Common mistakes in Form EA : Benefits-In-Kinds (BIK)

Overview

Must living accommodation provided by Company be declared under Form E and Form EA? How’s the declaration affect the tax of the director or employee?

Besides, what is the determination of the value of the living accommodation(VOLA) for employees and directors?

Let’s have a quick look below for more information on the benefit of living accommodation.

Key takeaways:

You will understand:

1. What consider the benefit of living accommodation?

2. What is the tax treatment for living accommodations?

3. How many categories of the value of living accommodation?

4. How to determine the value of the living accommodation?

5. Can the value of living accommodation be adjusted if provided for less than 12 months in a basis period?

6. What kind of expenses paid by employees allow them to set off the value of living accommodation provided by the employer?

Summary of learning

1. What consider the benefit of living accommodation?

- Living accommodation provided by the employer to its employee. This also includes if the benefit is provided to the employee’s spouse, family, servants, dependants or guests.

- This benefit is a benefit-in-kind and is not convertible into money.

2. What is the tax treatment for living accommodations?

- The benefit is taxable together with the employment gross income employment.

- Gross income from employment includes wages, salary, remuneration, leave pay, fee, commission, bonus, gratuity, perquisite or allowance (whether in money or otherwise) in respect of having or exercising the employment.

3. How many categories of the value of living accommodation?

- 3 categories of the employees/director received the benefit: -

a) Category 1 – For employees (private sector) or service director

b) Category 2 – For the director (not service director) of a controlled company

c) Category 3 – For the employee/service director/officer of the Government/Statutory Bodies.

4. How to determine the value of the living accommodation?

- Category 1 (For employees (private sector) or service director)

a) Defined value of the living accommodation (eg. rental of the living accommodation); or

b) 30% of the gross income from employment

Whichever is the less

- Category 2 (For the director (not service director) of a controlled company)

a) The defined value of the living accommodation

- Category 3 (For the employee/service director/officer of the Government/Statutory Bodies)

 For employees and directors except for a director (not a service director) of a controlled company

a) 3% of the gross income from employment

5. Can the value of living accommodation be adjusted if provided for less than 12 months in a basis period?

a) The value of the living accommodation should be reduced appropriately.

b) The basis of reduction can be based on the period of accommodation provided instead of the actual period of occupation.

6. What kind of expenses paid by employees allow them to set off the value of living accommodation provided by the employer?

a) Rent

b) Any public rates or insurance premiums

c) Expenses on repair or maintenance of premises.

Source

Public Ruling No. 3/2005 Living Accommodation Benefit Provided For The Employee By The Employer

https://phl.hasil.gov.my/pdf/pdfam/addendum_pr_3_2005.pdf

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