Employment income is deemed derived from Malaysia by virtue of: 1) SECTION 13(2) Gross income in respect of gains or profits from employment, a) for any period during which the employment is exercised in Malaysia; b) for any period of leave attributable to the exercise of the employment in Malaysia; c) for any period during which the employee performs outside Malaysia duties incidental to the exercise of the employment in Malaysia; d) for any period during which a person is a director of a company and that company is resident in Malaysia for the basis year for a year of assessment and within that basis year that period or part of that period falls; or e) for any period during which the employment is exercised aboard a ship or aircraft used in a business operated by a person who is resident in Malaysia for the basis year for a year of assessment and within that basis year that period or part of that period falls. SECTION To discharge an employment is to exercise the employment duties. All the employment duties need not be discharged in Malaysia before it could be said that the employment is exercised in Malaysia. Source of employment is irrelevant. Physical presence in Malaysia does not count. Discharge of duties does. Example: Lee Chunk Way is employed by Choc-oat China, a family owned company in China. From early 2012 to end 2013, he was stationed in Casemate to set up the factory for a manufacture choc-oat meal. He chose to have his remuneration paid partly in Malaysia and partly in China.
Issue: Would he be assessable in Malaysia on the whole of his remuneration related to his tenure in Malaysia? SECTION of TIT 1967 Leave pay is attributable to exercise of employment in Malaysia. Individual is said to have exercised employment in Malaysia. Leave pay does not need to have a close connection with the “exercise of employment” in Malaysia. Casual connection is sufficient. Place that the entire period of leave was spent is irrelevant. Example: Mr… Middleton, a British citizen was employed as a teacher in SMS Are Dalai from 1st January to 31st December 2013. He returned to England for a holiday from 21st September 2013 to 30 September 2013. He received leave pay for that period which was credited to him in England.
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Question: Would the leave pay is taxable in Malaysia? Individual is required to perform duties outside Malaysia which are connected to the Malaysian employment. Duties outside Malaysia do not serve an independent purpose. Employee would have to discharge his duties in Malaysia first before taking up the overseas assignment. Example: Mr… Cad, the sales manager of Confectionery Sad Bad, spends three months each year in Singapore and Brunet promoting sales of his company’s products in these territories. The preparation work for the sales visits are carried out in Malaysia. Furthermore, the sales visit reports for submission to his boss Mr… Berry are prepared in Malaysia.
Is his income from those months working outside Malaysia taxable here? Applies to director of a Malaysian resident company. Duties need not be discharged in Malaysia. If not applicable, provision 13(2)(a) shall apply. Example: Michelle OTOH is a director of Blue Lake Sad Bad, a Malaysian resident company. In Malaysia. For the calendar year 2012, Michelle receives directors’ fees of ARMS,OHO from Blue Lake Sad Bad. Are the director’s fees taxable in Malaysia? Applicable upon employment exercised aboard a ship or aircraft used in a business operated by a Malaysian resident. Reliance is placed on the resident status of the employer and not on the place of performance of duties by such employee.
Captain Affair is an employee of Mailing Airways. As a co-pilot he is never in a particular country for more than 3 days. He is unsure as to whether his income from Mailing Airways is taxable in Malaysia. Discuss. 2) SECTION 13(3) Gross income in respect of gains or profits from employment in public service or the service of a statutory authority: Employee is a Malaysian citizen. Employment is exercised in the public service or a statutory authority outside Malaysia. Employment is exercised outside Malaysia or the leave pay is attributable to the exercise of employment outside Malaysia. Example: Dry. Jay Jay, a Malaysian citizen is one of the employees of the Malaysian Embassy in USA.
He is unsure as to whether his income from discharging his services in USA is taxable in Malaysia. Assist Dry Jay Jay. BASIS OF ASSESSMENT: SECTION 25 1) section 25(1) Where gross income from an employment is not receivable in respect of any particular period; and first becomes receivable in the relevant period, it shall when received be treated as gross income of the relevant person for the relevant period. Applicable only upon gross income from an employment which is not receivable for any particular period. Will be taxed when received but would be attributable to the year of assessment when it first became receivable. Nash worked as consultant for Taxes Bad. Her salary was ARM,OHO per month.
For the calendar year ended 2013, she only received salary for 10 months, ARMS,OHO. Would she assessable for YAH and what would be the amount? May refer to Example 3 (peg 81) Where gross income from an employment is receivable in respect of the whole of the relevant period of any part of the relevant period, it shall when received be treated as gross income of the relevant person for the relevant period. Income will be treated as gross income of the relevant person for the relevant period for which it is receivable. Example: Aaron received his director fee of ARMS,OHO in relation to YAH from Aziza Sad Bad on 1. 3. 2013. Would he assessable for YAH or 2013?
May refer to Refer Example 4 (peg 81) 3) SECTION 25(3) Where the receipt of employment income becomes known to the Director General on a day more than five years after the end of the relevant basis year, it will be treated as gross income for the basis year for the year of assessment, which began 5 years before the beginning of the year of assessment (which includes the day when the receipt first becomes known). Applies to income where the receipt first becomes known to GRID on a day more than 5 years after the end of the basis year it is receivable. Income will be treated as gross income of the fifth year of assessment before year of discovery. (Year of receipt – 5) Abs’s bonus for his employment in 1996 was not paid to him until 15th April 2012. The Director General came to know of the receipt on 15th April 2012. In which year of assessment will the bonus be taxed? 4) SECTION 25(4)
Where employment income is receivable for overlapping periods, the income is apportioned to the appropriate basis periods on a time basis. A. Applies to income which overlaps several basis periods. B. Apportionment is based on the number of days in each basis year to which the employment income relates. C. Income is then taxed in the relevant “apportioned periods”. Example: Yen Ye receives a commission of ARMS,OHO for the period 1. 4. 11 – 31. 3. 2012. Compute the apportionment for YAH and 2012? Where an employee receives a lump sum by way of gratuity or deferred pay upon easing employment, that payment is to be spread back on a time basis over his different company but within the same group of companies.