When it comes to filing your taxes, your monthly salary is only part of the picture. Any petrol allowances, parking, phone lines, commissions, bonuses, and even employer-provided accommodation all count as income from employment too. The thing is, a lot of these extras are either fully or partially exempt from tax, and if they’re not recorded properly on your EA form, you could end up paying more than you need to.

The savings can be more than you’d expect. A RM6,000 petrol allowance for official duties is fully exempt. If you’re in the 24% tax bracket, that’s RM1,440 you get to keep, as long as your employer has recorded it correctly in Part F of your EA form.

Tax-exempt Perquisites And Benefits-in-kind

Your employer might use different terms for the extras they give you. Perquisites are typically cash or cash-equivalent benefits like travel allowances and childcare subsidies. Benefits-in-kind are non-cash benefits like a company car, furniture, or a personal driver. For tax purposes, both are treated as part of your employment income unless they fall under one of LHDN’s exemptions.

The table below covers the main exemptions. If your employer provides any of these, check your EA form to make sure the exemption is recorded. Otherwise, you’ll be taxed on income you didn’t need to declare.

Perquisite/Benefit-in-kind	Tax exemption limit (per year)
Petrol, travel, toll allowances	Up to RM6,000 for official duties*
Childcare subsidies / allowances	Up to RM3,000*
Parking fees / allowances	Fully exempt*
Meal allowances	Fully exempt*
Interest on loan subsidies	Fully exempt if total loans do not exceed RM300,000 (housing, vehicles, and education)*
Income tax borne by employer	Tax amount paid by employer
Awards (long service, excellence, innovation, productivity)	Up to RM2,000*
Leave passages	3 local leave passages (fares, meals, accommodation) OR 1 overseas leave passage up to RM3,000 (fares only)
Medical benefits (including traditional medicine and maternity)	Fully exempt
Telephone, broadband, Personal Digital Assistant (PDA)	Fully exempt, limited to 1 unit per asset type
Mobile phones, laptops, tablets (Flexible Work Arrangement Incentive)	Up to RM5,000
Company goods (free or discounted) for employee, spouse, or unmarried children	Up to RM1,000
Company services (free or discounted) for employee, spouse, or unmarried children	Amount of discount or value of services provided

*Not applicable for directors of controlled companies, sole proprietors, and partnerships.

Childcare subsidies are exempt up to RM3,000 a year. If your employer provides a childcare allowance and you’re in the 24% bracket, that’s RM720 in tax savings. Not every employer offers this, but if yours does, make sure it’s declared correctly.

The loan interest exemption works differently from the others. If your employer subsidises the interest on your housing, car, or education loan, and your total loans add up to RM300,000 or less, the entire subsidised interest amount is tax-free. Once your loans exceed RM300,000 in total, only a proportionate amount of the subsidy is exempt.

Employer-paid holidays are also tax-exempt within limits. You can receive up to three local leave passages a year, covering fares, meals, and accommodation — all fully exempt. For overseas travel, you get one passage per year with fares exempt up to RM3,000.

How Benefits-in-kind Are Valued For Tax

Benefits-in-kind don’t just refer to company cars. They can also include accommodation, furniture, a personal driver, club memberships, or even insurance paid by your employer.

Some benefits can’t be declared as a simple RM figure. If your employer gives you a company car for personal use, for instance, that car has to be assigned a monetary value for tax purposes. LHDN provides two methods for this.

The formula method calculates the benefit based on the actual cost your employer paid for the asset, divided by its prescribed lifespan. For a company car, the lifespan is 8 years, and the formula applies an 80% factor to account for the car’s residual value when it’s returned. So a car that costs your employer RM120,000 would have an annual BIK value of RM12,000 (RM120,000 ÷ 8 × 80%). The advantage of this method is that you can claim a deduction if you use the car partly for work, but you’ll need to keep records for seven years in case of an audit.

The prescribed value method is simpler. LHDN publishes a table of fixed annual values based on the original cost of the car when it was new. A car that costs up to RM50,000 when new has a prescribed annual value of RM1,200, while a car costing RM200,001 to RM250,000 has a prescribed value of RM9,000. If the car is more than five years old, the prescribed value drops by half. You can’t claim deductions for work use under this method, but the taxable amount is often lower.

Your employer has to pick one method and stick with it consistently. If they use the prescribed value method for the car, they have to use the same method for any related petrol benefit as well.

If you want the full breakdown of prescribed values by car cost and asset type, LHDN’s Public Ruling No. 11/2019 on Benefits-in-Kind has the complete tables.

The New 2% Dividend Tax From YA2025

Dividends in Malaysia used to be fully exempt under the single-tier tax system, but from YA2025 onwards, a 2% tax applies to individual dividend income exceeding RM100,000 per year. The first RM100,000 remains tax-free. 

This applies to dividends paid by Malaysian resident companies. It does not apply to foreign-source dividends. It also does not apply to dividends from certain companies that have been granted special government tax incentives, commonly known as “pioneer status” companies.

If you’re building an investment portfolio and expect your dividend income to grow over time, this is worth keeping on your radar.

Tax-exempt Interest Income

Interest earned from licensed banks, Islamic banks, finance companies, developed financial institutions, Lembaga Tabung Haji, Malaysia Building Society Berhad (MBSB), and Borneo Housing Finance Berhad is fully exempt from tax. So if your savings account or fixed deposit earns you RM500 in interest over the year, that doesn’t need to go on your tax form at all.

Rental Income Is Fully Taxable

Unlike bank interest, rental income is not tax-exempt.

If you earn income from renting out property, that amount must be declared in your tax return. However, you’re allowed to deduct certain expenses related to the property, such as loan interest, assessment tax, quit rent, maintenance costs, and agent fees, before arriving at your taxable rental income.

Don’t Pay More Than You Owe

Malaysia’s self-assessment system means it’s on you to calculate your chargeable income and payable tax correctly. LHDN won’t remind you about exemptions you forgot to claim — you’ll just end up declaring more income than you needed to and paying tax on it.

Before you file, go through your EA form line by line. Check that your employer has recorded your perquisites and benefits-in-kind correctly in Part B. If you’ve received any of the exemptions in the table above, make sure they’re there in Part F.

If you have any questions, do let us know in the comments! You can also check out our annual income tax guide for 2026 (YA 2025).

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