In Malaysia, there are criteria that a business need to meet in order to be eligible to claim the GST input tax credit for employee expenses reimbursement. The criteria are as follows:
(a) the goods or services acquired by the employees are used or to be used for the purpose of employer business
(b) directly attributable to taxable supplies or supplies made outside Malaysia which would be taxable if made in Malaysia
(c) the employee’s expense is directly related to their activities as an employee of the employer
(d) goods or services acquired by the employees were a taxable supply
(e) the employee is not entitled to claim the input tax credit on the expense
(f) the employer has in possession of a valid tax invoice on the employee’s expenses – the tax invoice (including simplified tax invoice) is in the business’s name or under the business account except otherwise allowed by the DG (use a company credit card by an employee to pay expense)
Note: this may render GST input tax for certain small expenses such as parking tickets, sundry purchases, etc not claimable since the criteria here requires even simplified tax invoices to be in the business name
(g) the expense is for an allowable input tax and is reasonable to be attributable to supplies
Furthermore, GST input tax on employees’ expense reimbursement can only be claimed only for persons considered employees of the business. They are:
(a) directors (under a contract of service)
(b) partners and any other managers
(c) the person directly employed by the employer and not through an agency
(d) a self-employed person who is treated as an employee
Therefore, it is important for businesses to be aware of such criteria when computing the input tax credit for employees’ expense reimbursement.
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