In Malaysia, when an employer decides to bear the income tax on behalf of an employee, it is considered a benefit-in-kind. However, the tax amount borne by the employer is not subject to further taxation within the same year — meaning the employer can report and cover the tax without creating a taxable loop. To handle this correctly in HReasily, you’ll need to configure both the current year payroll and the following year’s EA form reporting.

Below is a step-by-step guide on how to properly set up and manage this process in HReasily:

Part 1: Setting Up a Non-Taxable Pay Item to Offset Monthly Tax (Current Year)

1. Navigate to Manage Company > Payroll.

2. Scroll down to the Pay Item List section and click CREATE.

3. Create a new pay item using the following settings:

4. Save the pay item and assign it to the relevant employee(s) in their current year payroll.

Part 2: Reporting in the EA Form (Following Year)

In the following year, you’ll need to accurately report the total tax amount borne by the employer in the employee's EA Form under the relevant field.

1. Navigate to Staff Directory, then select Payroll Info from the employee’s dropdown menu and click GO.

2. Click EDIT to make changes.

3. Select the appropriate Tax Year (e.g., if the tax was borne in 2024, select 2025).

4. Expand the Tax Details: Employee MTD and Income Info section and enter the total income tax amount covered by the employer in the field labeled Income tax borne by the employer in respect of his employee.

Example:

If the employer bears the tax in 2024, you’ll:

• Create and assign the non-taxable pay item in 2024 payroll.

• Then, input the total 2024 tax amount into the 2025 EA Form under the appropriate field.