BBRAeNews No.11 - Budget 2009 and You (Part II)

Budget 2009 and you (Part II)

Continuations to What goodies does the budget have for individual taxpayers?

Tax Planning-By Yong Siew Chuen

Personal Money/Taxition-The Edge.

-edited by Jacob Mathews.

Dear residents,

This is a continuations of some useful informations before we fill up our 2009 tax return forms.

Calculation of accommodation benefit.

An employee who is provided with free accommodation by his employer is taxable on the value of the accommodation. The value is determined by comparing the defined value (market or economic rental) of the accommodation or 30% of the employee's gross employment income [under Section 13(1)(a) of Income Tax Act 1957]. Up to Year 2008, the said employment income figure includes the value of the right to purchase shares (such as employee share option schemes {ESOS}. With effect from Year 2009, the Section 13(1)(a) figure will exclude the value of the right to acquire such shares. This will effectively reduce the base on which the 30% is calculated and would likely reduce the quantum of the taxable benefit as well.

EXAMPLE

Mr Klever's employment package includes free accomodation(his employer pays rental of RM8,000 a month or RM96,000 a year) and the right to take up 5,000 shares (taxable value of the right is, say RM120,000) per year. Assuming Mr Klever's salary remains at RM240,000 for both years 2008 and 2009, the computation of the taxable value of his accommodation benefit is as follows:

Salary (Year 2008-RM 240,000) and (Year 2009-RM240,000).

Taxable value of shares taken up under ESOS (Year 2008-RM120,000) and (Year 2009-RMnil).

Income under Section 13(1)(a) for purpose of calculating the accomodation benefit (Year 2008-RM360,000) and (Year 2009-RM240,000).

30% thereon (Year 2009-RM108,000) and (Year 2009-RM72,000),

Compare to market/economic rent (Year 2008-96,000) and (Year 2009-RM96,000).

Taxable benefit is the lower of the two(Year 2008-RM96,000) and (Year 2009-RM72,000).

From the above, it can be seen that by excluding the share benefit, Mr Kelver's accommodation benefit is taxable at a lower amount althought the same accommodation is provided.

Note that a director of a controlled company is taxable on the full economic rent of the accommodation without a comparison to the 30%. This is an existing anti-avoidance provision.

If the accommodation provided by the employer is in a hotel or hostel, or premises in a plantation or forest or any other premises, the value of the benefit is set at 3% of the gross employment income under Section 13(1)(a). This base is, effective frm Year 2009, similarly exclusive of the value of the right to acquire shares.