What is Benefit In Kind (BIK)?

BIK (benefits in kind) are benefits provided by the employer to the employee in forms of services, vehicles, and lodging. These non-monetary benefits are considered as income to the employees.

BIK are non-monetary benefits. This means that these benefits cannot be converted to cash when they are given to the employee. The benefit also cannot be sold or exchanged for cash because it is stated in the employee’s contract or due to the nature of the benefit itself.

How do we calculate BIK?

There are TWO methods to calculate BIK. The first would be “The Formula Method” and the other method would be the “Prescribe Value Method”.

The Formula Method:

Annual Value of the benefit
=
Cost of the asset that is provided as benefit / amenity
Prescribed average life span of the asset

Prescribe Value Method:

The schedule for the prescribed methods are based on the table below.
The value of the BIK based on the prescribed value table can be removed if the BIK is :

  • Provided for less than a year
  • Shared with another employee
Benefit in Kind (BIK) - SQL Payroll

Prescribed Value of BIK

Asset Type Of Assets Prescribed Average Life Span (Years)
1. Motorcar 8
2. Furniture and Fittings
a. Curtains and carpets 5
b. Furniture, sewing machine 15
c. Air conditioner 8
d. Refrigerator 10
3. 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
4. Entertainment and recreation:
a. Piano 20
b. Organ 10
c. TV, video recorder, CD/DVD player, stereo set 7
d. Swimming pool (detachable), sauna 15
5. Miscellaneous 5
Cost of Motorcar (New)
(RM)
Annual Prescribed Benifit of Motorcar
(RM)
Annual Prescribed Benifit of Petrol
(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
500,001 and above 25,000 3,000
Cost of Motorcar (New)
(RM)
Annual Prescribed Benifit of Motorcar
(RM)
Annual Prescribed Benifit of Petrol
(RM)
1 Semi-furnished with furniture in the lounge, dining room or bedroom 840
2 Semi-furnished with furniture as in Column 1 and one or two of the following:
  • Air-conditioners
  • Curtains and alike
  • Carpets
1,680
3 Fully furnished with benefits as in Column 1 and 2 as above plus one or more of kitchen equipment, crockery, utensils and appliances 3,360
4 Services charges and other bills such as water and electricity Service charges and bills paid by the employer
Item Type Of Benefit Value of BIK Per Year
1. Telephone (including mobile phone)
  1. Before the year of assessment 2008
  1. Hardware: RM300 per telephone
  2. Bills:
    1. Telephone is subscribed and paid by the employer:
      • The benefit is taxed under paragraph 13(1)(b) of the ITA 1967
      • The prescribed value is RM300 per telephone
      • Where the formula method is used, the value of hte benefit is the amount of the actual cost of the private bills paid by the employer
    2. Telephone is subscribed by the employee and by employer:
      • The benefit is taxed under paragraph 13(1)(a) of the ITA 1967
      • The benefit to be taxed is the amount of the actual bills paid by the employer
  1. From the year of assessment 2008
  1. Hardware – fully exempt
  2. Bills – fully exempt
2. Gardener RM3,600 per gardener
3. Household servant RM4,800 per servant
4. Recreational club membership
  1. Individual membership – Membership subscription paid or reimbursed by employer
Tax treatment on the benefit received on the employee as follows:
  1. Entrance fee for club membership – taxed under paragraph 13(1)(a) of the ITA 1967
  2. Monthly/annual membership subscription fees for club membership – taxed under paragraph 13(1)(a) of the ITA 1967
  3. Term membership – is taxed on the amount of payment made under paragraph 13(1)(a) of the ITA 1967
  1. Corporate membership – Membership subscription paid by employer
Tax treatment on the benefit received on the employee as follows:
  1. Entrance fee – not taxable
  2. Monthly/annual membership subscription fees for club membership – taxed on the prescribed value under paragraph 13(1)(a) of the ITA 1967

Tax Exemption on BIK

Benefit in Kind (BIK) - SQL Payroll

Some BIKs are exempted from taxes or are labelled ad non-taxable. These are the BIKs :

  • Dental care
  • Free food & drinks
  • Childcare services and benefits
  • Insurance premiums for foreign workers in replacements to SOCSO contributions
  • Group insurance premiums for workers to protect them if a workplace accident occur
  • Discounted prices for business products and services

What is VOLA (Value of living accommodation)

VOLA is the living accommodation provided for an employee. It is a form of BIK and cannot be converted into money.

The accounted amount is the exact amount used by the employee for living accommodation in Malaysia. This includes living accommodation provided by the employer for free.

Category 1: Living accommodation provided for employee or service director

Service director is a director who is hired for their managerial or technical capacity and holds a maximum of 5% of the share capital of the company.
The calculation of VOLA follows is whichever is lesser of these two:

  • Defined value of VOLA
  • 30% of gross income from employment under the Para13(1)a of the ITA(exclude ESOS)

Category 2: living accommodation for directors of controlled companies

A director is an individual who:

  • Manages the company
  • A beneficial owner of 20% or more of the company’s ordinary share capital
  • Has been remunerated out of the business funds

The computation of VOLA will be the defined value of the accommodation.

Category 3: Hostel living accommodation for employee’s or service directors

The accommodation provided for employee or service director that is:

  • In a hostel, hotel or similar premises
  • Any premises in a plantation or forest
  • Any premises which although is in a rateable area but not subjected to any rates

The amount to take accounted for as VOLA is an amount equal to 3% of the gross income under Para 13(1)(a) of the ITA(Excluded ESOS)

Benefit in Kind (BIK) - SQL Payroll

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