Tax Planning for Employees

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Many have approached me to ask if there are any tax planning opportunities for employees. For the wage-earners, many complain that too much of their hard-earned money goes towards payment of taxes. This is a sad fact, but it’s TRUE. The taxes that you pay could reach as high as 26% of the salary that you earn, which is even higher than what the small-medium companies pay, which is 20% on the first RM500,000 of its chargeable income and 25% on the balance. Heck, the tax rate of an employee is already 26% on any chargeable income exceeding RM100,000!

Now for the tax tip: do you know that there are numerous tax-exempt allowances and perquisites which are available to an employee? If you can take advantage of these tax-free perquisites, do you know that a person with gross earnings of say, RM7,000 a month could potentially end up paying LESS TAXES compared to a person drawing gross earnings of RM6,000 with none of these tax-free perks?

Let’s take a look at the types of tax-exempt perks available to an employee:

However, from an employee’s perspective, the trick would be to get the employer to agree to restructure the salary package into the manner that will give the employee the best tax advantage. Not an easy task, I must admit; but if you’re successful in getting your salary package restructured, imagine the amount of taxes that you will potentially save annually! Naturally, the employee will have to convince the employer that doing this has no additional costs to the employer. Worst case scenario, you may even be bold enough to split the tax savings with your employer and offer to take a small pay reduction in order to entice him to accommodate to your request to change to your salary package!

A word of caution: Certain allowances or payments are NOT liable to EPF contribution so taking a travelling allowance, for example, will cause you to lose the employer’s contribution to EPF on that allowance. Please refer to the Employees’ Provident Fund Portal for the list of payments which are liable or not liable to EPF contribution.

Any other ways for the employee to save some taxes? Sure, there a several other ways; but I think I’ll keep those ideas to myself first so I can earn some fees from doing tax planning and advisory work!


About Richard

Richard Oon Hock Chye has more than 25 years of experience in taxation and business advice, with particular expertise in Malaysian property law. He began his taxation career with Deloitte Touche Tohmatsu, a ‛Big Four’ accounting firm, before starting his own practice, ConsulNet Tax Services Sdn. Bhd., in 1996. He is currently the National Tax Director of TY Teoh International, one of the leading consulting service providers in Malaysia. It is a member of the MSI Global Alliance, a global network of more than 250 independent legal and accounting firms, in over 100 countries. Richard sits on the board of two companies listed on the Main Board of Bursa Malaysia, as an independent non-executive director. He is also a regular contributor to several magazines and publications, and has shared his tax expertise on numerous occasions with organisations and property developers. As well as being a member of the Malaysian Institute of Accountants (MIA), Richard is a fellow member of both the Association of Chartered Certified Accountants (ACCA) and the Chartered Tax Institute of Malaysia (CTIM). He is a Certified Financial Planner (CFP) and holds a tax agent licence issued by the Ministry of Finance. Richard is also the author of the book, ‘Every Property Investor’s Guide To How To Pay Less Tax Legally’.

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