What Employers Need to Know About Manfaat Berupa Barangan in Malaysia

If your company offers staff perks like a car or phone, those are benefits in kind or commonly known as manfaat berupa barangan.

These are considered part of employee compensation and may affect income tax. As HR or employer, it’s your responsibility to track and report them properly.

In this article, we will explain more about manfaat berupa barangan that you need to know.

What is Manfaat Berupa Barangan (Benefits in Kind)?

Sometimes, the Malaysian company not only gives a salary offer, but also other benefits like a car, a place to stay, or a mobile phone. These are known as manfaat berupa barangan, or benefits in kind (BIK).

Benefits in kind are non-cash items that an employee receives from their employer. Even though they are not part of the monthly salary, these benefits still hold value. In many cases, they are considered taxable under Malaysian law.

For example, if your company gives an employee a car they can use for personal reasons, or pays for their house rental, that benefit must be declared to LHDN because it adds to their overall income.

The same applies to club memberships, domestic helpers, or even free meals provided regularly.

As an employer, understanding what counts as BIK and how it affects tax reporting is important especially when preparing EA forms and calculating PCB. Giving benefits is a great way to attract and keep talented staff, but it comes with responsibilities that should be handled properly.

Why Employers Offer BIK to Employees

BIK can play a big role in attracting and keeping the right talent, especially when used thoughtfully. Here are the key reasons employers choose to offer BIK:

To attract and retain top talent

Providing benefits in kind such as a company car, accommodation, or mobile devices helps make job offers more attractive. These perks often influence a candidate’s decision when choosing between multiple offers and give current staff more reason to stay.

To offer meaningful non-cash incentives

Some employees may value practical support, like subsidised housing, gym memberships, or free meals, more than a higher monthly salary. BIK helps employers cater to different employee needs while showing care for their well-being.

To optimise the overall compensation package

Employers can use BIK to create balanced packages that combine both monetary and non-monetary rewards. This lets businesses provide value without necessarily increasing payroll costs significantly.

Tax Implication of Benefits in Kind

Under Malaysian tax law, BIK are considered part of the employee’s income and are subject to tax. As an employer, you need to understand how BIK affects both your reporting duties and your employee’s tax calculation.

BIK is taxable under the Income Tax Act

According to the Inland Revenue Board of Malaysia (LHDN), benefits in kind are part of the employee’s gross income. This means they are taken into account when calculating Potongan Cukai Bulanan (PCB), or Monthly Tax Deductions.

It increases the employee’s chargeable income

When an employee receives taxable BIK, their total income for tax purposes increases. This may change their tax bracket and the amount of PCB to be deducted.

BIK must be properly valued

To report BIK correctly, employers must know how to calculate its value. LHDN provides two main methods:

Prescribed Value Method: This uses a fixed rate or table provided by LHDN. For example, a company car may have a fixed annual value based on engine size and age.
Formula Method: If no prescribed value is available, the employer uses a formula. This method usually applies to items like accommodation or household servants.

Reporting Benefits in Kind

Once a company provides BIK to employees, the next step is making sure everything is reported correctly. Even though these benefits may not involve direct cash, they still count as part of an employee’s overall income under tax laws in Malaysia.

So, what do employers need to do?

1. Report BIK in Form EA

At the end of each year, companies must issue Form EA to every employee. This form summarises the employee’s income, including salary, bonuses, allowances, and benefits in kind. BIK must be included in Section C of Form EA, which is specifically meant for this purpose.

Even if the benefit is not in cash, its value must still be calculated and written clearly. LHDN will determine how much tax the employee needs to pay when filing their income tax return.

2. Declare BIK in Form E (Employer Declaration)

Besides giving Form EA to each employee, employers must also submit Form E to LHDN. This form summarises all payments and benefits given to employees during the year.

BIK values need to be declared properly here as well, especially if the company is giving non-cash perks like housing, vehicles, or memberships.

3. Record and Keep Evidence

To avoid mistakes or problems during audits, employers should keep full records of:

What kind of benefit was given
When it was given
To whom it was given
The method used to calculate its value

If LHDN ever questions the benefit, the employer can easily explain and justify the reporting.

Common Types of Benefits in Kind in Malaysia

There are various of BIK in Malaysia. In the reading below, we explain the common types of BIK that Malaysian companies are used to give to their employees.

1. Company Vehicle (For Personal Use)

This is one of the most common BIKs in Malaysia. If an employee uses a company car not just for work but also for personal reasons such as commuting to and from the office or going on family trips, the vehicle becomes a taxable benefit. The value depends on the car’s engine size, age, and whether the fuel is also provided.

2. Accommodation

Providing free housing, whether rented or company-owned, is also treated as a BIK. This includes apartments, houses, or even hotel stays provided to employees. The value of the accommodation is based on its rental value or cost to the company, minus any amount paid by the employee.

3. Utilities and Household Staff

If the company covers the cost of electricity, water, gas, or internet at the employee’s residence, this is considered a taxable benefit. The same applies to household staff such as a driver, gardener, or domestic helper if they’re paid by the company.

4. School Fees

When an employer pays for an employee’s child’s education, such as international school or tuition fees, this is also a BIK. These payments are taxable and must be declared properly.

5. Club or Gym Memberships

Memberships to sports clubs, fitness centres, or golf clubs provided for personal use are classified as benefits in kind. If the membership is needed purely for business (e.g., entertaining clients), it may not be taxed, but clear documentation must be kept.

6. Loans at Reduced Interest Rates

If the company gives loans with interest rates lower than what banks offer, the savings gained by the employee are treated as a BIK. The taxable amount is the difference between the company’s interest rate and the market rate.

How to Calculate the Value of Benefits in Kind

Once you've identified the BIK provided to your employees, the next step is to calculate their value correctly for tax reporting.

The Inland Revenue Board (LHDN) gives employers two methods to calculate this: the Prescribed Value Method and the Formula Method. Choosing the right method depends on the type of benefit given.

1. Prescribed Value Method

This method uses fixed values provided by LHDN. It’s commonly used for benefits like cars, accommodation, household staff, and domestic allowances. The rates are clearly listed in LHDN's Public Ruling and are easy to refer to during payroll processing.

For example:

A company car with an engine size of 2,000cc and above may have a prescribed annual value of RM3,600.
For accommodation, the value is based on the annual rental paid by the company or 30% of the employee’s gross income, whichever is lower.

2. Formula Method

If the benefit does not fall under the prescribed list or if it’s difficult to assign a fixed value, the formula method is used. This approach calculates the actual cost to the employer, minus any amount paid back by the employee.

Formula:

BIK Value = Cost to Employer – Employee Contribution

For example: If a company pays RM2,000 annually for an employee’s gym membership, and the employee pays RM500 toward it, the taxable BIK is RM1,500.

This method is often used for benefits like club memberships, education fees, and any other goods or services that don't fall under the prescribed list.

Exemptions and Tax-Free Benefits in Kind

Some benefits in kind (BIK) are not taxable. This helps employers give extra perks without raising their employees’ tax bill. These exemptions also make it easier to build a benefit package that looks good and stays within tax rules.

Below are common examples of tax-free or partly exempt BIKs:

1. Mobile Phones, Laptops, and Tablets

If the employer provides these tools to help the employee perform their job duties, they are not taxable. However, if more than one unit is provided (e.g. two phones), only the first unit is exempt, and the rest may be taxed.

2. Meals Provided on Premises

Free meals or refreshments given at the workplace, such as during working hours, official events, or while on duty, are tax-exempt. This includes items like tea, coffee, or lunch provided in a company pantry.

3. Parking Facilities

Parking provided by the employer at or near the workplace is exempt from tax, whether the employer rents the space or owns it. This includes season passes or parking lots designated for employees.

4. Medical and Dental Benefits

General medical, dental, maternity, and traditional treatment expenses paid by the employer are fully exempt, as long as they are not part of a cash reimbursement or allowance.

5. Childcare Benefits

If the employer provides a childcare centre within office premises, or pays directly to a registered provider, it may qualify for tax exemption, depending on LHDN conditions.

6. Group Insurance Premiums

Premiums for group insurance such as personal accident, life, and critical illness policies are tax-free if the payout is made to the employee or their family. However, if the policy is structured as an investment, it may be taxed.

7. Long Service Awards

Awards such as watches, plaques, or items of limited value given for long service (10 years or more) or retirement are partially exempt, up to a value of RM2,000.

FAQs

1. Are benefits in kind taxable for all employees?

Yes, most benefits in kind are considered taxable under Malaysian tax law, regardless of the employee’s job level. However, there are specific exemptions provided by LHDN.

For example, work-related tools like mobile phones or laptops may be tax-free if they meet certain conditions. It’s important to refer to LHDN guidelines before offering or reporting BIK.

2. What is the difference between allowance and benefit in kind?

An allowance is a cash payment given to the employee, such as a transport or meal allowance. It is considered part of the employee’s gross income and taxed accordingly.

On the other hand, a benefit in kind refers to non-cash items provided by the company like a company car, housing, or phone. These have a different tax treatment and are valued using specific methods set by LHDN.

3. How to declare BIK in Form EA?

All taxable BIK must be declared in Section C of the EA Form under “Value of Benefit in Kind.” The employer is responsible for calculating the correct value, either using the prescribed value or formula method, and reflecting it accurately in the employee’s annual statement.

4. Can BIK be offered to part-time or contract workers?

Yes, employers can provide BIK to any category of employees ( part-time, contract, or probationary staff) depending on the company’s internal policies. However, the same tax rules apply. If the BIK is taxable, it must be included in the employee’s chargeable income.

5. What are examples of tax-exempt BIK in Malaysia?

Some common tax-exempt benefits in kind include:

One mobile phone, laptop, or tablet used for work
Parking at or near the office
Meals served during working hours
Medical and dental treatment
Group insurance premiums with non-investment structure
Long service awards (up to RM2,000)

Employers should refer to the official LHDN guidelines to verify current exemption limits and conditions, as they may change from time to time.

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