Benefits in kind are non-monetary benefits provided by employers to their employees.
Non-monetary benefits mean that these benefits cannot be sold, assigned, or exchanged for cash.
They are typically offered to employees in the form of goods, services, or tangible assets rather than cash payments. Benefits in kind play an important role in our workplace. They can be used
as an additional incentive to motivate employees or as rewards to improve their quality of
life. However, employers usually need to be aware of the legal and tax regulations in relation to benefits in kind to ensure compliance
What does 'Benefits in kind' consist of?
Some of the common examples of benefits in kind include:
- Living accommodation provided by the employer.
- Motor vehicle and fuel allowance provided by the employer.
- Medical and dental treatment provided by the employer to the employee.
- Goods provided to employees (including furniture and fittings, air conditioner and
household appliances) - Gardener, driver, domestic servant and guard employed by the employer.
- Electricity, water and telephone bills that are under the employers’ name.
How do we calculate benefits in kind?
There are two methods to calculate the benefits in kind:
Formula Method: Companies can calculate the value based on the cost of the asset divided by
the
prescribed average lifespan of the asset. The BIK computed should then be declared on the employees’ EA Form.
Prescribed Value Method: Companies can calculate the value based on the prescribed value
methods specified
by the Inland Revenue Board of Malaysia (IRB). The BIK computed should
then be declared on the employees’ EA Form.
Which of the benefits in kind are exempted from tax?
Basically, employers are required to
calculate and report the value of benefits in kind to employees’ Form EA and Form E. In general, non-cash benefits (e.g., accommodation or
motorcars) provided by employers to their employees are taken to be part of their gross income from employment and are taxable under paragraph 13(1)(b) of the ITA 1967. However, the Inland Revenue Board has provided exemptions for certain benefits in kind, such
as:
- Medical and dental treatment.
- Benefit for childcare - Childcare centres provided by employers to their employees'
children - Food and drink provided free of charge. (such as tea, coffee, biscuits, etc.)
