INTRODUCTION TO TAXATION

EMPLOYMENT INCOME TAX

QUESTION

Question 1

Encik Khairul work as the manager of Yummy Restaurant on 1 July 2011. On 31 December
2019, due to some reasons (but not ill health), his employment was terminated by Yummy
Restaurant. He was paid a gratuity of RM140,000 and a compensation for loss of
employment amounting of RM184,000

Other payments and benefits received by Encik Khairul from employer in 2019 were as
follows:
 Salaries (per month) RM6,000;
 Bonus, equivalent to six months’ salary;
 Medical bills of RM8,000 paid by the employer;
 Costs of leave passage, paid by employer;
RM
i. to Seoul, South Korea (Oversea) 19,200
ii. to Pulau Langkawi (Local) 6,000
iii. to Sabah (Local) 4,000

 Entertainment allowance (per month) RM2,000;

 A car (Honda) and fuel were provided by the employer. The car was purchased in
2015 at a cost of RM180,000. Encik Khairul used the car until 30 September 2019.
 Accommodation:
i. An unfurnished house was provided since 2014 until 30 September 2019. The
monthly rent of RM4,000 were paid by the employer.
ii. From 1 October 2019 until 31 December 2019 Encik Khairul stayed in a hotel
where all the following expenses were provided by the employer;
RM
Hotel room rate 12,000
Food at the hotel 4,000
Taxi fares from the hotel to Yummy Restaurant 2,000
Additional notes:

1. On 24 June 2019 Yummy Restaurant offered En. Khairul the option to purchase
5,000 units of Yummy Restaurant’s shares at RM2.00 per share although the current
market price was RM5.00 per share. En. Khairul accepted the option and purchased
the 5,000 shares on 30 September 2019 when the market price was RM7.00 per
share.
2. En. Khairul entered into agreement with Yummy Restaurant whereby he agreed not
be employed by any restaurant for a period of five years, effective from January
2020. As a consideration, En. Khairul was paid RM360,000 by Yummy Restaurant.
3. In 2019, En. Khairul is 48 years old.
4. For the house provided by Yummy Restaurant, En. Khairul was required to pay
RM400 per month to his employer.
5. For the entertainment allowance received, En. Khairul actually spent RM28,000 in
2019 to entertain clients.

Required:

Compute the statutory employment income of En. Khairul for the year of assessment 2019.

Notes:
 You should indicate by the use of the word ‘exempted’, where appropriate, any item
referred to in the question for which no adjusting entry needs to be made in the tax
computation.
 Use the prescribed value method for benefits in kind.
[16 mark)
TUTORIAL 2

Pn Amira telah work as an accounant at Bestari Sdn Bhd since 1 January 2014. Bestari Sdn
Bhd provides Amira with benefits and inccured expenses as details below for YA 2019:

a. Puan Amira received monthly salary amounting RM5,000 as an accountant. On 1st

August 2019, she was promoted to be as finance manager and her slalary RM7,000 per
month.

b. In year 2019, Puan Amira received bonus amounting RM30,000. As finance manager Pn
Amira received all the benefits beloe:
i. Entertainment allowances RM1,600
ii. Travelling allowances RM700 per month
iii. Child care allowance RM 300 per month
iv. Dental allowances RM500

c. Puan Amira also received medical treatment benefit amounting RM2,600 for YA 2019.

d. As finance manager, empoyer has provide living accomodation starting from 1st August
2019. The accomodation consists of a bunglow which located at Shah Alam. (the
bunglow was fully furnished). The rental was paid directly by the company to its owner.
The rent paid by the company for the accomodation was RM 4,500 per month which
( included RM2,000 per month for furniture).

e. A gardener and domestic helper for Pn.Amira is employed by Bestari sdn.Bhd at salary
RM7,200 and RM6,000 per year respectively.

f. As finance manager,a new BMW car costing RM150,000 was provided to Pn. Amira for
her use from 1 August 2019 along with the fuel.Employer also provide driver for
Pn.Amira with salary RM800 per month.

g. On Disember 2019, Bestari Sdn Bhd inccured expenses as follows in respect of Pn.
Amira’s holidays with her family:

Cost of air fare - 3 adult ( Puan Amira, husband dan her mother) (RM
3,958 per person).
2 children (RM2,000 per person)
Cost of meals - RM3,000
Required:

Compute the statutory employment income of Pn. Amira for the year of assessment 2019.

Notes:
 You should indicate by the use of the word ‘exempted’, where appropriate, any item
referred to in the question for which no adjusting entry needs to be made in the tax
computation.
 Use the prescribed value method for benefits in kind
TUTORIAL 3

Simon has a contract of employment with Chandler Bhd. Simon;s income for the year ended 31
December 2020 is as follows:

RM
Salary 168,000
Entertainment allowance 30,000
Bonus for Year 2019 42,000

Chandler Bhd provides Simon with benefits and incurred expenses as detailed below: Unless
otherwise stated, the benefits were provided for the full year ended 31 December 2020.

1. The income tax payable by Simon is borne by the company. Income tax payable by
Simon for the YA 2019 amounted to RM77,000. The tax payable for the YA 2020 is
expected to be RM90,987.

2. Reimbursement of salary in respect of a driver employed by Simon, amounting to

RM13,000.

3. A domestic helper for Simon is employed by Chandler Bhd at a monthly salary of

RM1,300 commencing from 1 July 2020.

4. Chandler Bhd incurred expenses as follows in respect of Simon’s holidays with his wife
and child:

In September 2020 in Dubai:

RM
Cost of air fare 17,000
Cost of meals and accomodation 6,800

In December 2020 In Pulau Redang, Malaysia:

RM
Cost of air fare 2,600
Cost of meal and accomodation 4,100

5. Child care allowance for Simon’s sun, costing RM2,500

6. The use of new car costing RM210,000 and petrol expenses amounting to RM6,000

7. Hotel room charges amounting to RM27,000, from 1 january 2020 to 31 May 2020.

8. The use of an unfurnished house provided to Simon by Chandler Bhd from 1 June
2020 to 31 December 2020. The company incurred a rental expense at RM8,000 per
month.
 Simons was required by Chandler Bhd tto contribute a sum of RM650 per month for
maintenance of the premises, commencing from 1 June 2020. He also incurred
entertainment expenses of RM33,000 in carrying out his official duties:

Required:

Compute the statutory employment income of Simon for the year of assessment 2020.

Notes:
 You should indicate by the use of the word ‘exempted’, where appropriate, any item
referred to in the question for which no adjusting entry needs to be made in the tax
computation.
 Use the prescribed value method for benefits in kind

TUTORIAL 4

Mr. Khalis has been employed as an account manager at Kyasara Sdn Bhd since 2 January
2011. On 1 October 2019, Kyasara Sdn Bhd decided to merge with another company named
Maxell Sdn Bhd. As a consequence from that merger, the top management of Kyasara
Sdn Bhd had terminated many employees including Mr. Khalis who was terminated on 30
November 2019. The company paid him a gratuity of RM280,000 in appreciation of his service.
In addition, Mr. Khalis received RM110,000 as compensation for loss of employment and he
withdrew RM140,000 from an unapproved fund whereby 60% of the fund was contributed by
Kyasara Sdn Bhd.

His remuneration and benefits received until 30 November 2019 are as follows:

1. Monthly salary of RM8,010 (after deducting employee’s EPF contribution of 11%).

2. Bonus paid in June 2019 amounted to RM10,000

3. A monthly entertainment allowance of RM1,800, but he only spent 80% to

entertain company’s clients.

4. A monthly petrol allowance for official duties of RM480 and parking fees
allowance of RM300.

5. Traditional medical treatment at an approved hospital costing RM650 was paid by the
company.

6. Mr. Khalis was awarded the performance incentive of RM2,500 for the year of
assessment 2018, which was paid on 31 October 2019. This incentive was given due to his
excellent service performance for the year of assessment 2018.

7. Mr. Khalis obtained a housing loan amounted to RM600,000 on 1 January 2019. The
interest on loan of 3% per annum was subsidised by his employer.
8. A new car costing RM250,000 with a driver were provided by the company throughout
his service.

9. A fully furnished condominium with a rental value of RM2,500 per month

(including furniture of RM800 per month) was provided until 30 November 2019. Mr. Khalis was
required to pay a nominal monthly rental of RM500 to Kyasara Sdn Bhd.

10. A reimbursement of RM600 per month was made to pay for the salary of a servant
employed by Mr. Khalis.

11. The company paid for Mr. Khalis’s annual corporate membership fees of RM2,500
to Kota Kemuning Golf Centre.

12. In January 2019, the company paid RM18,000 for his family’s vacation to Las Vegas.
The expenses inclusive of air tickets, accommodations and meals which were RM8,000,
RM6,000 and RM4,000 respectively.

Required:

Compute the statutory employment income of Mr. Khalis for the year of assessment 2019.
(15 marks)