Tuesday, September 26, 2006

Benefit in kind whether exempt or taxable under Malaysia Income Tax Acts? How to Reduced?-Part 1

Generally they are certain expenses is exempted if provided by employers

1. Leave Passage
The Act specifically excludes from tax, benefits in the form of costs of leave passages within Malaysia not exceeding three times in a calendar year and once outside Malaysia not exceeding RM3,000 in a calendar year.
The tax exempt benefit is confined to the employee and members of his immediate family.

Tax Exempt Benefits
Besides leave passage as stated above, the following are also tax exempt :
medical and dental treatment
goods and services offered at a lower price / discount
free transport
childcare facilities / benefits

Motor vehicles and related benefits
The provision of motor vehicle to an employee for his private use constitutes a taxable benefit, the value of benefits will be the value of the private use of the car and fuel provided. For simplicity and ease of application, the value of benefits will be based on the following table:

Cost of car (when new) Annual Value of BIK Fuel Per Annum

Up to RM50,000 RM1,200 RM600
RM 50,001 - RM 75,000 RM2,400 RM900
RM 75,001 - RM100,000 RM3,600 RM1,200
RM100,001 - RM150,000 RM5,000 RM1,500
RM150,001 - RM200,000 RM7,000 RM1,800
RM200,001 - RM250,000 RM9,000 RM2,100
RM250,001 - RM350,000 RM15,000 RM2,400
RM350,001 - RM500,000 RM21,250 RM2,700
RM500,001 and above RM25,000 RM3,000

  • Cost refers to actual cost or market value of the car including accessories but excluding financial charges, insurance premiums and road tax.
  • Toll charges borne by the employers are deemed to be included in the value of BIK assessed for cars.
  • Where the car provided is more than 5 years old the value of the car benefit to be assessed will be equivalent to half the above rates but the value of fuel provided will remain unchanged.
    Where a car is not provided throughout the basis year the value should be adjusted appropriately. Employers should indicate in the individual employee's statement of remuneration the type, year and model of the car provided to the employee.
  • Where a driver is provided to an employee, the value of the benefit for private use is fixed at RM300 per month.
  • Where fuel is provided without motor cars, the actual value is treated as benefit received.

Share Options
Where share options are granted to an employee by reason of employment or office held by him, the difference between the market value of the share at the date of grant of the options and the option price constitutes a benefit assessable to tax

Other benefits
Other benefits such as the use of household furniture are valued at certain rates for inclusion as employment benefits for Malaysian tax purposes. These rates are computed in accordance with the Inland Revenue Board's guidelines applicable from the Year of Assessment 1998 and onwards.

Generally, the annual value of a given benefit-in-kind is computed by reference to the following formula:
Annual value of benefit=cost of the asset providing benefit /amenity / prescribed average life span of asset
Cost refers to the actual cost incurred by the employer or market value of the asset.
The prescribed life span of the various assets is as follows:
Motor car 8 years
Curtains, carpets 5 years
Furniture, sewing machine 15 years
Air-conditioner 8 years
Refrigerator 10 years
Kitchen Equipment (i.e. crockery, rice cooker, electric kettle, toaster, coffee-maker, gas cooker, cooker hood, oven, dish-washer, washing machine, dryer, food processor, etc) 6 years
Piano 20 years
Organ 10 years
Colour television, VCD/Dvd 7 years
Swimming pool (detachable), sauna 15 years
Mobile telephone 5 years
Household Furnishings, Appliances, etc and Others
To avoid detailed calculations, employers may, instead of using the formula, determine the values of benefits in the form of household furnishings, equipment and appliances based on the following:
Type of accommodation
Value of benefit
i. Semi-furnished with furniture in the lounge, dining room or bedrooms
RM70 per month (RM840 per annum)
ii. Semi-furnished with furniture as in (i) above and one or more of the following:
air-conditioners ,curtains carpets
RM140 per month (RM1,680 per annum)
iii. Fully furnished with benefits as in (i) and (ii) above plus one or more of kitchen equipment, crockery, utensils and appliances
RM280 per month (RM3,360 per annum)
iv. Service charges and other bills such as for water, electricity and telephone
Service charges and bills paid by the employer

Valuation of other benefits-in-kind
Types of BIK
Annual Value of BIK
i. Mobile telephone (rental and charges) RM600
ii. Gardener RM3,600
iii. Domestic servant RM4,800
iv. Interest free loan Value of interest paid by employer
v. Subsidised loan/interest below the market value rate Subsidised loan interest paid by employer
vi. Insurance Annual insurance premium paid by employer
vii. School/tuition fees Actual school/tuition fees paid by employer
Viii. Membership in recreation clubs Membership fees paid by employer


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