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 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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ACRA Cancels Registration of Filing Agent and Qualified Individual for AML/CFT Breaches

The Accounting and Corporate Regulatory Authority (ACRA) had cancelled the registrations of filing agent (RFA) and qualified individual (RQI) on 18 January 2024. The registrations were cancelled in view of breaches of anti-money laundering and countering the financing of terrorism (AML/CFT) controls under the ACRA (Filing Agents and Qualified Individuals) Regulations 2015 (the “ACRA Regulations”).

Some of the basic AMT/CFT controls that a RFA and RQI are required to exercise are as follows:

(a) perform additional customer due diligence measures when a customer is not physically present during onboarding;

(b) inquiring if there exists any beneficial owner in relation to some of its customers; and

(c) perform risk assessments i

RQIs and RFAs provide corporate secretarial services for business entities, such as helping customers to incorporate companies, file annual returns and fulfil other filing requirements under the Companies Act 1967 or other Acts under ACRA’s purview. RQIs and RFAs are required to perform customer due diligence measures in accordance with the ACRA Regulations, and conduct their business in such a manner as to guard against the facilitation of money laundering and the financing of terrorism. RQIs and RFAs must also satisfy statutory requirements such as being fit and proper persons, to be registered or continue to be registered.

RQIs and RFAs who breach their statutory obligations may be subject to enforcement actions, such as financial penalties of up to $10,000 or $25,000 per breach respectively or have their registrations with ACRA suspended or cancelled.

Therefore, RQIs and RFAs play an important role in helping to detect and combat illicit activities.

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