How Are Per Diem Expenses Managed in Malaysia?

When employees travel for business purposes in Malaysia, they may receive travelling allowances, meal allowances, and per diem allowances to cover their expenses. These allowances are considered perquisites from employment and are subject to tax exemptions as outlined in Public Ruling No. 5/2019 issued by the Inland Revenue Board of Malaysia (LHDN).

Horizons ensures full compliance with these regulations to facilitate seamless and tax-compliant expense claims for employees.

Travelling Allowance, Petrol Allowance, and Toll Rate

Travelling allowances, petrol allowances, and toll reimbursements received by employees for business-related travel are tax-exempt up to RM6,000 per year. However, the following conditions apply:

If an employee receives more than RM6,000 for travelling expenses, they may claim a further deduction on the amount actually spent for official duties.
Employees must maintain records of their claims and exemptions for at least seven years for audit purposes.
Employers must clearly differentiate between allowances provided for commuting between home and workplace and those for business-related travel.
If the employer is unable to distinguish these amounts, the exemption is capped at RM6,000 per year.

Meal Allowance

Meal allowances provided to employees can be exempt from tax under the following circumstances:

Regular meal allowances provided daily or monthly at a uniform rate for all employees.
The amount provided must be reasonable and not excessive.
Meal allowances granted for overtime, outstation, or overseas business travel are tax-exempt as they are meant to cover actual meal expenses incurred by the employee.
The exemption is applicable only if the meal allowances are given based on a fixed rate specified in the internal circular or written instructions of the employer.

Per Diem Allowance

Per diem allowances, which cover daily expenses incurred by employees while conducting official duties away from their usual place of work, are exempt from tax if the following conditions are met:

The allowances are specifically meant to cover meal expenses during business travel.
The per diem rates must be established in the employer’s internal policies, circulars, or written instructions.

Invoice and Receipt Requirements

To ensure proper documentation and compliance, invoices submitted for expense claims must include the following information:

The supplier’s name and address
The date of the transaction
A description of the goods or services provided
The total amount paid

Receipts are required when claiming expenses for business-related travel, meals, and other reimbursable costs, except where per diem allowances are provided at fixed rates based on company policy.

Compliance and Record-Keeping

To ensure compliance with Public Ruling No. 5/2019, employees and employers must:

Maintain accurate records of expenses and allowances provided.
Ensure that the allowances align with reasonable and standard business practices.
Differentiate between commuting and business-related travel expenses to claim the appropriate exemptions.

Summary

In Malaysia, travelling allowances, meal allowances, and per diem allowances are eligible for tax exemptions under the conditions specified in Public Ruling No. 5/2019. Employees should ensure they maintain detailed records, while employers must provide clear policies on allowance rates and justifications. Horizons remains committed to ensuring all expense claims are managed in compliance with the most recent regulations, ensuring both transparency and efficiency in the reimbursement process.

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Malaysia