Question

Income Tax

Employment Income - Computation

Edriana is employed as a managing director at a multinational company in Malaysia and her salary is RM180,000 per annum. She is provided with unfurnished living accommodation for which the company pays rent amounting to RM60,000 per annum. Edriana is not provided with a company car but she has been given the option of: a. a driver provided by the company; or b. the reimbursement of the driver's salary amounting to RM15,600 per annum. State, with reasons and supporting calculations, which of the above options Ms Edriana should choose from a tax perspective.

Answer 1

Income tax computation in both the following cases:

a) When the driver is provided by the company

Gross Income = Income + House allowance + Transportation

Gross income = RM180,000 + RM60,000 = RM 240,000

Lets assume there is 28% income tax in malaysia in this income bracket.

Income tax would be = RM240,000*28% = RM67,200

Then, Net pay would be = RM 240,000- RM67,200 = RM172,800

b) When the reimbursement of the driver's salary amounting to RM15,600 per annum is given.

Gross Income = Income + House allowance + Transportation

Gross income = RM180,000 + RM60,000 +RM15,600 = RM 255,600

Lets assume there is 28% income tax in malaysia in this income bracket.

Income tax would be = RM255,600*28% = RM71,568

Then, Net pay would be = RM 255,600- RM71,568 = RM184,032

Conclusion - Ms Edriana should choose the second option from the tax perspective because net pay would be more in the second case.