The value of benefits-in-kind (BiK) can be calculated through two methods.
The Formula Method
Under this method, each benefit provided to the employee is ascertained by using the formula below:
annual value of BiK = cost to the employer of the asset / prescribed average lifespan of the asset
Here, cost means the actual cost incurred by the employer, and the prescribed lifespan of the asset can be found in Appendix 1.
The value of BiK based on the formula method provided to the employee by the employer can be abated if the BiK is
- provided for less than a year; or/and
- shared with another employee; or/and
- used for purpose of the business of the employer.
The Prescribed Value Method
As a concession, the prescribed value method can be used as an alternative to determine the value of the BiK provided by the employer to his employee.
The schedules for the prescribed values of the benefits commonly provided to the employee are as in Appendix 2.
The value of BiK based on the prescribed value method provided to the employee by the employer can be abated if the BiK is:
- provided for less than a year; or/and
- shared with another employee.
Under the prescribed value method, there is no abatement for business usage on the BiK provided to the employee.
Whichever method is used in determining the value of the benefit provided, the basis of computing the benefit (whether the formula method or the prescribed value method) must be consistently applied throughout the period of the provision of the benefit.
If using the formula method to calculate the value of motorcars an abatement of 20% is given and the formula becomes:
annual value of BIK = cost to the employer of the car / 8 years (prescribed lifespan for motorcars) x 80%
Alternatively the prescribed value method may be used. Under this method, the valuation of the benefit will be based on the cost of the motorcar at the time when it was new (see appendix 2). This treatment is also applicable to a second-hand motorcar, and a leased / rented motorcar. Where the prescribed value method is applied to value the car benefit and where the motorcar provided is more than 5 years old, the annual value of the benefit can be reduced to half of the prescribed value.
|Asset||Prescribed average lifespan|
|Curtains and carpets||5|
|Furniture, sewing machine||15|
|Kitchen equipment (e.g crockery, rice cooker,electric kettle, toaster, coffee maker, gas cooker, oven)||6|
|TV, video recorder, CD/ DVD player, stereo set||7|
|Swimming pool (detachable), sauna||15|
THE PRESCRIBED VALUE OF MOTORCAR AND ITS RELATED BENEFITS
|Cost Of Motorcar (New) / RM||Annual Prescribed Benefit Of Motorcar / RM||Annual Prescribed Benefit Of Petrol / RM|
|Up to 50,000||1,200||600|
|500,001 and above||25,000||3,000|
PRESCRIBED VALUE OF HOUSEHOLD FURNISHINGS, APPARATUS AND APPLIANCES
|CATEGORY||TYPE OF BENEFIT||ANNUAL PRESCRIBED VALUE OF BIK PROVIDED / 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 Columns 1 and 2 as above plus one or more of kitchen equipment, crockery, utensils and appliances||3,360|
|4||Service 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)||(i) Hardware - fully exempt (ii) Bills - fully exempt|
|2||Gardener||RM3,600 per gardener|
|3|| Household servant||RM4,800 per servant|
|4||Recreational club individual membership – subscription|
paid or reimbursed by employer
|Tax treatment on the benefit received on the employee as follows-|
Entrance fee for club membership - taxed under paragraph 13(1)(a) of the ITA 1967
Monthly/annual membership subscription fees for club membership - taxed under paragraph 13(1)(a) of the ITA 1967
Term membership - is taxed on the amount of payment made under paragraph 13(1)(a) of the ITA 1967
|Recreational club corporate membership – subscription paid by employer||Tax treatment on the benefit received on the employee as follows-|
Entrance fee - not taxable
Monthly/annual membership subscription fees for club membership - taxed on the prescribed value under paragraph 13(1)(b) of the ITA 1967
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