What is Benefit In Kind (BIK)?
BIK (benefit 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:
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Annual Value of the benefit
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Cost of the asset that is provided as benefit / amenity
Prescribed average life span of the asset
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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
Prescribed Value of BIK
Prescribed Average Life Span (Years)
| 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 |
Prescribed Value Of Motorcar And Its Related Benefits
| 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 |
Prescribed Value Of Household Furnishing, Apparatus and Appliances
| 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:
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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 |
Prescribed Value Of Other Benefits
| Item | Type Of Benefit | Value of BIK Per Year | |
|---|---|---|---|
| 1. | Telephone (including mobile phone) |
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| 2. | Gardener | RM3,600 per gardener | |
| 3. | Household servant | RM4,800 per servant | |
| 4. | Recreational club membership |
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Tax treatment on the benefit received on the employee as follows:
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Tax treatment on the benefit received on the employee as follows:
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Tax Exemption on BIK
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)
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