Compensation can in cash or non-cash. Benefits in kind (BIK) can be defined as non-monetary benefits granted by an employer to an employee. It is common for an employer to grant BIK to an employee in mid-level management or above. Examples of BIK are official car, accomodation.
Valuation of benefits
Where an employer provides any benefit to an employee except accommodation, the valuation shall be as follows:
- Where the employer still owns the assets that the employee uses wholly or partly, the value of the benefits will be five percent of the asset’s cost. If the cost cannot be ascertained, five percent of the market value of the asset at the point of purchase. The revenue authority will decide the market value.
- Where the employer pays for rent or hire of an asset, the BIK is the annual expense for rent or hire.
How to apply the rate
- Official car: The value will be five percent (5%) of the cost of the motor vehicle. Where it is not feasible to know the cost of the asset, then the Revenue Authority can use 5% of the market value at the time of the acquisition.
- Accommodation: Rateable value of the accommodation using the tenement rates.
- Utility expenses, for example, cable subscription, internet subscription: Actual amount paid
The benefit to the employee is calculated using the income tax laws in a jurisdiction. BIK is a taxable income in the hands of the employee.
Expenses that are not employee benefits
BIK does not include the provision of;
- Meals in a canteen or luncheon vouchers for employees in general
- Uniform, overall, or other protective clothing
- Reasonable relocation expenses may or may not include a temporary subsistence allowance that an employer incurs when an employee changes their place of residence.