Benefits in Kind (BIK) Malaysia: How to Calculate Tax on a Company Car, House and Perks

A benefit in kind (BIK) is a non-cash perk from your employer, such as a company car, petrol, a driver or furniture. LHDN taxes it as part of your employment income. Your employer puts a yearly value on each benefit, using either LHDN's formula method (cost ÷ asset life) or the prescribed value tables in Public Ruling No. 11/2019. That value goes on your EA form and is taxed at your normal income tax rate.

This guide shows how each value is worked out, which perks are tax-free, and what a typical company car or house adds to your tax bill. For how the tax rates and reliefs work, see how to calculate income tax in Malaysia.

BIK, perquisites and accommodation: three different things

LHDN splits employer-provided extras into three groups, and each one is valued differently:

• Benefits in kind (section 13(1)(b)): benefits you can't sell or swap for cash, such as a company car, petrol card, driver, furniture, gardener or maid. Valued under Public Ruling (PR) 11/2019.
• Perquisites (section 13(1)(a)): benefits that can be converted into money, such as cash allowances, vouchers, club fees reimbursed to you, or awards. They're taxed at their cash value, with some exemption limits, under PR 5/2019.
• Living accommodation (section 13(1)(c)): a house, condo or hotel room provided by your employer. It has its own rule under PR 3/2005, explained further down.

All three appear on your EA form (Borang EA) and are added to your salary for tax.

Method 1: the formula method

For most assets, the yearly value is:

Annual BIK = cost of the asset ÷ prescribed average life span

"Cost" is what your employer actually paid. LHDN sets the life spans: 8 years for a car or air-conditioner, 10 for a fridge, 15 for furniture, 6 for kitchen equipment, 7 for a TV or sound system, 5 for curtains, carpets and miscellaneous items. A RM2,000 fridge is RM200 a year.

Company cars get a 20% discount for the value left when you return the car:

Car BIK = cost of the car × 80% ÷ 8

Under the formula method you can reduce the value if the benefit is only provided for part of the year, is shared with another employee, or is partly used for work, but you must keep records (such as a mileage log) to prove business use.

Method 2: the prescribed value method

As a concession, LHDN publishes fixed yearly values. For a car, the value depends on the car's cost when it was new, even if your employer bought it second-hand or leases it:

Other prescribed values in PR 11/2019:

• Driver: RM600 a month (RM7,200 a year). No BIK if the driver comes from a pool used only for business.
• Gardener: RM3,600 a year. Household servant (maid): RM4,800 a year.
• Furnished home: RM840 a year (semi-furnished: lounge, dining or bedroom furniture), RM1,680 (plus air-conditioners, curtains or carpets), RM3,360 (fully furnished, including kitchen equipment). Utility bills your employer pays are taxed at the actual amount.

Two special rules apply only to prescribed values. If the car is more than 5 years old, the car value (not the petrol) is halved. But there's no reduction for business use. Whichever method your employer picks for an asset, it must keep using that method for as long as the benefit is provided.

Worked example 1: a new company car

Hafiz earns RM8,000 a month (RM96,000 a year). His employer gives him a new car that cost RM120,000, which he drives home every day.

• Formula method: RM120,000 × 80% ÷ 8 = RM12,000 a year
• Prescribed value (RM100,001–RM150,000 band): RM5,000 a year

Most employers use the prescribed value because it's lower. With the self relief (RM9,000), EPF relief (RM4,000) and SOCSO/EIS relief (RM350), Hafiz's chargeable income goes from RM82,650 to RM87,650. His tax rises from RM6,103.50 to RM7,053.50, an extra RM950 a year (about RM79 a month) at his 19% marginal rate. Under the formula method the car would add RM2,280 a year instead.

Hafiz also has a petrol card. He can either be taxed on the prescribed petrol value of RM1,500, or claim the petrol exemption of up to RM6,000 a year for travel in the course of his job, keeping records to support it. If he spends RM4,200 on petrol, all of it on work trips, the exemption leaves RM0 taxable.

Worked example 2: a company-provided apartment

Mei Ling earns RM5,000 a month (RM60,000 a year). Her employer rents an unfurnished apartment for her at RM1,400 a month and fully furnishes it.

For an ordinary employee, accommodation is valued at the lower of (a) the "defined value", which here is the rent paid for the unfurnished unit, or (b) 30% of her gross employment income under section 13(1)(a):

• Defined value: RM1,400 × 12 = RM16,800
• 30% × RM60,000 = RM18,000
• Taxable accommodation benefit = RM16,800

The furniture is a separate BIK: fully furnished = RM3,360. Her chargeable income goes from RM46,650 to RM66,810, and her tax from RM1,299 to RM3,349.10, about RM2,050 more a year. If the employer instead owns the unit, the defined value is usually the property's rateable value (nilai tahunan) set by the local council for assessment rates (cukai taksiran). For a hotel, hostel, or a plantation or forest home, it's 3% of gross employment income.

Worked example 3: an old car for part of the year

Kumar gets a 7-year-old car from 1 April. It cost RM90,000 when new, and the employer also provides a driver.

• Prescribed car value: RM3,600 × ½ (over 5 years old) × 9/12 = RM1,350
• Driver: RM600 × 9 months = RM5,400
• Petrol: prescribed RM1,200 × 9/12 = RM900, or the RM6,000 exemption if it's all for work travel

The driver is worth far more than the car here, and it's often overlooked when people estimate their own tax.

Benefits that are tax-free

PR 11/2019 lists these as exempt or not taxable:

• Dental and medical benefits (modern medicine, registered traditional medicine and maternity; spa and reflexology don't count)
• Child care centres run by the employer
• Free food and drink, and free transport between home or pick-up points and work
• Group accident insurance, and the compulsory insurance for foreign workers that replaces SOCSO
• Leave passages: up to 3 trips a year in Malaysia, plus one overseas trip a year capped at RM3,000, for you and your immediate family
• Discounts on your employer's own products (up to RM1,000 a year) and its services (fully exempt)
• One mobile phone, one fixed line, one PDA and one broadband subscription in the employer's name, including the monthly bills. A second phone is taxable (cost ÷ 5 years, plus its bills).
• Anything you use only to do your job

These exemptions don't apply if you control your employer, for example a director who controls the company through shareholdings, a partner of the employer, or a sole proprietor. Cash allowances such as travel, parking, meal or child care allowances are perquisites, not BIK. Some of them have their own exemption limits under PR 5/2019. Check LHDN's current rules, or the exempt section of your EA form.

How BIK affects your monthly PCB

PR 11/2019 says your employer must deduct the tax on a BIK through your monthly tax deduction (PCB/MTD) under the PCB rules. If your salary is too small to absorb it, the employer must get LHDN's approval to collect it in instalments. If your payslip shows the same PCB before and after you got a company car, ask HR whether the BIK is being included. Otherwise you may face a lump sum to pay when you file Form BE. To see what your cash pay looks like after EPF, SOCSO, EIS and PCB, use the salary calculator. BIK isn't cash, so it doesn't add to your take-home pay. It only increases the tax deducted from it.

Common mistakes

• Using the second-hand price under the prescribed method. The table uses the car's cost when new. A used car bought for RM120,000 that cost RM205,000 new falls in the RM200,001–RM250,000 band (RM9,000), not RM5,000.
• Halving the formula value for an old car. The "over 5 years, halve it" rule only applies to prescribed values.
• Claiming business use under prescribed values. Business-use reductions are only allowed under the formula method, with records.
• Treating lease rentals as the BIK. For a leased car, the value comes from the car's new cost, not the RM3,000 a month your employer pays the leasing company.
• Forgetting the driver, gardener or maid. These have fixed values and add up fast.
• Leaving BIK off Form BE. Your EA form lists it. Declare it, because under-declaring can lead to penalties.

Quick checklist

1. Find the BIK and accommodation lines on your EA form, or ask HR for the breakdown.
2. Check the method and the car's new cost against the table above.
3. Check whether the petrol exemption or the 5-year halving applies.
4. Multiply the total by your marginal tax rate to estimate the extra tax.
5. Confirm it's built into your PCB so there's no surprise in April.

If you're comparing a job offer with a car or housing against one with a higher cash salary, also see salary with bonus, allowance and overtime to see how cash allowances are treated.