If an employee has control over their employer then ALL perquisites, allowances and benefits-in-kind received by that employee will be considered part of their taxable income. No tax exemptions will apply. For example an employee who has control over their employer cannot claim the RM6,000 annual tax exemption for travel/petrol allowance for official duties.

Definitions

The phrase “control over their employer“ has the following meanings:

  1. For a company, the power of an employee to control is through the holding of shares or the possession of voting power in or in relation to that or any other company, or by virtue of powers conferred by the articles of association or other document regulating that or any other company, that the affairs of the first mentioned company are conducted in accordance with the wish of the employee.

  2. For a partnership, the employee is a partner in the business.

  3. For a sole proprietor, the employee and the employer is the same person.

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FAQs

Some frequently asked questions...

If an employee has control over their employer, all perquisites, allowances, and benefits-in-kind received by the employee become part of their taxable income, and no tax exemptions apply. 

For example, an employee who has control over their employer cannot claim the RM6,000 annual tax exemption for travel allowance for official duties.

The phrase “control over their employer” is defined based on the type of employer:

  • For a company, it involves the employee’s power to control through shareholding, voting power, or powers conferred by governing documents.
  • For a partnership, it is when the employee is a partner in the business.
  • For a sole proprietor, control exists when the employee and the employer are the same person.

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