1.0 Introduction
Human resources are important intangible to every business. Experienced and skillful employees are provided with the various benefits in kind to appreciate their services. These perquisite requires immediate formulation and refinement in the existing employment contract to accommodate the e-Invoice elements. The implementation of e-Invoice system beginning in 1.8.2024 and would be fully completed on 1.7.2025.
The clock is ticking and time is running out. Attention is needed now.
2.0 Benefits in kind
The common benefits in kind provided to the employees comprise of medical / dental benefits, the provision of car with petrol and toll charges, repairs and maintenance on motor vehicle, subsidised childcare centre or kindergarten payment, recreational club membership, gym membership, professional subscription fees and etc. These benefits are part of employment income, which are governed by preferential tax benefits.
3.0 Business deduction
The deduction of the various benefits in kind provided to the designated employees would be accepted as business expense provided:
- these benefits in kind are stated in the employment contract;
- the claims by the employees need to be accompanied by the e-Invoice from the respective suppliers together with the reimbursement claim form; and
- these expenses are reasonably incurred and required in the production of company business income.
4.0 Compliance procedure
The company has to incorporate, revise and refine the employment contract adding in the e-Invoice compliant attached on the various agreed benefits in kind provided to the designated employee. Whenever possible, the company should initiate payment directly to the organisation or service provider, providing the mandatory data fields to be included in the e-Invoice issued to the company.
Alternatively, the company may issue corporate credit card to the designated employee so that the expenses incurred directly be issued with e-Invoice to the company. This would facilitate the payment of toll charges, parking fees, repairs and maintenance of the car, petrol etc., at ease and convenience, which also in complete compliance with the e-Invoice mechanism.
5.0 Conclusion
The company bears the legal burden to explain, justifying and support the essential of these employees’ expenses being ‘wholly and exclusively’ incurred in the production of business income to facilitate tax audit enquiries in later period.
The tax efficiency in mitigation of tax penalty also ensure complete deduction on business expense depends entirely on the fundamental ground works now especially on the review and revise employment contract or new employment contract incorporating the agreed benefits in kind to the employees with e-Invoice elements.
