(TAX UPDATE) Form EA and Form E Season : BIK and Perquisites Are Still the Same Hidden Risk for SMEs

Each year, when employers prepare Form EA and submit Form E, the same issue comes back again and again. It is not about the forms. It is about what was missed in payroll during the year.

The most common trigger is Benefit in Kind, BIK, and perquisites.

Many SME owners tell us, “This is small staff benefit only.”
IRB does not see it as small when it affects PCB and taxable income.

This is where the exposure usually hits.

First, PCB audit.
If BIK or perquisites were not included in monthly PCB calculations, IRB may treat it as under deduction. The employer may be required to pay additional PCB, and in many cases, compounds follow.

Second, company tax audit.
Where the expense is personal in nature or not properly supported, IRB may disallow the deduction. The amount is then added back in the tax computation.

One item can trigger two outcomes. Payroll exposure and corporate tax exposure.

What SMEs commonly argue about

We see repeated pushback in these areas.

Company provides director car. Petrol, toll, maintenance are paid by the company.
Company pays director or staff personal insurance.
Company pays housing rental for director.
Company settles personal credit card.
Company gives fixed petrol or handphone allowance but there is no claim documents, no log, no basis.

The problem is not whether the company paid.
The problem is whether it is a taxable benefit to the individual, and whether it was properly declared in Form EA and captured in PCB.

A simple example that often becomes costly

Director’s house rental is paid by the company at RM6,000 per month.

It is booked under rental expense in the profit and loss account
No BIK or perquisite is reported in the director’s Form EA.
PCB is calculated as normal, without adding the benefit.

After three years, PCB audit comes.

IRB recalculates PCB based on the benefit.
Employer may face additional PCB and compound.
At the same time, during company tax audit, the same rental may be questioned and partly disallowed if the facts and documents do not support business necessity.

This is how a “normal expense” becomes an audit issue.

What to do before you submit Form E

We recommend a focused review, not a long exercise.

Step 1
List down benefits provided to directors and key employees. Car, housing, insurance, bills, allowances, and any personal expenses paid by company.

Step 2
Check whether these items were included in payroll and PCB calculation during the year.

Step 3
Make sure Form EA reflects the benefits correctly before Form E is finalised.

Step 4
For allowances treated as reimbursement, ensure there is supporting basis. Claims, mileage log, bills, and approval trail.

This review is usually faster and cheaper now, compared to explaining later during audit.

Closing note

Form EA and Form E are not just annual compliance. They are often the documents IRB uses as a starting point to test whether payroll reporting is consistent with what the company actually paid.

When payroll is casual, the audit outcome is rarely friendly.

Question for SME owners and account & finance teams

This year, did you do a quick BIK and perquisite check before submitting Form E, or are you relying on last year’s approach again?

PS : Read others Form E & EA in KTP Blog

Easy Steps to Submit Form E (CP8D) via LHDN MyTax Portal

https://www.ktp.com.my/blog/form-e-2025/13mar2025

Form E & EA in Malaysia: What Every SME Employer Needs to Know

https://www.ktp.com.my/blog/form-e-2025/28feb2025

Common mistakes in Form EA : Benefits-In-Kinds (BIK)

https://www.ktp.com.my/blog/common-mistakes-in-form-ea-benefits-in-kinds-bik/22feb24

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