4 Myths of BIK and Perquisite In Form E Part 1 of 2 

eKTP 108

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Myth 1

Commission / incentives received by authorized agents from the insurance companies 

Insurance agents are the professionals who have to be licensed by Bank Negara Malaysia under the Insurance Act 1996 and / or under the Takaful Act 1984. Most insurance agents report their income as a sole-proprietorship but there are some who incorporate companies to report these incomes.   

Kindly LHDNM confirm whether insurance agents are allowed to incorporate a company for purposes of reporting their income for tax purposes. Should LHDNM decide that insurance agents are not allowed to report their income under a limited company although they have already done so, what should be the course of action the insurance agents need to do, moving forward. Kindly advise. 

In the case of taxpayers conducting business activities as tax agent insurance business depending on the fact of the actual case and income reported and taxed need to consistent with the Income Tax Act.

The contents of the agreement documents need to be reviewed as the definition of insurance agent, the party responsible for paying and incurring damages / indemnity costs in the event of legal and other liability to verify whether the commission received is an income that can be reported as business income from sole-proprietorship or Sdn Bhd.

Myth 2

Medical benefits for directors of controlled companies

Under section 13(1) b ITA 1967, medical and dental benefits are exempted from income tax. Does the exemption extend to directors of a controlled company who are not service directors just like for any other employees of the company?  We are of the opinion that such expenses should also be deemed as exempted benefits as the directors do work in the company just like any ordinary employee in the company. 

In Public Ruling No. 3/2013 - Benefits In Kinds, under paragraph 9.3.1 has clarified that if the employee receiving BIK from the employer has control over his employer (company) is no exemption. Therefore, BIK received by the directors or employee is a part of the gross income of the employment and taxed under paragraph 13 (1) (b) of the Income Tax Act 1967. 

In addition, the meaning of 'control over employers' is described in paragraph 9.3.2.1 of the same public ruling.

 
Darren Yap