12/03/2026
For the HR department of ABC Sdn Bhd to properly account for the Benefit-in-Kind (BIK) provided to Ali, they must follow the specific rules for motorcar benefits under the Income Tax Act 1967 (ITA) and related Public Ruling No. 11/2019.
1. Statutory Classification
The provision of a company car for private use is classified as a Benefit-in-Kind under Section 13(1)(b) of the ITA. It is considered non-convertible income because the employee enjoys the use of the asset without owning it.
2. Valuation Methods
The HR department can choose between two methods to determine the value of the BIK. Once chosen, the method must be applied consistently:
- Prescribed Value Method (Most Common): This is a concessionary method where the value is based on a predetermined table provided by the IRB, linked to the cost of the car when new. For a car valued at RM250,000, the prescribed annual value is RM9,000 (plus RM2,400 if fuel is also provided).
- Formula Method: The annual value is calculated as the cost of the asset divided by 8 years (the prescribed average life of a car). Example: RM250,000 / 8 = RM31,250 per year.
3. Accounting for Ali’s Commencement (Proration)
Since Ali joined the company on 14th December 2025, he only enjoyed the benefit for a portion of the year (18 days).
- Abatement: The BIK value must be abated (prorated) to reflect the actual period the car was available to him.
- Calculation (Prescribed Method): (RM9,000 / 365 days) × 18 days = RM443.84 for the 2025 Year of Assessment.
4. HR Department Responsibilities
- Monthly Tax Deduction (MTD/PCB): HR must include the prorated BIK value (RM443.84) in Ali's gross remuneration for December 2025 to calculate the correct PCB. This is mandatory and no longer an employee's choice.
- Excluded Items: HR should not include the cost of the car’s road tax, insurance, or maintenance (servicing/repairs) in Ali's BIK value, as these are regarded as costs to the employer to maintain their own asset and do not constitute a benefit to the employee.
- Reporting (Form EA): The total value of the car BIK (and fuel, if provided) must be clearly disclosed in Ali’s Form EA (Statement of Remuneration), which must be issued to him by the last day of February 2026.
Extra:
Company Tax Deduction: While Ali is taxed on the benefit, the company itself is restricted in its claim for Capital Allowances (CA). For a car costing more than RM150,000, the company’s qualifying expenditure for tax purposes is limited to RM50,000.
Summary for HR Action, steps:
1. Value - Use the Prescribed Value (RM9,000/year) for a RM250k car.
2. Prorate - Calculate the value for 18 days (14 Dec – 31 Dec).
3. PCB - Add the prorated amount to December 2025 payroll.
4. Form EA - Report the amount in Section B of Ali's 2025 Form EA.
-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-
The provided information is intended for reference only.
Please consider seeking additional professional guidance if necessary.
If you need reliable audit and tax services,
contact us at 014-3612749 or email to [email protected]
