What is Benefits-in-Kind (BIK)?
Benefits-in-Kind is a type of non-cash convertible benefit provided by the employer to the employee to be personally enjoyed by that employee.
*Non-cash convertible simply means it is not in cash form paid to the employee, the benefit itself cannot be sold, assigned, or exchanged for cash either because of the employment contract or due to the nature of the benefit itself. And one of the significant criteria of BIK is that BIK is employer pays the amount directly to the product or service provider, not directly to the employee.
When the employer is providing such BIK to the employee, the value of BIK will be added to the gross income of the employee and will be included in the yearly income tax calculation. The employee is liable to bear any of the tax imposed on the value of the BIK. However, there are also some BIK that are tax exempted.
Value of Benefits-in-Kind (BIK)
There are 2 methods to be used to determine the value of BIK:
- The formula method
- The prescribed value method
The Formula Method
(Actual cost of the asset/Prescribed average life span of the asset) = Annual value of the benefit
The value of BIK on the formula method can be reduced or removed if the BIK is provided for less than 1 year/ shared among other employees/ used for the purpose of the business of the employer.
The Prescribed Value Method
In this method, the annual prescribed values of the benefits are as per the table in Appendix 2 of the BIK Public Ruling No.11/2019
The value of the BIK on the prescribed value method can be reduced or removed if the BIK is provided for less than 1 year or shared among other employees.
*Note: The value of the BIK under both methods must be consistent throughout the entire period.
How to add BIK to altHR's payroll?
#1 - Create & Set up BIK
- Login to your admin account
- Go to Payroll > Settings > Set Pay Items
- Under "Normal" > Click "Add New Pay Item"
- Enter the Name of the BIK > Select "Wage Type"> Select "EA Field" (Read more about "Understand the EA Field")
- If the BIK is Tax exempted,
- Toggle on the button under "Is this tax exempted"
- If the BIK is Tax exempted, and has a limit,
- After toggling on the button under "Is this tax exempted"
- Toggle on "Has tax exempt limit"
- Under "Exempted Limit", key in the amount of the yearly exemption limit
- Select EA Field if the amount exceeds the exempt limit
- Click "Confirm" to save
- On the newly created BIK > Tick the entitled statutory deduction (PCB / EPF / SOCSO / EIS / HRDF)
#2 Add BIK to Employee's payroll
- Go to Payroll > Run Payroll
- Select the desired employee > Click Manage
- Under "Normal Remuneration" Click Add Item
- Select the BIK that you created in #1 > Key in the amount under "Amount"
- Click "Send" to add the BIK to the employee's payroll
- As BIK is in a non-convertible to cash form, it shall not be added up as a cash form allowance to the employee's monthly salary - therefore, when you add the amount for BIK, the amount of BIK will not reflect on the "Pay Amount", it will only affect the Income Tax amount if it is taxable
- BIK items will not show on the employee's payslip as it is a "Benefit" not "Remuneration"
- BIK amount is consistent and regular
- It shall not be treated as "Allowance/Perquisite" as the tax treatment between BIK and Allowance/Perquisite are different. If you are paying a cash allowance/ or gift/ award to the employee - as it is in cash form and convertible to cash, it shall be treated as Allowance/Perquisite.
- For more information or clarity about BIK, please:
- Refer to LHDN Public Ruling on BIK here: https://phl.hasil.gov.my/pdf/pdfam/PR_11_2019.pdf
- Contact LHDN via Hasil Careline or through the Maklumbalas form on Hasil website