Which Benefits are Tax Exempt for Employees in Malaysia (YA 2021)?

Disclaimer: This article should not be considered to be legal advice, and altHR is not liable for any actions taken based on this article. As of 1 July 2023, altHR no longer offers a Payroll module.

Tax season is just around the corner, and as usual, employers should have already issued EA forms for the Year of Assessment (YA) 2021 to their employees by the end of February 2022 — just yesterday. 

If you’ve switched jobs midway through the previous year of assessment, it’s also important to reach out to your former employers to send EA forms to their present/former employees by 28 February 2022, as confirmed by the LHDN here in Malaysia.

Many employees in Malaysia will also be busy filing their tax returns in the coming months, with those who receive their income wholly from employment salaries having a deadline of 30 April 2022 submit their Form BE — or until the 15th of May 2022 for e-filing. 

As you go through the arduous process of filing your taxes, it’s important to understand which part of your monthly remuneration is actually exempt from tax; this gets slightly more complicated if your package includes more than just a basic salary. Here’s a quick breakdown on tax exemptions when it comes to benefits in YA 2021, when filing your taxes in 2022. 

Tax Exempt Employee Benefits in Malaysia

Many taxpayers are entitled to tax exemptions on certain allowances, perquisites, gifts, and  benefits — as provided for under Part F of the EA form. Of course, this is of particular interest for many employees, with exemptions on tax returns allowing you to reduce the overall amount of tax you need to pay across the year. 

Pay attention to the following types of benefits, and exemptions available: 

1. Benefits-in-Kind

Benefits-in-Kind are benefits that are provided to employees on top of their basic salary which are not convertible into money. For example, think of cars, productivity tools, or even personal drivers — benefits which have monetary value, but cannot be sold or exchanged for cash due to the terms of the contract, or simply the nature of the benefit. 

All Benefits-in-Kind are technically taxable, but Paragraph 8 of the LHDN’s Public Ruling No. 11/2019 provides for the following exemptions: 

• Dental benefit 
• Child-care benefit; Child-care centres provided by employers
• Food & drink provided free of charge
• Free transportation between pick-up points/home and work
• Obligatory insurance premiums for foreign workers in replacement of SOCSO
• Group insurance premium covering workers in event of accidents 
• Leave passage 
• Benefits used by employer to perform employment duties 
• Discounted price for consumable business products/services of employer
• Benefits and monthly bills for fixed line telephones, mobile phones, broadband subscriptions
• Medicine and maternity 
• Benefit on free petrol (petrol cards, petrol bills) up to RM6,000
  

It’s important to note that the exemptions here do not apply if the employee in question is a director, or an employee who has “control over his employer” via holding of shares or other powers. 

Full details on Benefits-in-Kind available from the LHDN here. 

2. Perquisites from employment

Perquisites, meanwhile, are benefits that are either given in cash, or are convertible into money by the employee. This mainly covers the variety of allowances that you may receive as part of your employment, as well as subsidies on loans and more. 

The LHDN provides for perquisites from employment under Public Ruling No. 5/2019. Just like Benefits-in-Kind, Perquisites are taxable from employment income. However, there are exemptions: 

• Travelling allowance, petrol allowance, toll rate up to RM6,000 annually 
• Parking allowance 
• Meal allowance 
• Child care allowance of up to RM2,400 annually 
• Subsidies on interest for housing, education, car loans 
• Full exemption if up to RM300,000 loan 
• Allowance for monthly bills for fixed line telephone, mobile phone, tablet, broadband subscription (only one line for each category)
• Obligatory insurance premiums for foreign workers (in lieu of SOCSO)
• Group insurance premiums to protect workers in event of accident 
• Aviation travel insurance (travelling on official duty)
• Medical treatment paid by employers to healthcare facilities 
• AWARDS given to employees for excellent service, long service, past achievement, innovation, productivity of up to RM2,000
  

Just like Benefits-in-Kind, these exemptions do not apply if the employee has “control over his employer”. 

Full details on Perquisites available from the LHDN here.