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According to LHDN’s perquisites rulings (e.g. Public Ruling 3/2013 and related explanatory notes), mileage-based travel reimbursements are not taxable, and can be excluded from PCB calculations, if they adhere to these criteria:
- The employer reimburses using a fixed per‑kilometer rate, not actual fuel receipts.
- Employees submit detailed claim forms showing date, purpose, destination, and kilometers travelled.
- The per‑km rate is consistently applied across categories of staff or uniformly to all eligible employees.
- No petrol bill submission—the reimbursement must be mileage‑based to remain tax‑free.
In contrast, reimbursements based on actual petrol or travel allowances are only exempt up to RM 500.00 per month or RM 6,000.00 annually. Any amount beyond this limit is treated as a taxable perquisite.
LHDN Public Ruling No. 5/2019
Perquisites from Employment
This ruling outlines the tax treatment of petrol allowances, travelling allowances, toll rates, parking, meals, childcare allowances, and other perquisites. Notably, it specifies the exemption of petrol/travel allowances up to RM 6,000.00 per annum (i.e. RM500.00 per month).
Suggested Standard Mileage Rate for Employers
While LHDN does not prescribe an official mileage rate for employers, Malaysian businesses commonly choose a reasonable rate to reflect vehicle running costs. Based on industry practices, reasonable rates currently range between RM 0.30 to RM 1.00 per km, depending on factors such as vehicle type, engine size, or fuel cost variance .
Recommended approach:
- Define a fixed per‑km rate based on your cost benchmark or industry average.
- Publish the policy formally to all employees. (Ideally this is best set out in an Company Handbook)
- Require claim documentation to support reimbursements.
- Avoid reimbursing actual fuel bills for tax‑free treatment under PCB.
Guidelines for PCB Purposes
1. Mileage Reimbursement (Per‑kilometer Model)
- When the employer reimburses based on a fixed mileage rate per km—supported by a proper claim form detailing client/purpose, travel date, and distances—it is considered fully exempt and not taxable benefit‑in‑kind.
- Must be applied consistently across all employees or structured by staff level/category.
2. Petrol Bill Reimbursement
- If the employer reimburses actual petrol/fuel bills, only the first RM500.00 per month (or RM 6,000.00 per year) is exempt.
- Any amount beyond that becomes taxable and must be declared as a perquisite in the EA form.
Example Structure for a Mileage Policy
|
Policy Element |
Recommended Practice |
|---|---|
|
Rate |
RM 0.50 per km (or defined banded rates) |
|
Documentation required |
Claim form with date, purpose, client, distance |
|
Consistency |
Same rate for all eligible employees |
|
Cap on petrol bills |
RM 500.00 per month or RM 6,000.00 per year (if used) |
|
PCB impact |
Mileage rate – not taxable; petrol cap excess – taxable |
Best practice
- Reimbursements paid via fixed per‑km rate, with proper documentation
- Keep logs, claim forms and rate policies on record for audit purposes.
These claims will be fully exempt for PCB.
Keep in mind that reimbursement of actual petrol costs is only exempt up to RM 500.00 per month. Anything exceeding that must be flagged as perquisite and included in EA forms.
This article is intended for general informational purposes only. While every effort has been made to ensure its accuracy, we do not guarantee that the information is free from errors or omissions. Users are encouraged to verify any important details independently and should not rely solely on the information provided.