Correct me if I am wrong, Johnny will have to pay tax notwithstanding the payment is counted as wages, or fixed allowance. So even if you treat the payment as allowance, it is still considered as income and subject to taxation.

Claims to the tax authority should be supported by bills and invoices. If it is a monthly fixed claim (eg entertainment, petrol claims) without supporting documents, it is also subject to tax

If the above is true, the question now is not a taxation issue, but an employment contract issue / what is negotiated before joining Apple

What Johnny has done wrong (some say "stupid") is that when he negotiate with Apple, he did not mention specifically Apple should pay the net of tax amount (ie gross up) so that he doesn't need to pay penalty for leaving early

If it is Apple who insists Johnny should join them early, and they will bear the pay-in-lieu payment, then Johnny should "discuss" with the boss and tell Apple he should not be on the losing side for something Apple requested and get the tax amount reimbursed

But if during negotiation, Apple told Johnny "if you cannot join us in 1 month's time, you couldn't get the job", then Johnny will have to keep quiet and get on with life in the new company loh...

p/s the naming of the companies sounds like a case study of a lecture course to me....

This post has been edited by EddyLB: Aug 24 2012, 06:42 PM