Staff Claim

Hi Joseph,

Looks like you are the most active in this forum. I have some more issues which I would like to ask your opinion, it is on processing staff claim under GST.

Currently we do summary of individual staff claim into few category such as entertainment, toll & parking, petrol, accommodation, meal allowances, millage, etc. and end of month process it by booking each category using one entry.

Issues under GST are:
1. Will we continue to process staff claim as summary or we have to enter bill by bill (invoice by invoice) as per staff submission in our Account Payable?
2. Which tax codes to use if we go by summary of each expense if we have bills for same category (let say parking) but parking can be standard rate supply with shown GST amount and theoretically can be provided by non-registered person where no GST amount will be shown?
3. Which tax code to use for expenses directly related to staff such as meal allowances & millage, claim under staff claim, since it is treated as not supply, payment to staff, but I cannot see any such tax code (in our accounting system we have to select a code)?
4. How to process staff claim if there is enclosed invoice on which we can claim GST (entertainment, accommodation, etc). Can we treat our staff as "suppler" under Account Payable or we have to enter invoice under name of issuer (restaurant name or hotel name?
5. If we pay to staff less than hotel invoice is shown, due to company policy on maximum amount for accommodation, how much of GST we will claim, full amount of GST as per invoice or we have to calculate based on reimbursement to staff?

Regards
Edin

Hi Edin,

Tried to help wherever I can. I am not GST expert, so you guys should counter-check my replies to the GST Act, Regulations or Guides provided by the Customs.

Currently we do summary of individual staff claim into few category such as entertainment, toll & parking, petrol, accommodation, meal allowances, millage, etc. and end of month process it by booking each category using one entry.

Issues under GST are:
1. Will we continue to process staff claim as summary or we have to enter bill by bill (invoice by invoice) as per staff submission in our Account Payable?
Customs view seemed to be that you have to capture the individual Tax Invoices because they will use the details to check against the sales by your suppliers (matching using the GST registration numbers).
Some accounting software (such as Sage 50 & Sage UBS) allows the capturing of the suppliers' names and GST numbers under individual transaction lines. Customs would probably like to see the details in the GAF file.

2. Which tax codes to use if we go by summary of each expense if we have bills for same category (let say parking) but parking can be standard rate supply with shown GST amount and theoretically can be provided by non-registered person where no GST amount will be shown?
You have to split between TX (has impact on fields 6(a) & 6(b) of the GST-03 Return) and NR (no impact in GST-03 Return).

3. Which tax code to use for expenses directly related to staff such as meal allowances & millage, claim under staff claim, since it is treated as not supply, payment to staff, but I cannot see any such tax code (in our accounting system we have to select a code)?
Some consultants/software recommend using no tax codes, some recommend creating a 24th tax code - MYOB uses N-T, some recommend using NS (non-supply). Check with your accounting software vendor.

4. How to process staff claim if there is enclosed invoice on which we can claim GST (entertainment, accommodation, etc). Can we treat our staff as "suppler" under Account Payable or we have to enter invoice under name of issuer (restaurant name or hotel name?
If I am not mistaken, Sage Accpac recommend creating such control account in AP and also a Misc Supplier account for cash/misc purchases. Question is does your accounting software allow you to capture the supplier names and their GST registration numbers in your individual transaction entries.
Note: Sage Accpac and a couple of other accounting software do not allow capturing of the tax codes via their GL modules, and hence you have to capture the transactions under AP.

5. If we pay to staff less than hotel invoice is shown, due to company policy on maximum amount for accommodation, how much of GST we will claim, full amount of GST as per invoice or we have to calculate based on reimbursement to staff?
You will probably have to apportion the GST.

Further to Q1:

Normally, the amounts of these individual invoices are quite small and there can be quite many invoices/receipts, and therefore not practical to capture them individually, so most businesses would most likely summarise them (using Excel) and capture the staff claim expenses in one accounting journals per month, example:

Debit
TX : Total Parking Expenses XXX
NR : Total Parking Expenses XXX
EP : Total Toll Expenses XXX
NS : Total Mileage Claims XXX
TX : Total Entertainment (for staff & existing customers) XXX
BL : Total Entertainment (GST non-claimable) XXX
EP : Total Medical Expenses XXX
BL : Total Medical Expenses XXX

Credit
Staff Claims Account XXX

Basically continue doing what you are doing now.

Debit
TX : Total Parking Expenses XXX
NR : Total Parking Expenses XXX
EP : Total Toll Expenses XXX
NS : Total Mileage Claims XXX
TX : Total Entertainment (for staff & existing customers) XXX
BL : Total Entertainment (GST non-claimable) XXX
EP : Total Medical Expenses XXX
BL : Total Medical Expenses XXX
NS : Total Meal Allowance XXX
TX : Total Hotel Accommodation XXX
TX : GST Input Tax (BS) XXX
BL : GST Expense (PL) XXX

Credit
Staff Claims Account XXX

Thanks a lot, it is very good explanation, I wish Custom could do similar explanation / clarification, it will be really useful for all of us.

My company is suing SAGE 300 and they recommend to enter Tax Invoices, where we can claim GST under supplier's name and once we make payment to staff we will use “single reference” or something like that to close that supplier.

Just to make some comment, I think that parking should came under either under block input tax and used code BL or as you explained NR: Purchase from non GST registered supplier with no GST incurred. Most of parking will be related to parking of passengers’ car. Only in certain cases if passenger’s car is approved by Custom to be used as business vehicle, we will be able to claim GST for parking and use code TX.

On the other hand, how about other expenses related to passenger’s car, if I’m not mistaken we can claim GST on passenger’s car insurance only, the rest will fall under block input tax.

Take a simple view of the blocked GST list.

A good GST Consultant worth his salt will tell you that if an item is not specifically stated in the list, then the item is not blocked.

In Singapore, all running costs of a passenger car is blocked. In Malaysia, Customs chose to only block repair, maintenance & refurbishment costs.

Despite what Customs officers claimed that our GST is based on Australia or UK model, I said they are copying 90% from Singapore! Our government just don't want to admit it because "how can we copy something as important as GST from a small country and our neighbour, Singapore??!".

Motorbike (e.g. used by your despatch boy) is not mentioned in the list, so claim the GST, unless your company has a lot of motorbikes.

Laptops - most of us take back company laptops to use at home. But since laptop is not mentioned in the list, I said claim the GST on expenses (and the purchase) relating to the laptops!

Customs should know very well the common expenses incurred by a business, so if they chose not to mention such expenses in the blocked input tax list, basically they are telling us indirectly we can go ahead and claim the input tax credit!

Well I would agree on the above. Many things are very similar to Singapore GST, but on the other hand they have very good explanation on many issues.

I also want to seek your opinion in case of inter-company charges. My holding company pays many expenses which are related to our subsidiaries. Those expenses at the end of each month charge to each subsidiary.

Paying and later on charging items which falls under standard rate supply are easy and straight forward, I will claim all GST incurred on such expenses and later on charge GST once invoicing to subsidiaries for such expenses. Subsidiaries will be able to claim GST which I invoice to them.

However, my problem will be on those charges which fall under exempt supply or out of scope supply.

Once I pay for it, invoice will come to holding company name and we will not be able to claim GST since it is exempt supply (let say life insurance, medical expenses, and certain expenses which are incurred by top management and later charged back to subsidiaries, including donation etc.), and again no problem. But problem will be once I re-invoice it to subsidiaries, I cannot charge GST on exempted items or out of scope items, so in that case I can fall under exempt supplier if those charges are more than RM 5,000 / month or 5% of my turnover than I have to use again complicated partial exemption for claiming my other input tax. So what do you think, what will be the best way to charge subsidiaries for such shared expenses?
Regards
Edin

1) charge as management fee, so everything will be standard-rated
2) transfer the staff to respective companies - this will also take care of transfer pricing issue

Edin wrote:Well I would agree on the above. Many things are very similar to Singapore GST, but on the other hand they have very good explanation on many issues.

I also want to seek your opinion in case of inter-company charges. My holding company pays many expenses which are related to our subsidiaries. Those expenses at the end of each month charge to each subsidiary.

Paying and later on charging items which falls under standard rate supply are easy and straight forward, I will claim all GST incurred on such expenses and later on charge GST once invoicing to subsidiaries for such expenses. Subsidiaries will be able to claim GST which I invoice to them.

However, my problem will be on those charges which fall under exempt supply or out of scope supply.

Once I pay for it, invoice will come to holding company name and we will not be able to claim GST since it is exempt supply (let say life insurance, medical expenses, and certain expenses which are incurred by top management and later charged back to subsidiaries, including donation etc.), and again no problem. But problem will be once I re-invoice it to subsidiaries, I cannot charge GST on exempted items or out of scope items, so in that case I can fall under exempt supplier if those charges are more than RM 5,000 / month or 5% of my turnover than I have to use again complicated partial exemption for claiming my other input tax. So what do you think, what will be the best way to charge subsidiaries for such shared expenses?
Regards
Edin

If the invoice is in the name of the holding company and the holding company charges the cost to the subsidiary, this will fall under reimbursement and GST must be accounted for notwithstanding the fact that the items are exempt items. This is because the holding company will be deemed to be providing a service to the subsidiary. The subsidiary can claim input tax on this billing.

However, if the the invoice is in the name of the subsidiary and the holding company pays on behalf of the subsidiary and claims back the amount from the subsidiary, this will fall under disbursement and no GST will be applicable. The holding company does not need to charge the subsidiary GST and the subsidiary do not need to claim input tax.

joseph wrote:Basically continue doing what you are doing now.

Debit
TX : Total Parking Expenses XXX
NR : Total Parking Expenses XXX
EP : Total Toll Expenses XXX
NS : Total Mileage Claims XXX
TX : Total Entertainment (for staff & existing customers) XXX
BL : Total Entertainment (GST non-claimable) XXX
EP : Total Medical Expenses XXX
BL : Total Medical Expenses XXX
NS : Total Meal Allowance XXX
TX : Total Hotel Accommodation XXX
TX : GST Input Tax (BS) XXX
BL : GST Expense (PL) XXX

Credit
Staff Claims Account XXX

Hi Joseph

Wish to know what is the NS code above?

I have the following questions :-
1) Say for company P/L we have wages, HP interest (code EP?), bank charges (Code EP?), EPF, licence fee, donation, do we have to allocate each separate tax codes or can leave it blank?

2) EP - Purchase in relation to residential properties, certain financial services (Exempt from GST)
I understand that toll is tolled highway therefore it is EP. But for medical expenses, how is it a EP other than BL?

3)OP - Outside scope of GST - Can we apply to license fee or EPF, Socso, Licence fee, work permit fee charged by government authority?

NS is a self-created 24th tax code for non-supply.

NS - wages, EPF & SOCSO, donation
OP - licence fee, work permit fee
EP - HP interest, loan interest, toll charges
TX - fee-based financial services, e.g. bank charges

Healthcare services is an exempt supply as per GST (Exempt Supply) Order 2014. However, not all charges by hospitals/clinics fall under this category, e.g. registration fee which is standard-rated.

Dear Joseph

Thank you so much for your helpful reply.

Customs Putrajaya said no need to create a new tax code for supply/purchase which is neither a supply of goods nor supply of services. Use the tax codes for out-of-scope supply and purchase, i.e. OS or OP.

Dear Joseph,

May I know if GST input tax for parking, entertainment expenses (where normally tax invoice or receipt from restaurants will not print my company's name), training meals expenses are claimable?

Thanks

If it is a simplified tax invoice, then input tax up to RM30 is claimable.

If it is a full tax invoice not in your company's name (e.g. electricity bills in landlord's name), then cannot claim GST.