Total Tax Exempt Allowances, Perquisites, Gifts & Benefits in Malaysia (2025)

Employers often provide benefits like fuel allowances, childcare subsidies, and performance bonuses. But do you know which of these are tax-exempt?

Not all benefits add to an employee’s taxable income. This article outlines the tax-exempt allowances, perquisites, and gifts that employers can offer.

What Are Tax-Exempt Allowances, Perquisites, Gifts & Benefits?

Employers provide different types of non-salary compensation to employees. These can be classified into allowances, perquisites, gifts, and benefits-in-kind (BIK).

While these additional perks can improve employee satisfaction, some of them are subject to tax, while others are tax-exempt.

Allowances refer to fixed payments given to employees to cover specific expenses, such as travel, meals, or childcare expenses. Some of these allowances qualify for tax exemption.
Perquisites are additional benefits, usually in the form of cash or reimbursements, such as employer-sponsored insurance, discounted goods, or subsidized loans.
Gifts are rewards given to employees for achievements or special occasions. Some gifts, like long-service awards, have tax exemptions.
Benefits-in-Kind (BIK) include non-monetary perks provided to employees, such as company cars, free parking, or mobile phones. Some of these are tax-exempt, depending on the LHDN’s guidelines.

Tax-Exempt Allowances for Employees

Certain allowances provided by employers are tax-exempt up to specific limits. Use these exemptions to support their employees while keeping tax costs low.

Allowance	Tax Exemption Limit
Petrol, travel, toll allowances	Up to RM6,000 per year (if used for official duties). Claims above RM6,000 require record-keeping for 7 years.
Parking allowance	Fully exempted, including payments made directly to the parking operator by the employer.
Meal allowance	Fully exempted if provided regularly and fairly to all employees at the same rate or for specific work-related meals such as overtime and travel.
Childcare allowance	Up to RM3,000 per year, including direct payments by the employer to a childcare provider.
Phone and internet subsidies	Fully exempted, limited to one line per category of asset. Phone allowances are taxable.
Special relocation allowances	Tax-exempt if provided to cover costs of transferring employees to a different work location.

Tax-Exempt Perquisites (Cash & Non-Cash Benefits)

Perquisites, or additional benefits provided by employers, can also qualify for tax exemptions. These benefits support employees in various ways while reducing taxable income.

Perquisite	Tax Exemption Limit
Leave passage for domestic travel	Exempt up to 3 times per year within Malaysia (including fares, meals, and accommodation) and once for overseas travel (up to RM3,000 for fares only).
Employer-sponsored insurance	Tax-exempt for obligatory insurance for foreign workers, group accident insurance, and employer-paid medical insurance.
Discounted goods provided by employer	Up to RM1,000 per year for employer-produced goods.
Subsidized loans (housing, car, education)	Fully tax-exempt if the total loan does not exceed RM300,000. Excess amounts follow a tax calculation formula.

Tax-Exempt Gifts to Employees

Gifts given to employees can also qualify for tax exemptions, particularly those related to performance, service tenure, or retirement.

Gift Type	Tax Exemption Limit
Long-service awards	Up to RM2,000 if the employee has worked for more than 10 years in the same company/group.
Retirement or termination gratuity	Fully tax-exempt based on qualifying conditions.
Exceptional performance awards	Up to RM2,000 per year for recognition of achievements, innovation, or productivity.
Wedding and personal gifts	Fully tax-exempt if given for personal reasons unrelated to work, such as wedding gifts or appreciation awards

Tax-Exempt Benefits-in-Kind (BIK)

BIK refers to non-cash benefits that employers provide to employees. Some of these benefits are fully tax-exempt.

Benefit Type	Tax Exemption Limit
Mobile phones, laptops, tablets	Fully exempted (limited to one unit per category of asset).
Employer-provided childcare facilities	Fully exempted.
Free or subsidized parking	Fully exempted.
Gym memberships	Exempted if related to employee wellness programs.

Perquisites, Benefits-in-Kind, and Tax Exemptions in Table Summary

Category	Item	Tax Exemption Limit
Tax-Exempt Allowances	Petrol, travel, toll allowances	Up to RM6,000 per year for official duties. Claims above RM6,000 require records for 7 years.
	Parking allowance	Fully exempted, including payments made directly by the employer.
	Meal allowance	Fully exempted if provided regularly and fairly to all employees or for work-related meals such as overtime and travel.
	Childcare allowance	Up to RM3,000 per year, including payments made to a childcare provider.
	Phone and internet subsidies	Fully exempted (limited to one line per category of asset). Phone allowances are taxable.
	Special relocation allowances	Tax-exempt if covering costs for employee transfers.
Tax-Exempt Perquisites	Leave passage (domestic travel)	Exempt up to 3 times per year within Malaysia (including fares, meals, accommodation).
	Leave passage (overseas travel)	Exempt once per year (up to RM3,000 for fares only).
	Employer-sponsored insurance	Exempt for foreign worker insurance, group accident coverage, and employer-paid medical insurance.
	Discounted goods from employer	Up to RM1,000 per year for employer-produced goods.
	Subsidized loans (housing, car, education)	Fully tax-exempt if total loan does not exceed RM300,000. Excess amounts follow a tax formula.
Tax-Exempt Gifts	Long-service awards	Up to RM2,000 if the employee has worked for more than 10 years in the same company/group.
	Retirement or termination gratuity	Fully tax-exempt based on qualifying conditions.
	Exceptional performance awards	Up to RM2,000 per year for recognition of achievements, innovation, or productivity.
	Personal gifts (weddings, appreciation)	Fully tax-exempt if unrelated to work (e.g., wedding gifts, prizes for personal feats).
Tax-Exempt Benefits-in-Kind (BIK)	Mobile phones, laptops, tablets	Fully exempted (limited to one unit per category).
	Employer-provided childcare facilities	Fully exempted.
	Free or subsidized parking	Fully exempted.
	Gym memberships	Exempted if part of wellness programs.

FAQ

Which employee allowances are fully tax-exempt?

Several employee allowances are fully tax-exempt under Malaysia’s tax regulations. These include parking allowances, meal allowances given regularly or for overtime and work-related travel, and employer-covered phone and internet bills (limited to one per asset type). Childcare allowances up to RM3,000 per year and petrol, travel, and toll allowances up to RM6,000 per year (for official duties) are also exempt.

What is the maximum limit for tax-exempt benefits in Malaysia?

The tax exemption limit depends on the type of benefit. Some have full exemptions, while others have specific limits. For example:

Petrol, travel, and toll allowances up to RM6,000 per year
Childcare allowance up to RM3,000 per year
Discounted goods from employers up to RM1,000 per year
Long-service or performance-based gifts up to RM2,000 per year
Leave passage up to 3 times for domestic travel and 1 time overseas (up to RM3,000 for fares)

Do employers need to report tax-exempt perquisites?

Yes, even if certain perquisites are tax-exempt, employers are required to report them in the EA Form under Part F. This section is for perquisites, benefits-in-kind (BIK), and employer-paid taxes. Reporting helps ensure transparency and compliance with tax laws. While employees may not be taxed on exempt perquisites, they still need to be disclosed for record-keeping purposes.

Can employers provide tax-free gifts to employees?

Yes, employers can provide tax-free gifts under specific conditions. Long-service awards (for employees with over 10 years of service) and gifts for outstanding performance are tax-exempt up to RM2,000 per year.

Pure gifts unrelated to work, such as wedding gifts or appreciation awards, are also fully exempt from tax. However, recurring gifts or those given as part of remuneration may be considered taxable.

How do tax-exempt benefits affect employer tax deductions?

Tax-exempt benefits help employers structure compensation packages efficiently while maintaining compliance with tax laws. Although these benefits are not taxed on employees, employers may still claim deductions for business expenses related to them, such as travel allowances, insurance contributions, and professional memberships.

Hire the Best with the Right Benefits in 2025

Offering tax-free perks like travel allowances, medical benefits, or meal vouchers makes your team feel valued and motivated. Happy employees work harder and stay longer!

Want to build a strong and loyal team? Post your job today and hire top talent with the best benefits!