Understanding Benefits in Kind (BIK) in Malaysia

In Malaysia, Benefits in Kind (BIK) are part of an employee’s gross income from employment, as defined under the Income Tax Act 1967 (ITA).

This guide explains the benefits in kind Malaysia tax treatment, based on Public Ruling No. 11/2019, issued by the Inland Revenue Board of Malaysia (IRBM).

What Are Benefits in Kind (BIK)?

Benefits in Kind (BIK) refer to non-cash benefits provided by an employer to an employee, which cannot be converted into money, even though they have monetary value.

These benefits cannot be sold, assigned, or exchanged for cash due to the employment contract or the nature of the benefit itself.

💡 Example: Use of a company car, free housing, domestic servants, or furniture.

Are Benefits in Kind Part of Gross Income?

✅ Yes.

Under Paragraph 13(1)(b) of the ITA, any amount equivalent to BIK provided to an employee by or on behalf of the employer, to be personally enjoyed by that employee, is treated as gross income from employment.

Methods of Valuing Benefits in Kind

According to Subsection 32(1) of the ITA, the value of BIK included in employment income must be “just and reasonable” in the circumstances.
Two methods are allowed to ascertain the value:

1️⃣ Formula Method

Each benefit is valued based on this formula:

Cost of the asset provided ÷ Prescribed Average Life Span = Annual Value of Benefit

Here, cost refers to the actual cost incurred by the employer.

Example of Prescribed Average Life Span

📌 Abatement (Reduction) Rules:
The annual value of BIK under the formula method can be reduced if the benefit is:

• Provided for less than a year, or
• Shared with another employee, or
• Used for the employer’s business purposes.

2️⃣ Prescribed Value Method (Alternative Method)

As a concession, employers may use the prescribed value method, which uses fixed annual amounts from IRBM’s Appendix 2 in Public Ruling 11/2019.

Example: Motor Vehicle Benefit

A motor vehicle provided to an employee is regarded as used privately if:

• It is used for travelling between the employee’s home and workplace; and
• It is kept at the employee’s home for personal use.

📍 Special Notes:

• If the motorcar is more than 5 years old, annual value can be reduced by half.
• The petrol benefit value remains unchanged.
• First registration in Malaysia applies to imported or reconditioned vehicles.
• Value of car is based on new price, regardless of second-hand or lease status.
• MTD (Monthly Tax Deduction) applies—value divided by the number of months the car is in use.
• Petrol benefit exempted up to RM6,000 under Section 13(1)(a).

Example: Other Common Benefits

📌 Abatement under Prescribed Value:
Allowed only if:

• The benefit is provided for less than a year, or
• Shared with another employee.
  (🚫 No reduction for business usage under this method.)

Tax Exemptions for Benefits in Kind

While most BIK are taxable, certain benefits are fully or partially exempted under Paragraph 25, Schedule 6 of the ITA.

Full Exemption

• Dental and medical benefits (including traditional and maternity)
• Child-care benefits (company child-care centres)
• Free meals and drinks
• Transportation between home/pick-up points and workplace
• Group insurance premiums (accident coverage)
• Local leave passage (up to 3 times per year)
• Discounted company products (if not convertible into money and given to all staff)
• Broadband, mobile phone, PDA (1 unit per category under employer’s name)
• Corporate membership annual fees (if paid by employer)

Partial Exemption

• Overseas leave passage — up to RM3,000 per year
• Discounted goods — up to RM1,000 exemption
  
  

Benefits in Kind (BIK) vs. Perquisite

Key Takeaways

• Benefits in Kind (BIK) are taxable under Paragraph 13(1)(b) ITA.
• Two valuation methods: Formula Method & Prescribed Value Method.
• Certain BIK are exempted to encourage employee welfare.
• Always retain supporting documentation for employer-provided benefits.
• Ensure compliance with Public Ruling No. 11/2019 to avoid under-declaration risks.

ANC Group – Your Personal Tax Advisor

Tax consulting is the core service of ANC Group. Our tax professionals provide clients with comprehensive tax support and guidance. We offer tax consulting and compliance services for expatriates, entrepreneurs, and listed and non-listed companies.

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If you need professional tax advisory services regarding the Malaysia Income Tax Act 1967, our team is ready to assist you. Contact us here to discuss how we can support your business.