PR 1/2003 Tax Treatment of Leave Passage

Leave passage – traveling/vacation within Malaysia or outside Malaysia provided to the employee

Leave passage cost - cost of fares

1. Leave passage not assessable as employment income
- Local trip < 3 times
- Oversea trip – 1 time or maximum RM3,000

2. Leave passage assessable as employment income
- Local trip - 4 or more (the most expensive passages are exempt)
- Oversea trip - 2 or more or > RM3,000

3. Leave passage incurred by employer
- Cost of fares - not deductible, disallowed under Paragraph 39(1)(m) ITA
- Food, accommodation and other incidental expenses – deductible as entertainment expenses

4. Leave passage for partnership or sole proprietors
- Not qualify for tax deduction as its private in nature

Addendum to PR 1/2003
1. W.e.f Ya2007 Leave passage incurred by an employer to facilitate a yearly event within Malaysia for employee and family is categorized as entertainment expenses – allowable as deduction

Source: summarised from
http://www.hasil.gov.my/pdf/pdfam/PR1_2003.pdf