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
Detailed Taxable Benefits-in-Kind (BIK)
Let’s explore in-depth the most common taxable BIK in Malaysia:
| Benefit | Details | Taxable? | How it's Calculated |
|---|---|---|---|
|
Company Car (Petrol/Diesel) |
Use for personal travel, including fuel and maintenance |
✅ |
Prescribed Value or Formula Method |
|
Company Car (Electric Vehicle) |
Personal use of EVs |
✅ |
Formula Method (4%–7%) of car value |
|
Housing Accommodation |
Free or subsidized living quarters |
✅ |
Lower of 30% salary or market rental |
|
Value of Living Accommodation (VOLA) |
Housing for directors or special industries |
✅ |
Special rules apply |
|
Household Furnishings, Appliances |
Furniture, electrical items, air-conditioners |
✅ |
Fixed prescribed values based on furnishing level |
|
Medical Benefits |
Local treatment exempt; overseas/emergency rules apply |
⚠️ |
Depends on location and situation |
|
Interest-Free or Low-Interest Loans |
Below-market rate loans (e.g., housing) |
✅ |
Difference between market and actual interest rate |
|
Subsidized Goods/Services |
Discounts exceeding regular staff discounts |
✅ |
Value of extra discount taxable |
|
Gifts & Vouchers |
Non-cash gifts exceeding RM500 taxable; all cash gifts fully taxable |
✅ |
Full amount |
|
Children’s Education Fees |
Employer-paid tuition fees unless scholarship |
✅ |
Entire amount taxable |
|
Club Memberships |
Fees for golf, gyms, or social clubs |
✅ |
Fully taxable unless work-specific |
Fully or Partially Exempted Benefits-in-Kind (BIK)
Thankfully, not all benefits will land you a bigger tax bill. Some are entirely exempted if conditions are met:
| Benefit | Condition for Exemption |
|---|---|
|
Mobile Devices (Phone, Tablet, Laptop) |
Provided strictly for work purposes |
|
Uniforms, Tools, Protective Equipment |
Used for performing official duties |
|
Meals Provided at Workplace |
Meals free at in-house canteens or offices |
|
Parking Allowances |
Parking near work premises |
|
Retirement Benefits |
Paid under an approved scheme |
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
|
Car Cost (New, RM) |
Prescribed Car Value (RM) |
Prescribed Petrol Value (RM) |
|---|---|---|
|
Up to 50,000 |
1,200 |
600 |
|
50,001 – 75,000 |
2,400 |
900 |
|
75,001 – 100,000 |
3,600 |
1,200 |
|
100,001 – 150,000 |
5,000 |
1,500 |
|
150,001 – 200,000 |
7,000 |
1,800 |
|
200,001 – 250,000 |
9,000 |
2,100 |
|
250,001 – 350,000 |
15,000 |
2,400 |
|
350,001 – 500,000 |
21,250 |
2,700 |
|
Above 500,001 |
25,000 |
3,000 |
✅ If the car is over 5 years old, the car value is reduced by 50%, but not the petrol value.
Special Treatment for Electric Vehicles (EVs)
EVs are calculated differently under the Formula Method based on car value:
| Approx. cc Equivalent | Prescribed Tax Rate |
|---|---|
|
Up to 1,600cc |
4% |
|
1,601 – 2,000cc |
5% |
|
2,001 – 2,500cc |
6% |
|
Above 2,500cc |
7% |
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:
| Category | Who is Covered | Calculations | Notes |
|---|---|---|---|
|
General Employees |
Standard staff |
Lower of 30% salary or market rental |
Employee contribution deductible |
|
Directors of Controlled Companies |
Directors with ≥5% shareholding |
Full market rental value |
No 30% salary comparison |
|
Employees in Remote Locations |
Plantation workers, remote hostels |
3% of gross salary |
Simpler calculation |
✅ Example:
- A plantation worker earning 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.
Common examples include:
- Housing allowances
- Bonuses
- Transport allowances
- Mobile phone reimbursements
According to LHDN Public Ruling No. 5/2019, unless exempted, all perquisites are taxable.
Understanding Taxable and Exempted Perquisites
Common Exemptions:
| Perquisite | Exemption Limit | Condition |
|---|---|---|
|
Petrol/Travel Allowance |
RM6,000/year |
Official duty only |
|
Childcare Subsidy |
RM3,000/year |
Child under 12 years |
|
Parking Allowance |
Fully exempt |
Work parking |
|
Meal Allowances |
Fully exempt |
Overtime/duty meals |
|
Long Service Awards |
Up to RM2,000/year |
10+ years of service |
|
Mobile Phone/Internet |
Fully exempt |
Limited to one device for work |
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)
Practical Real-World Examples
| Scenario | Tax Status | Reason |
|---|---|---|
|
RM5,000 Transport Allowance |
Exempt |
Within RM6,000 limit for official travel |
|
RM8,000 Housing Allowance |
Fully Taxable |
Personal benefit |
|
RM1,500 Childcare Subsidy |
Exempt |
Child aged 7 |
|
Free Mobile Phone (one device) |
Exempt |
Work-related |
|
RM3,500 Supplier Gift Voucher |
Taxable |
Cash-convertible |
|
Waiver of RM250,000 Loan |
Exempt |
Loan under 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!
FAQs About Employee Benefits & Perquisites (Perks) in Malaysia
No, benefits like mobile phones for work, workplace meals, and childcare subsidies are exempt if conditions are met.
Use the Prescribed Value Table or the Formula Method (especially for EVs).
Yes! EVs enjoy lower BIK tax rates between 4%-7%.
Yes, but parking must be work-related, and transport allowances are exempt up to RM6,000.
Penalties include fines up to RM20,000 or 6 months in jail.
Yes, if the vouchers are cash-convertible and exceed exemption thresholds.
