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Tax Treatment and Exemption Limits on Traveling Allowances in Malaysia
Tax Treatment and Exemption Limits on Traveling Allowances in Malaysia

Auto-exemption of Taxes for Traveling Allowances with a value of RM6,000 or less in Talenox.

Nicholas avatar
Written by Nicholas
Updated over a week ago

The following are some frequently asked questions that we often encounter:

  1. "How can I have the relevant tax exemptions apply to my employee's traveling allowances?"

  2. "There is an exemption limit on allowances for travel, how do I account for this in payroll?"

  3. "How do I handle tax on petrol allowances?"

Good News! Talenox has automated the RM6,000 tax exemption threshold for the following types of payments included into an employee's payroll for the financial year:

  • Petrol allowance

  • Travelling allowance

  • Toll payment

This means that if an employee receives any of the payments indicated above (or any combination of the above payments) for official duties, they will have these amounts exempted from tax contributions. This will apply to amounts that do not exceed RM6,000 in a financial year.

If the amount received by an employee exceeds RM6,000 a year, the employee can make a further deduction in respect of the amount spent for official duties.

How Can I Have The RM6,000 Exemption Limit Automatically Apply to My Employees in Payroll?

When you head into process any of these allowance types in payroll, you'll need to use the "Transport Allowance" pay item in the system to do so:

This way, the system will help you with tracking of the allowance amounts processed per annum.

If the total transport allowance amounts processed for the year exceeds RM6,000, the pay item will automatically have the 'Tax' checkbox ticked for the employee:

If the total transport allowance amounts processed for the year is less than RM6,000, the pay item will automatically have the 'Tax' checkbox un-ticked for the employee:

How Do I Determine If I Have Selected the Correct Pay Item that Contributes to Traveling Allowances Per Annum?

Any pay item that has the 'Item Type' settings tagged to "Transport Allowance" will be included into the exemption limit calculations.

You can view this the list of pay items settings by heading to the Custom Pay Item Settings page.

Hope this helps with your payroll processing and tax filing needs!

Find out more about the different types of tax exemptions through these links here:

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