Introduction: Why Employee Benefits & Perquisites Matter in Malaysia
Employee benefits are no longer just “nice to have” perks — they are a critical part of an employee’s total remuneration package. In Malaysia, Benefits-in-Kind (BIK) and perquisites significantly impact both employees’ taxable income and employers’ compliance obligations.
However, misreporting these benefits could lead to serious consequences such as fines, penalties, or even jail time under the Income Tax Act 1967.
Understanding how different benefits are treated for tax purposes ensures:
- Correct salary packaging
- Compliance with tax laws
- Maximization of tax exemptions
- Avoidance of unnecessary penalties
Let’s dive deeper into each category.
Understanding Benefits-in-Kind (BIK)
What is BIK?
Benefits-in-Kind (BIK) refers to non-cash benefits provided by employers to employees in exchange for services rendered. Examples include the use of a company car, free housing, or discounted services.
Key points:
- BIK are taxable unless specifically exempted.
- Must be reported accurately in an employee’s Form EA and annual tax filing.
- Applies even if the employee does not request the benefit.
Why Does BIK Matter? BIK increases the employee’s gross employment income, which affects:
- Overall tax payable
- Eligibility for tax reliefs
Mortgage and loan application assessments
Fully or Partially Exempted Benefits-in-Kind (BIK)
Not every benefit from your employer becomes a tax burden. Some benefits are fully exempted from tax, while others are partially exempted depending on the circumstances.
- Fully Exempted BIK
These are benefits that do not attract any tax when conditions are met:
- Refreshments: Free coffee, tea, or light snacks provided at the workplace.
- Medical benefits: Coverage for medical, dental, maternity, optical, and even approved traditional treatments.
- Childcare facilities: Employer-provided childcare services for employees’ children.
- Recreational facilities: Gyms, sports areas, or libraries located within the company premises.
- Free transport: Shuttle buses or vans provided for travel between home and workplace.
- Leave passage: Up to three local leave passages per year (no limit) and one overseas passage per year (capped at RM3,000).
- Partially Exempted BIK
These benefits are only exempted up to certain limits:
- Leave passage (overseas travel): Exemption limited to RM3,000 once a year.
- Interest subsidies on loans: Exempted for housing, education, or car loans up to RM300,000.
- Company car and driver: Partially exempted, assessed using LHDN’s prescribed valuation.
- Petrol and parking: Allowances may be partially exempt if within reasonable limits.
Important: If a benefit is provided for both personal and work use without clear documentation, it may be deemed taxable.
Prescribed Value Tables
One major tool for calculating the taxable value of BIK is using Prescribed Values. Here’s a breakdown:
Prescribed Values for Motorcars and Petrol
- The prescribed value depends on the engine capacity of the car and whether petrol is provided.
- If the car is more than 5 years old (from registration date), the car’s prescribed value is reduced by 50%, but the petrol value remains unchanged.
- When both car and petrol are provided, the taxable value is the sum of both prescribed amounts.
| Engine Capacity (cc) | Car (Annual Value) | Petrol (Annual Value) |
|---|---|---|
| ≤ 1,500cc | RM1,200 | RM600 |
| 1,501cc – 2,000cc | RM2,400 | RM900 |
| 2,001cc – 2,500cc | RM3,600 | RM1,200 |
| 2,501cc – 3,000cc | RM5,000 | RM1,500 |
| > 3,000cc | RM7,000 | RM1,800 |
Example:
If an employee is given a 2,000cc car (over 5 years old) with petrol:
- Car value = RM2,400 × 50% = RM1,200
- Petrol value = RM900
- Total taxable BIK = RM2,100 per year
Special Treatment for Electric Vehicles (EVs)
EVs are calculated differently under the Formula Method based on car value:
Example:
- A Tesla Model 3 (~RM200,000): 5% × RM200,000 = RM10,000 taxable BIK annually.
Extra Tip: Free EV charging facilities provided by your company may be considered equivalent to free petrol benefits!
Deep Dive into Value of Living Accommodation (VOLA)
Housing benefits are taxed differently based on employee type:
Example:
- A plantation worker earns RM240,000/year, 3% × 240,000 = RM7,200 taxable housing benefit.
What Are Perquisites?
Perquisites are cash or cash-convertible benefits provided by employers due to employment exercised in Malaysia.
- Housing allowance – cash paid to help cover rental or housing costs.
- Bonuses – additional cash reward on top of salary.
- Transport allowance – cash provided for commuting or travel expenses.
- Mobile phone reimbursement – repayment of bills or expenses for work-related phone use.
According to LHDN Public Ruling No. 5/2019:
Unless specifically exempted under the Income Tax Act 1967, all perquisites are taxable as part of the employee’s gross income from employment.
Some perquisites may be partially or fully exempt, for example:
- Petrol card, transport allowance, or toll up to RM6,000 per year.
- Childcare allowance up to RM2,400 per year.
- Meal allowance, parking allowance, and certain travel allowances may also be exempt if within limits.
Understanding Taxable and Exempted Perquisites
Common Exemptions:
Common Fully Taxable Perquisites:
- Housing allowance (cash)
- Transport allowance (personal use)
- Personal income tax paid by employer
- Gift vouchers (cash-convertible)
- Club membership fees
- Waiver of large loans (>RM300,000)
Conclusion
Understanding Employee Benefits and Perquisites is not just a tax compliance necessity — it’s an opportunity for both employees and employers to maximize benefits wisely and legally.
Always remember:
- Keep documentation clear
- Use prescribed valuation methods
- Stay updated with public rulings
- Seek professional advice if in doubt
With the right knowledge, you can enjoy your perks while staying stress-free at tax season!
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