Benefits in Kind (BIK)
A Benefit in Kind (BIK) can be something that an employee or any member of their family may receive as a result of being in an employment, in addition to any remuneration paid to the employee by their employer.
Some benefits are taxable on the amount paid under section 8(1)(b) of the Taxes Ordinance 1997 as gains or profits from employment.
There are also prescribed benefits taxable under section 8(1)(c) as defined in section (1) of the Taxes (Benefits in Kind) Rules 2003, as being:
- The payment by an employer of or in respect of any travel expenses incurred by or in respect of an employee
- The use by an employee of a motor vehicle provided by the employer
- The provision by an employer of a loan to the employee
- The provision by an employer of any living accommodation, including board, heating and electricity, for the use of the employee
Under sections 8(1)(b) and 8(1)(c) of the Taxes Ordinance 1997 these benefits are part of the employee’s income, received other than by way of money. The benefit arises on the employee as and when it is paid or the benefit is made available to the employee. Under the current POAT (Payment on Account of Tax) system, that benefit is not taxed at source by their employer.
However, so that the correct amount of benefit can be taxed, we require the employer to tell their employee and us of the actual amount of benefit received by the employee in the tax year. The employee should then enter those details on their Tax Return.
It is therefore important that the employer maintains accurate records throughout the year and completes the relevant forms to give the employee at the end of the tax year, or during the year if the employee leaves that employment before 31 December.
For BIK rates and further information: