Claiming GST input tax credit for employee expenses reimbursement in Malaysia

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 was a taxable supplies

(e) the employee is not entitled to claim input tax credit on the expense

(f) employer has in possession of valid tax invoice on the employee’s expenses –  the tax invoice (including simplified tax invoice) is in the business’s name or under business account except otherwise allowed by the DG (use company credit card by 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 reasonable to be attributable to supplies

 

Furthermore, GST input tax on employees expenses reimbursement can only be claimed only for persons considered as employees of the business. They are:

(a) directors (under contract of service)

(b) partners and any other managers

(c) person directly employed by the employer and not through an agency

(d) self-employed person who are treated as employee

Therefore, it is important for businesses to be aware of such criteria when computing the input tax credit for employees expenses reimbursement.

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