p.9
Relevant Provisions of the Law
What is the minimum retirement age for employees effective from 1.7.2013?
Increased from 55 to 60 years.
p.7
Tax Treatment of Gratuity Payments
What is the tax treatment of gratuity according to the ITA?
Gratuity is included in the gross income from employment and taxed in the year it is received.
p.16
Death Gratuities and Tax Exemptions
Are sums received by way of death gratuities taxable?
No, they are tax exempt according to paragraph 14 of Schedule 6 of the ITA.
p.4
Relevant Provisions of the Law
Which law provisions are relevant to this Public Ruling?
Sections 7, 13, 25, subsection 83(3), 150, paragraphs 14, 25, 25A, 25B, 25D, and 30A of Schedule 6 of the Income Tax Act 1967.
p.3
Objective of Gratuity Public Ruling
Who is the Public Ruling intended for?
The public and officers of the Inland Revenue Board of Malaysia.
p.7
Tax Treatment of Gratuity Payments
What qualifies an employee for full exemption on gratuity payment upon retirement?
Retirement due to ill-health, as per the Minimum Retirement Age Act 2012.
p.7
Tax Treatment of Gratuity Payments
What was Aiman's situation that led to his early retirement?
He suffered a heart attack and was diagnosed with serious heart disease.
p.17
Tax Treatment of Gratuity Payments
What portion of the lump sum payment from the AA Retirement Benefit Scheme is taxable?
Only the employer's contribution is taxable under paragraph 13(1)(d) of the ITA.
p.5
Determination of Gratuity and Compensation Elements
What influences the apportionment between gratuity and compensation?
The circumstances of each case and the employer’s normal practice.
p.6
Situations for Payment of Gratuity
What was the reason for Donald's retrenchment from Sam Electronics Sdn Bhd?
A merger exercise that resulted in his post being declared redundant.
p.1
Objective of Gratuity Public Ruling
What is the title of the document published by the Inland Revenue Board of Malaysia?
Gratuity Public Ruling No. 9/2016.
p.2
Objective of Gratuity Public Ruling
Can professional firms use the Public Ruling for training purposes?
Yes, they are permitted to use it for training purposes only.
p.4
Objective of Gratuity Public Ruling
What is the objective of the Public Ruling No. 9/2016?
To explain the method used to characterize lump sum payments received by employees upon termination of employment as gratuity and the tax treatment of gratuity.
p.16
Retirement Benefits and Taxability
Under what condition are retirement benefits not taxable?
They are not taxable if received from a pension or provident fund approved under section 150 of the ITA, according to DGIR conditions.
p.8
Situations for Payment of Gratuity
What gratuity did Rani receive upon retirement?
RM100,000 for 23 years of service.
p.15
Tax Treatment of Gratuity Payments
What happens to gratuity payments if they are credited to the EPF account?
The gratuity accrues as income at the time of payment and is subject to tax.
p.15
Situations for Payment of Gratuity
In the example provided, how much gratuity did Ruben receive?
Ruben received a retirement gratuity of RM190,000.
p.15
Retirement Benefits and Taxability
What is the amount that qualifies for exemption from Ruben's gratuity?
RM16,000 qualifies for exemption based on his 16 years of service.
p.14
Situations for Payment of Gratuity
What happens to gratuity payments when an employee reaches the compulsory retirement age?
No further gratuity is paid.
p.6
Objective of Gratuity Public Ruling
What is the purpose of the Public Ruling No. 9/2016 by the Inland Revenue Board of Malaysia?
To grant gratuities to employees leaving service and outline the rate or amount of gratuities normally granted.
p.2
Objective of Gratuity Public Ruling
What rights are reserved on the Public Ruling?
All rights are owned by the Inland Revenue Board of Malaysia.
p.3
Relevant Provisions of the Law
What empowers the Director General to make a Public Ruling?
Section 138A of the Income Tax Act 1967.
p.7
Tax Treatment of Gratuity Payments
When is employment income taxed according to the ITA?
In the year the payment is received, regardless of the period it is attributable to.
p.9
Situations for Payment of Gratuity
What age did Chan retire and what amount did he receive as retirement gratuities?
Chan retired at the age of 50 years and received RM108,000.
p.17
Tax Treatment of Gratuity Payments
What happens when an approved retirement scheme loses its approved status under section 150 of the ITA?
All contributions made by the employer must be included in the employee's gross employment income.
p.15
Tax Treatment of Gratuity Payments
What is the tax treatment of gratuity payments credited to the Employees Provident Fund (EPF)?
Gratuity is taxed in the year of receipt as income.
p.8
Situations for Payment of Gratuity
What is the significance of working in the same group of companies for Chan?
It allows him to qualify for gratuity exemption after 10 years of service.
p.6
Interpretation of Key Terms
What is the distinction between gratuity and compensation for loss of employment?
Gratuity is a lump sum payment for past service, while compensation is for loss of employment.
p.2
Objective of Gratuity Public Ruling
What is the title of the Public Ruling issued by the Inland Revenue Board of Malaysia?
Gratuity Public Ruling No. 9/2016.
p.2
Objective of Gratuity Public Ruling
What is prohibited regarding the reproduction of the Public Ruling?
Systemic or multiple reproduction, distribution for commercial purposes, and modification of content are prohibited.
p.3
Relevant Provisions of the Law
Can the Director General withdraw a Public Ruling?
Yes, either wholly or in part, by notice of withdrawal or by publishing a new Public Ruling.
p.16
Death Gratuities and Tax Exemptions
What was the outcome for Mike's widow regarding the death gratuity received?
The sum received by Mike's widow as death gratuity is tax exempt.
p.17
Tax Treatment of Gratuity Payments
Are returns on investment from an unapproved scheme included in the employee's gross employment income?
No, returns on investment are not included and should not be subject to tax.
p.9
Tax Treatment of Gratuity Payments
Does the partial exemption apply to employment with other companies in the same group?
No, it only applies to the gratuity attributable to the service with the last company in the group.
p.9
Tax Treatment of Gratuity Payments
How is the balance of gratuity taxed after the partial exemption?
It will be taxed in the year of receipt as provided in subsection 25(1) of the ITA.
p.9
Lump Sum Payment on Termination of Employment
What happens to lump sum payments received upon cessation of employment?
They are taxed in the year of receipt.
p.9
Tax Treatment of Gratuity Payments
What types of payments are not eligible for partial exemption?
Payments from unapproved retirement schemes or compensation for loss of employment.
p.6
Gratuity Payment Credited to Employees Provident Fund
When is a lump sum payment treated as gratuity?
When it is payment for past services at the end of a specific contract or upon reaching retirement age.
p.4
Interpretation of Key Terms
What does 'Employee' refer to in this Public Ruling?
An employee is the servant in a master-servant relationship or the holder of an appointment or office constituting the employment.
p.4
Lump Sum Payment on Termination of Employment
What are some reasons an employee's employment may cease?
Retirement, resignation, premature termination of the contract of service, or by mutual agreement.
p.16
Retirement Benefits and Taxability
Are all retirement benefits taxable?
Yes, all retirement benefits including gratuities and pensions are taxable unless specifically exempted under Schedule 6 of the ITA.
p.17
Tax Treatment of Gratuity Payments
In the example provided, what was the status of the AA Retirement Benefit Scheme?
It was not an approved scheme under section 150 of the ITA.
p.14
Tax Treatment of Gratuity Payments
Does Selva qualify for any exemption on his gratuity payment?
No, he does not qualify for any exemption.
p.15
Gratuity Payment Credited to Employees Provident Fund
What condition may apply to gratuity payments in collective agreements?
Gratuity may be paid to the EPF account instead of directly to the employee.
p.12
Tax Treatment of Gratuity Payments
What is the taxable amount of Soo's retirement gratuity?
RM280,000 (RM300,000 less RM20,000).
p.1
Objective of Gratuity Public Ruling
Which organization published the Gratuity Public Ruling?
Inland Revenue Board of Malaysia.
p.4
Interpretation of Key Terms
How is 'Employer' defined in this Public Ruling?
An employer is the master in a master-servant relationship or the person responsible for paying remuneration to the employee.
p.4
Interpretation of Key Terms
What is the definition of 'Employment' according to this Public Ruling?
Employment refers to a relationship of master and servant or any appointment or office for which remuneration is payable.
p.8
Situations for Payment of Gratuity
What gratuity did Zubir receive upon retirement?
RM180,000 for 18 years of service.
p.5
Lump Sum Payment on Termination of Employment
What can an employer describe a lump sum payment as upon employment cessation?
Compensation for loss of employment, ex-gratia, contractual payment, retrenchment payments, gratuity, etc.
p.5
Tax Treatment of Gratuity Payments
What must be established to determine the tax treatment of a lump sum payment?
The purpose of the lump sum payment.
p.5
Situations for Payment of Gratuity
What can employees do if they face wrongful dismissal?
Make a complaint or claim to the Department of Industrial Relations Malaysia, Industrial Court, Civil Courts, or Labour Court.
p.15
Tax Treatment of Gratuity Payments
What is the taxable amount of Ruben's gratuity after exemption?
The taxable amount is RM174,000 (RM190,000 - RM16,000).
p.14
Tax Treatment of Gratuity Payments
How is Selva's gratuity payment treated for tax purposes?
It is part of Selva’s gross income.
p.6
Determination of Gratuity and Compensation Elements
How is the RM50,000 payment divided in terms of gratuity and compensation?
RM10,000 as gratuity and RM40,000 as compensation for loss of employment.
p.6
Compensation for Loss of Employment
How are retrenchment benefits treated if employment is prematurely terminated with the prospect of continuing until retirement?
They are considered compensation for loss of employment.
p.3
Interpretation of Key Terms
What does a Public Ruling set out?
The interpretation of the Director General regarding tax law, policy, and applicable procedures.
p.17
Tax Treatment of Gratuity Payments
When does a lump sum payment from an unapproved scheme accrue as income?
At the date the payment is credited to the employee's EPF account.
p.5
Determination of Gratuity and Compensation Elements
What two elements may the amount paid upon termination of employment consist of?
Compensation attributable to loss of employment and gratuity attributable to past services.
p.17
Tax Treatment of Gratuity Payments
What must the employer do before crediting the net lump sum payment to the executive officers' EPF accounts?
Make the necessary tax deductions.
p.5
Situations for Payment of Gratuity
What are the two main remedies determined by the court for wrongful dismissal?
Reinstatement of the dismissed employee and/or monetary compensation.
p.6
Relevant Provisions of the Law
How are retirement benefits, including gratuities, typically documented?
In the contract of service or other binding documents between employer and employee.
p.3
Objective of Gratuity Public Ruling
What is the purpose of the Public Ruling No. 9/2016 by the Inland Revenue Board of Malaysia?
To provide guidance on the application of provisions of the Income Tax Act 1967 regarding gratuity.
p.16
Gratuity Payment Credited to Employees Provident Fund
What happens to the retirement gratuity if an employee requests it to be credited to their EPF account?
The employer can credit the net amount of gratuity to the EPF account after deducting the tax to be remitted to the DGIR.
p.7
Tax Treatment of Gratuity Payments
What must the DGIR be satisfied with for an employee to qualify for full exemption on gratuity?
That the retirement was due to ill-health.
p.9
Tax Treatment of Gratuity Payments
What exemption is available for gratuity payments effective for the year of assessment 2016?
Exemption of RM1,000 for each completed year of service.
p.15
Gratuity Payment Credited to Employees Provident Fund
What must employers do before crediting gratuity to an employee's EPF account?
Employers must file Form CP 22A to the Inland Revenue Board of Malaysia and withhold payment until receiving a clearance letter.
p.7
Tax Treatment of Gratuity Payments
What evidence did Aiman provide to qualify for full exemption on his retirement gratuity?
A medical report and documentary proof of medical treatment received.
p.12
Situations for Payment of Gratuity
What health issues did Soo have regular medical treatment for?
Hypertension, prediabetes, chronic backache, migraine, arthritis, and frozen shoulder.
p.5
Situations for Payment of Gratuity
What determines whether a termination benefit is a gratuity payment or compensation?
The particular circumstances of each case.
p.12
Tax Treatment of Gratuity Payments
Why did Soo not qualify for a full exemption on his retirement gratuity?
He could not prove his retirement was due to ill health and retired before age 55.
p.13
Tax Treatment of Gratuity Payments
Did Alias's gratuity of RM120,000 qualify for any exemption?
No, because he retired before the age of 55 years.
p.5
Tax Treatment of Gratuity Payments
How is the nature of termination payments assessed for income tax exemption?
The characteristics and nature of termination payments prevail over form and labeling.
p.6
Lump Sum Payment on Termination of Employment
What happens if a lump sum payment is received due to premature termination of employment?
It is treated as compensation for loss of employment, not gratuity.
