Is gift from employer taxable?

When I received a gift or reward from my employer during the New Year celebration, will this affect my tax payable?

Overview

In a competitive business climate, a gift or reward has been proven to improve organizational values, enhance team efforts, increase customer satisfaction and motivate certain behaviours amongst members of staff.

However, do you know the tax impact of the gift or reward received? 

Key takeaway

You will understand the:

• Meaning of perquisites

• Tax treatment of perquisites 

What are Perquisites?

Perquisites are benefits in cash or in-kind which are convertible into money received by an employee from his/her employer or from third parties in respect of having or exercising employment.

Perquisite is a chargeable income to tax as part of the gross income from employment under paragraph 13(1)(a) of the ITA.

Tax treatment

1. In respect of having employment or exercising an employment

a) Gift

The value of the gift is chargeable to tax when it is received, can be sold, assigned, or convertible into cash, and is received in appreciation for the performance of past services.

However, there is an exemption of RM2,000 under paragraph 25C, Schedule 6 of the ITA if is for a long service award.

b) A sum of cash

Cash money is considered a perquisite if it is an appreciation for the excellent service rendered even though it is given voluntarily by the employer.

* The phrase having employment or exercising employment includes the performance or any duties by an employee.

2. Not related to having or exercising the employment

Pure gifts or testimonials received by an employee from his employer or third parties purely for personal appreciation or for specific personal reasons are not taxable.

Examples of pure gifts or testimonials include:

a) wedding gifts whether, in the form of cash, jewellery or other items were given to an employee by the employer.

b) cash is given to an employee by the employer for passing the professional examination with excellent results. 

c) cash, other items and certificate of appreciation given to an employee for his/her extraordinary achievement.

Source:

Public Ruling 5/2019 Perquisites from Employment

http://lampiran1.hasil.gov.my/pdf/pdfam/PR_05_2019.pdf

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