not paid any salary. On 13th October 2016,
Shadis resigned from their employment. The company agreement to compensate
him with a mutually agreed termination settlement of RM600,000 which was
approximately ten months salary, for the premature termination of his employment.
He left Malaysia on 16th October 2016.

Required:

Determine if the payment of RM700,000 is subject to income tax. In your discussion

you must consider the situation where the sum can be taxable and when it may not
be taxable. All your arguments must be supported by the legislation and case law.

Case 2

Rasheed was a partner of the accounting firm of Alan and Augustine (AA).Disputes
including objections of AA’s plan to merge with the firm of Jacob and John led to the
dismissal of 3 partners including Rasheed.
A settlement was reached and 15 payments were made as consultancy payments
totalling RM2m.

Required:
Discuss how the receipt of RM2m would be treated for income tax purposes.
Your discussion must cover the considerations that must be taken into account.in
determining taxability of receipts
Support your arguments with the legislation and case law.

Read Malaysian Taxation-eg page 130 to 136. Look for others

Research UNIEC