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Benefits in kind, perquisites come under greater scrutiny
TTCS Virtual Sharing Session on Indirect Tax

04 March 2024

ALL employees should have received their EA forms by Feb 29 where your income together with your benefits in kind (BIK), allowances, per-quisites, etc, will be made available for the employees to enable them to file their tax returns, which are due on April 30.

There are many employers who are oblivious of their obligations to fully disclose BIK and perquisites provided to their employees. Many employers take this lightly. It is time that this should stop as the tax authorities are now beginning to pay greater attention to whether there is completeness in the disclosure of BIK and perquisites.

The responsibility to disclose all BIK and perquisites lies with the employer. Failure to disclose can lead to the employer being taken to court and, if convicted, be liable to a fine not more than RM20,000, imprisonment for up to six months, or both. Inevitably, the persons who will face the consequence in court will be the directors of the company.

Difference between benefits in kind and perquisites

Perquisites are benefits in cash or kind which are convertible into monies – such as company credit card, loan interest subsidy, scholarships, company products sold at a discount, utility bills borne by the company, etc.

BIK are not convertible into monies; examples include company car, house furniture and furnishings, domestic help such as maids, gardeners, drivers or security guards, etc.

Both of them could be received from the employer or third parties in the course of exercising an employment.

What is commonly missed out?

In many cases, companies tend to claim that cars provided to directors and employees are available, if required, to other employees. However, in practice, this rarely happens, and the so-called “company car” is usually parked at night at the employee’s residence. In such cases, the car should be treated as a BIK of the respective employee.

The same principle applies to company drivers too as many employers claim that they have a pool of drivers and there should be no BIK to the individual but in reality there is a specific driver assigned to the employee or director.

Companies could provide discounted stock or assets to their employees, from basic consumables to expensive properties. Such discounts are treated as perquisites to the employees. If an employee is given more than one unit of mobile phone, the additional unit should be treated as a BIK.

There is also a misconception that as long as the employer does not claim a tax deduction on BIK or perquisites provided to directors or employees, it is not a BIK or perquisite to the staff and therefore is not reported in the EA forms. Claiming a deduction in the company and declaring the BIK or perquisite in the EA forms are two different matters.

Different treatment for directors

Any employee such as a director who has the power to control the affairs of the company through shareholding, or possession of voting power or other means will not be able to enjoy the same tax treatment in benefitting from the exemption of taxation of certain BIK and perquisites such as travelling allowance of RM6,000 per year, childcare allowance of RM3,000 per year, discounts for consumable business products of the employer up to RM1,000 per year, meal allowance, monthly telephone or internet bill.

Similarly, when living accommo-dation is provided by the company, there is different treatment given to a non-service director.

In case there are any errors in the EA forms given to the employees for YA2023, it is advisable for employers to amend the forms immediately before the employees file their annual tax returns.

This article is contributed by Thannees Tax Consulting Services Sdn Bhd managing director SM Thanneermalai (www.thannees.com).

This article was originally published on the Sun daily.

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