# Benefits-in-Kind and Perquisites — Both Sides of the Transaction

> What a company car, housing or phone costs the employee in tax and what the employer can actually deduct, in one place.

- Category: taxation
- Language: en
- Status: published
- Updated: 2026-07-20
- Canonical: https://negaraku.md/en/taxation/benefits-in-kind

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Every guide to benefits-in-kind picks a side. Payroll blogs explain what the
employee pays. Tax blogs explain what the company deducts. Nobody puts them on
the same page — which is why boards approve a car policy believing the company
gets a deduction equal to what the executive is taxed on. It does not. The two
numbers are computed under different provisions and are almost never the same.

Here is a single RM280,000 saloon, seen from both ends.

- **Employee:** RM15,000 a year of benefit under paragraph 13(1)(b), plus RM2,400 for free petrol, taxed at the marginal rate, with monthly tax deducted.
- **Employer:** no deduction of RM17,400. Instead, qualifying plant expenditure restricted to **RM50,000** under paragraph 2(2) of Schedule 3, because the car costs more than RM150,000 — written off through initial and annual allowances.

Same car, two regimes, no relationship between the figures.

## What counts as a benefit-in-kind

Paragraph 13(1)(b) of the Income Tax Act 1967 brings into gross employment
income any benefit or amenity provided by the employer that is **not convertible
into money**. Convert-to-cash items are perquisites under paragraph 13(1)(a) and
sit in Public Ruling No. 5/2019 instead. Living accommodation is a third
category under paragraph 13(1)(c) with its own valuation rules in s.32.

The distinction matters in practice. Public Ruling 11/2019 Appendix 2 taxes an
**individual** club membership under paragraph 13(1)(a) — entrance fee, monthly
or annual subscription and term membership alike — while a **corporate**
membership escapes tax on the entrance fee entirely and taxes only the
subscription, under paragraph 13(1)(b) at prescribed value.

## Valuing the benefit — two methods, different answers

Section 32(1) requires a just and reasonable valuation. Public Ruling 11/2019
gives two acceptable methods.

**Formula method.** Cost of the asset divided by its prescribed average life
span, from Appendix 1 — a motorcar is eight years, curtains and carpets 15,
kitchen equipment six, a piano 20. For a motorcar the result is then taken at
80%.

**Prescribed value method.** LHDN's table.

| Cost of motorcar when new | Annual prescribed benefit of motorcar | Annual prescribed benefit of petrol |
| --- | --- | --- |
| Up to RM50,000 | RM1,200 | RM600 |
| RM50,001 – RM75,000 | RM2,400 | RM900 |
| RM75,001 – 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 |

Other prescribed values: **driver RM600 a month**, gardener RM3,600 a year,
household servant RM4,800 a year. Furnishings run RM840 semi-furnished, RM1,680
with air-conditioning, curtains or carpets, and RM3,360 fully furnished
including kitchen equipment.

The choice is not neutral, and Example 11 of the ruling shows why. A six-year-old
car costing RM280,000 new, driven 36,000 km of which 12,000 km is private, with
RM8,400 of petrol and RM1,200 reimbursed by the employee:

| | Formula method | Prescribed value |
| --- | --- | --- |
| Car | RM6,667 | RM7,500 |
| Petrol | RM1,600 | RM2,400 |

The formula method allows abatement for business use and for employee
contributions. The prescribed value method allows neither — but it alone allows
the **half-value reduction for a car more than five years old**, which paragraph
6.1.8 expressly withholds from the formula method. The petrol value is never
halved.

## Living accommodation is a different computation

Section 32(2) values the paragraph 13(1)(c) benefit at the **lower of**:

- the **defined value** of the accommodation — the arm's length unfurnished rent where the employer leases, otherwise the rateable value or, failing that, the economic rent; and
- **30% of the employee's paragraph 13(1)(a) gross income**.

Where the accommodation is a hotel, hostel or similar premises, is on a
plantation or in a forest, or is in a rateable area but not subject to public
rates, the value is instead **3% of paragraph 13(1)(a) income**.

Section 32(3)(a) removes the 30% ceiling entirely for a **director of a
controlled company** who is not a service director. That person is taxed on the
full defined value, whether or not still a director when the accommodation is
used. Directors of owner-managed Sdn Bhds routinely miss this.

## The employer side

Paragraph 12.1 of Public Ruling 11/2019 sets out the position, and it is not
symmetrical with the employee charge.

**Capital expenditure incurred to provide a benefit gives capital allowances**
under Schedule 3, and industrial building allowance where subparagraph 42A(2)
applies. For a non-commercial motor vehicle that means the RM50,000 cap, or
RM100,000 where the car is new and costs no more than RM150,000. For leased
cars, s.39(1)(k) applies the same ceilings to rentals, in aggregate over the
whole lease.

**Specific benefits are deductible instead under gazetted Rules.** The Income Tax
(Deduction for Benefit and Gift From Employer to Employee) Rules 2009,
P.U.(A) 153/2009, cover monthly bills for broadband, fixed line, mobile phone
and pager whether issued in the employee's or employer's name, travelling
allowances or petrol cards for home-to-work travel, and the devices themselves.
A separate one-year rule, P.U.(A) 31/2021, allowed a deduction for smartphones,
tablets and personal computers given to employees in year of assessment 2020.

The general position for everything else is unchanged: staff costs are deductible
under s.33(1) if wholly and exclusively incurred in producing gross income, and
non-deductible items in s.39 stay non-deductible however they are labelled.

## What is exempt on the employee

Paragraph 8.2 of Public Ruling 11/2019 lists benefits either exempt or not
regarded as taxable, including:

- dental benefit; child care centres provided by the employer; free food and drink; transport between pick-up points or home and work;
- insurance premiums obligatory for foreign workers in place of SOCSO, and group insurance covering workers against accident;
- **leave passage** — up to three within Malaysia in a calendar year, or one overseas passage capped at **RM3,000**, extended to the immediate family;
- benefits used solely for performing employment duties;
- **discounted employer products up to RM1,000** of discount value, and discounted employer services in full — but only the employer's own products, not a group company's;
- **one unit per asset category** of fixed line, mobile phone, pager, PDA or broadband, together with the bills for that unit.

## Common mistakes

**Applying the five-year halving to a formula-method computation.** Paragraph
6.1.8 rules it out.

**Halving the petrol value with the car.** It stays at full prescribed value.

**Using the current market value of the car.** The table keys off the **cost when
new**, including accessories but excluding bank charges, insurance premium and
road tax.

**Assuming the employer deducts what the employee is taxed on.** The employer
gets capital allowances on a capped cost, not a deduction of the benefit value.

**Treating a pool driver as a taxable benefit.** Where a driver is not assigned
to any individual and the pool exists solely for business purposes, no benefit
arises. A dedicated driver is RM600 a month.

**Forgetting monthly tax deduction on the benefit.** Paragraph 11 requires the
employer to deduct tax on the benefit in the month it is provided, under the
Income Tax (Deduction from Remuneration) Rules 1994, P.U.(A) 507/1994. Where
salary is insufficient to absorb it, LHDN approval must be obtained to pay by
instalments.

**Extending the product discount exemption to group companies.** Example 19 of
the ruling denies it — the goods must be the employer's own.

## What's next

Run both valuation methods before you fix a car policy, because the cheaper one
depends on business mileage and vehicle age, and the choice is the employer's to
make in the Form EA. Then check the employer side separately against Schedule 3
and P.U.(A) 153/2009, and stop assuming the two figures should reconcile.

## Sources

- Public Ruling No. 11/2019 — Benefits in Kind — https://www.hasil.gov.my/wp-content/uploads/PR_11_2019.pdf (LHDN)
- Public Ruling No. 5/2019 — Perquisites From Employment — https://www.hasil.gov.my/wp-content/uploads/PR_05_2019_2.pdf (LHDN)
- Income Tax Act 1967 (Act 53), reprint as at 21 May 2024 — ss.13(1)(b), 13(1)(c), 32, 39(1)(k), Schedule 3 — https://www.hasil.gov.my/wp-content/uploads/20240521-akta-cukai-pendapatan-1967-akta-53.pdf (LHDN)
- Public Ruling No. 6/2015 — Qualifying Expenditure and Computation of Capital Allowances — https://www.hasil.gov.my/wp-content/uploads/PR_6_2015.pdf (LHDN)
- Income Tax (Deduction for Value of Benefit given to Employees) Rules 2021, P.U.(A) 31/2021 — https://lom.agc.gov.my/ilims/upload/portal/akta/outputp/pua_20210126_PUA31.pdf (Attorney General's Chambers)

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