Tax Alert 22 July 2019

FURTHER DEDUCTION FOR EMPLOYMENT OF SENIOR CITIZEN, EX-CONVICT, PAROLEE, SUPERVISED PERSON AND EX-DRUG DEPENDANT

Following the 2019 Budget announcement, the Income Tax (Deduction for Employment of Senior Citizen, Ex-Convict, Parolee, Supervised Person and Ex-Drug Dependant) Rules 2019 has been gazetted to provide for further deduction to employer on remuneration paid to employee who is a senior citizen, ex-convict, parolee, supervised person and ex-drug dependant. Pertinent points relating to the Rules include:

Application

• Only applicable to employers who has business income for the years of assessment (“YA”) 2019 and 2020.

Further deduction

• Further deduction in ascertaining the adjusted income shall be allowed on remuneration payable by the employer to his employee who is a citizen of Malaysia and resident in Malaysia based on the following:

    i.  Senior citizen who shall be sixty years and above;

   ii.  Ex-convict who is a person who have been convicted for any offence by a court and had

       served his sentence of imprisonment ;

  iii.  Parolee as defined in the Prison Act 1995 ;

  iv.  Supervised person who is a prisoner directed by an officer in charge to work at such

        labour under subparagraph 47(1)(b)(iii) of the Prison Act 1995;

  v.   Ex-drug dependant who had undergone/placed:

      a) treatment and rehabilitation pursuant to the Drug Dependants (Treatment and

           Rehabilitation) Act 1983 ;

      b) supervision pursuant to paragraph 6(1)(b) of the Drug Dependants (Treatment and

           Rehabilitation) Act 1983 or subsection 38B(1) of the Dangerous Drug Act 1952 ;

      c) under supervision pursuant to paragraph 8(3)(b) of the Drug Dependants (Treatment

          and Rehabilitation) Act 1983 ;

       and is registered with the National Anti-Drugs Agency (MyAADK system)

The above deduction is in addition to any deduction allowed under Section 33 of the Income Tax Act 1967.

Condition to be fulfilled

     i.   Full-time employee;

    ii.   Remuneration paid by employer to the employee does not exceed RM4,000.00 (Note);

   iii.   The employer and employee are not the same person;

   iv.   Employer is not a relative of the employee, that is:

       a)  spouse ;

       b)  parent, including step parent or parent in law ;

       c)  child including step child or child adopted in accordance with any law ;

       d)  brother or sister, including step brother or step sister;

       e)  grandparent or grandchild, including step grandparent or step grandchild.

The further deduction is subject to a written confirmation from the Malaysian Prison Department or National Anti-Drugs Agency, where applicable.

Note:  The proposal in Appendix 16 of the 2019 Budget Speech refers to monthly remuneration, however this is not specified in the Rules.

You may click on the link below to refer to the gazetted Rules

Income Tax (Deduction For Employment Of Senior Citizen, Ex-Convict, Parolee, Supervised Person And Ex-Drug Dependant) Rules 2019

Should you require any clarification, please do not hesitate to contact our Tax Team in our respective offices