After LHDN looked at the shareholding, they said:
“You are not an ordinary employee.”
This sentence, SME bosses really need to listen carefully.

Many bosses give themselves some allowances every month.
Meal allowance.
Petrol allowance.
Parking allowance.
Telephone allowance.
Childcare allowance.

In the boss’s mind:
“Isn’t this employee benefit?”
“Public Ruling also says can exempt what.”
“Company has been doing this for many years, should be no problem lah.”

Sounds reasonable.
Until LHDN audits the payroll record.

Story comes already.
There was one taxpayer, Lam Kam Wing, who was the Managing Director of a Sdn Bhd.
He also held 30% shares in the company.
In YA 2011 and YA 2012, he received RM14,400 allowances per year, including food, petrol, parking and telephone allowances.

The company treated these allowances as tax exempt and did not include them in his taxable income.

Later, LHDN audited the company’s STD record.
LHDN said this exemption did not apply to him.

Why?
Because he was not an ordinary employee.
He was the Managing Director.
He was also a shareholder.
And later, the Court held that he had control over the company.
As a result, the additional assessments for YA 2011 and YA 2012 were maintained.

Simple meaning, tax still had to be paid.
But this case also had another important part.
LHDN originally imposed a 45% penalty under Section 113(2).

However, the Court of Appeal set aside the penalty.
Why?

Because the Court found that the taxpayer had no intention to deceive LHDN.

He merely misunderstood the Income Tax (Exemption) Order 2009.
Wrong tax treatment does not necessarily mean intentional tax evasion.
But wrong tax treatment may still mean tax has to be paid.

This case is very important for SME bosses.
Because in many SMEs, the reality is like this:
The same person is the boss.
The same person is the director.
The same person is the shareholder.
The same person is also receiving “employee allowance”.

From a business angle, it looks normal.
From a tax angle, it may not be safe.

Public Ruling No. 5/2019, Perquisites From Employment, does explain the tax treatment of employee perquisites.
Some allowances, if they meet the conditions and limits, may be exempt.
But bosses should not only look at the exemption list.

The more important question is:
Who is receiving the allowance?

An ordinary employee may qualify.
A director-shareholder with control may not qualify.

This is the tax trap.
So SME bosses need to be careful.

Do not assume that once the allowance is called meal, petrol, parking or telephone allowance, then it is automatically tax exempt.
Do not assume that once payroll is done and voucher is signed, then everything is safe.
Do not assume that because it was okay in the past, it will surely be okay now.

For the full article, you may read our blog.
https://www.ktp.com.my/blog/list-of-tax-exempt-allowances-/26june2026