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Individual Income Tax in Malaysia

In Malaysia, its tax year runs in accordance with the calendar year (a current year basis of assessment) – the calendar year begins on 1 January and ends on 31 December. All income tax is imposed on a territorial basis – An individual, whether tax resident or non-resident in Malaysia, will be taxed on any income generated in or derived from Malaysia.

Malaysia Personal Income Tax Guide

In Malaysia, an individual (regardless of citizenship) is liable for income tax if he or she fulfils any of the following criteria:

  1. He or she has been resident in Malaysia for 182 days of the tax year
  2. He or she has been resident in Malaysia for less than 182 days of the tax year, but was resident in the country for a total of 182 consecutive days linked to days from the year immediately preceding or following that tax year
  3. The individual has been resident in Malaysia for at least 90 days of the current tax year and was resident in Malaysia for at least 90 days in three of the four preceding years
  4. The individual will be resident in Malaysia in the year following and has been resident in Malaysia in the three years preceding the one being taxed.

Please read the detailed Malaysia Personal Income Tax Guide from our website to find out more about Malaysia’s personal income tax system.

 

Responsibilities of Individual in Malaysia

The personal income tax system in Malaysia operates under the self-assessment tax system (SAS). Hence, it is everybody’s legal responsibility to compute tax liability (for individual who is liable for income tax) to file his or her tax return before the deadline. Registering as a taxpayer in Malaysia is rather easy. You can do the registration either on-line or at the nearest branch of the Malaysian Inland Revenue Board (IRBM) (Lembaga Hasil Dalam Negeri Malaysia).

What do you need for your application?

  • A copy of the latest payroll
  • A copy of the Identification Card or international passport
  • A copy of the marriage certificate (if applicable)

Here is the comprehensive guide that can help you to successfully register yourself as a taxpayer in Malaysia.

 

Malaysia Personal Income Tax Rate

Malaysia adopts a progressive income tax rate system. Taxpayers only pay the higher rate on the amount above the rate. The income tax rates are on Chargeable Income (not salary or total income) and Chargeable Income is calculated only after tax exemptions and tax reliefs.

The tax rate in Malaysia is always a percentage of your chargeable income. In other words, the more you earn, the higher the percentage of tax you need to pay. That said, that higher percentage is only applied to the amount that is higher. Taxpayers will never end up with less net income after tax even if they earn more.

 

Tax Planning for Individual Income Tax in Malaysia

When it comes to tax, understanding how best to manage your finances (effective tax planning) can significantly benefit your financial position. In fact, everyone who is liable to pay tax needs professional advice and support if they are to optimise their tax position and ensure they meet all the compliance requirements. For this and other reasons, you need to review your tax plan at least once a year or on the annual basis to find out what approaches can best accommodate your financial goals and preserve your and your family’s wealth.

 

Personal Tax Reliefs in Malaysia

Every Ringgit of income tax you save means more income at your disposal. In other words, every well-planned disposal of money means minimal loss, and every inheritance tax saving means more benefit for yourself and your family. As such, every taxpayer should make sure to take full advantage of the tax-saving opportunities. Here we’ve included a complete list of tax exemptions for the year assessment of 2017 for your calculation – Personal Tax Reliefs in Malaysia