Understanding Employment Income in Malaysia for Easier Taxation
Taxation is a very complex work. It is even more complicated if we do it without understanding what we are working on. If you are an employed individual with high enough compensation, you will probably pay taxes from your salary. If you yet barely understand the taxation process, it is high time that you do.
This article discusses employment income in Malaysia. We want to help you understand what it means to understand its taxation better.
What is Employment Income in Malaysia
Employment income in Malaysia is the income of an individual employed in Malaysia. Further, it could also mean the income of an employed person on paid leave. Employment income in Malaysia also means the income of a director who is a resident of Malaysia. Or the income of a person employed to work on board an aircraft or ship operated by a resident of Malaysia.
It means that it is the income earned by residents in Malaysia or any individual working in Malaysia as an employee. It could either be cash or non-cash. Cash employment income in Malaysia includes salary, bonus, and allowance. Further, non-cash employment income is benefits-in-kind like a motorcycle and housing accommodation attributable to the exercise of employment in Malaysia.
Why Pay Taxes for Employment Income in Malaysia?
People’s taxes are the lifeblood of the government. The taxes are the main sources of income for the government. So without it, the state cannot operate and implement projects.
That is why for every income earned by its people, the government takes a portion of its taxes. Because eventually, these taxes will return to the people in the form of infrastructures, health and educational benefits, and many more.
Similarly, employment income in Malaysia is the income earned by employees in Malaysia. And for every employment income earned, there is a proportional tax imposed on it. That tax will be their contribution to the overall development of Malaysia.
Employment income taxes will be filed and paid to the Inland Revenue Board of Malaysia (IRBM). Further, Malaysia is under the progressive tax system. This means that people or organizations with higher income will be charged with higher taxes.
Collection of Employment Income Tax
The state imposes tax from employees through compulsory monthly deductions. Most of the time, the remuneration employees receive is already net of the employment income tax.
So if your employer follows the monthly tax deduction system, it’s more likely that the employer is also the one who files and pays for the employees’ taxes. Moreover, if you are an employer who is not using computerized payroll software, you can calculate your employees’ income tax using the schedule of monthly tax deductions.
The employers are the ones responsible for submitting the monthly withholding tax return and making payments. Employers do this every 15th of the month following the month of payroll. Moreover, IRBM will charge penalties for failure to file and pay said taxes.
Lastly, at the end of every business year, employees themselves must complete their annual tax filing. Employees should do this on or before the 30th of April, for those with purely employment income. Moreover, individuals who also earn business income from their separate businesses should file it before June 30.
Expert Tax Assistance
Are you a business owner who needs expert assistance in computing their employees’ monthly tax deductions? Or maybe you are an individual looking for a professional perspective on issues relating to employment income tax? 3E Accounting Malaysia can assist you with that.
We offer professional Malaysia income tax services to both individuals and businesses alike. We can complete your tax filings and resolve your issues in no time. Our highly experienced expert teams can help you with all your tax concerns. Contact 3E Accounting Malaysia today!