Flexible Work Arrangement incentives

Flexible Work Arrangement incentives

Under the Short-term Economic Recovery Plan (PENJANA) announced on 5 June 2020, to encourage work-from-home arrangements, the Government proposed certain flexible work arrangement incentives. One of the incentives proposed was a tax exemption of up to RM5,000 for individual taxpayers who receive handphones, notebooks or tablets from their employers (see Take 5: COVID-19: Short-term Economic Recovery Plan).

To legislate the above, the following Order and Rules were gazetted on 26 January 2021, and are effective for YA 2020.

The Order provides that in ascertaining the gross income from his employment for a YA, an employee is exempted from the payment of income tax on the value of benefit (in the form of a smartphone, tablet or personal computer) received from his employer. The value of benefit is capped at RM5,000.

The Order will not apply to an employee where:

(a)   The employee is a sole proprietor,

(b)  The employee is the employer’s partner in a partnership, or

(c)   His employer is a company, and the employee has the control or power to manage the affairs of the company or any other company that has control over his employer, to be conducted in accordance to the wishes of the employee in the following manner:

(i) By means of shareholding in the company or such other company,

(ii) By possession of voting power in relation to the company or such other company, or

(iii) By exercising any power conferred in the constitution of the company or other documents regulating the company or such other company

The Rules provide that in ascertaining the adjusted income of a Malaysian resident from his business for a YA, a deduction shall be allowed for the value of the benefit (for the purchase of a smartphone, tablet or personal computer) given to his employee.