This page is also available in: Melayu (Malay)
|Packages Available||Fee (RM)
subjected to 6% Service Tax
|Personal Income Tax (Form BE/B/M/MT) Submission|
|– With Salary||From RM500|
|– With Rental Income||From RM1,000|
|– With Active Business Operation||From RM1,500|
|Partnerships Form P Submission||From RM500|
In order to determine the Malaysia income tax liability of an individual, you need to first determine the tax residency and amount of chargeable income and then apply the progressive tax rate to it. Key points of Malaysia’s income tax for individuals include:
- Personal Income tax is payable on the taxable income of residents at the progressive rates from 0% to 25% with effective Year of Assessment 2015. Nonresidents are subject to withholding taxes on certain types of income. Other income is taxed at a rate of 26%.
- Residents and non-residents are subject to tax on Malaysian-source income only. Effective from 1 January 2004, remittances of foreign-source income into Malaysia is exempted from Malaysia Income Tax
- Tax rules differ based on the tax residency of the individual.
- Income tax is assessed on a current-year basis. The tax year, commonly called the year of assessment (YA), runs from January 1 to December 31.
Please click Income Tax Rates for details about the personal income tax rate for resident.
Kindly take note of the following key dates which related to the filing of personal tax.
- Delivery of Form EA by the employer to employee no later than last day of February of the following year
- The deadline for filing of Form BE, BT, M, MT by the a person not carrying business (generally refer to employee) is by 30 April of the following year
- The deadline for filing of Form B by the a person carrying a business such as sole proprietor is by 30 June of the following year
- The deadline for filing Form P by a partnership excluding limited liability partnerships, LLPs is by 30 June of the following year
|Form CP 22||Notification of New Employee – an employer is required to notify the Inland Revenue Board (IRB) via Form CP22 of the commencement of employment of its employees in Malaysia within one month of the date of commencement of employment.|
|Form CP 22A||Cessation of Employment – an employer is required to notify the IRB of the cessation of employment of an employee by the completion of Form CP22A at least 30 days before the date of cessation unless the employee is subject to the Monthly Tax Deduction (MTD) and deduction has been made by the employer or whose income is below the minimum amount subject to MTD, and employer is aware that the employee is to be employed elsewhere in Malaysia.|
|Form CP21||Departure from Malaysia for a Period Exceeding 3 Months – an employer is required to notify the IRB of departure of an employee (most of the case will be expatriate) from Malaysia for a period of more than 3 months by the completion of Form CP21. The employer is required to withhold any money in the employer’s possession owing to the expatriate who has ceased or is about to cease employment until 90 days after the IRB receives the Form CP21 or upon receipt of the tax clearance letter, whichever is earlier. The employer can then release the balance of money withheld from the employee after the settlement of the outstanding taxes (if any) as shown in the tax clearance letter.|
|Form E||Every employer must furnish the Form E of its employees’ employment income no later than 31 March of the following year.|
|Form EA||Statement of remuneration (Form EA) completed and provided to the employee on or before the last day of February of the following year for employee’s personal income tax purpose. Form EA is not required to be sent to IRB.|
Tax withholdings from employment income are covered by the MTD system.
Employer’s responsibilities under the MTD Rules are as follows:
- Deduct the MTD from the remuneration of employee in each month or the relevant month in accordance with the Schedule of MTD or Computerised Calculation Method and pay to the Director General.
- Make additional deductions from employee’s remuneration in accordance with the direction given by the Director General under Rule 4 of MTD Rules.
- Employer shall pay to the Director General, not later than the fifteen day of every calendar month, the total amount of tax deducted or should have been deducted by him from the remuneration of employees during the preceding calendar month.
- Furnish a complete and accurate employee’s information in a return (Form CP39/CP39A) when submitting MTD payments/additional deductions.
- Keep and retain in safe custody sufficient documents for a period of seven years from the end of the calendar year in which the remuneration is deducted in respect of his employee according to the MTD Rules.
- Inform every employee of his following responsibilities:
- to submit a TP3 Form to the employer to notify information relating to his employment with previous employer in the current year.
- to submit a TP1 Form to the employer if employee wishes to claim deductions and rebates in the relevant month. The deductions and rebate will be effected subject to approval by employer.
- to submit a TP2 Form if employee wishes to include benefits in kind (BIK) and value of living accommodation (VOLA) as part of his monthly remuneration in ascertaining the MTD amount subject to approval by employer.
- to keep and retain in safe custody each and every receipt relating to claims of deductions for a period of seven years from the end of that year of assessment under the Act.
- to furnish complete and accurate personal information and update any changes of his personal particulars to the employer.
- to furnish correct information in a prescribed form relating to his own chargeability to tax and failure by the employee to do so constitutes an offence
For more information on MTD: www.hasil.gov.my
New statutory provisions in Malaysia have been enacted that amend the definition of “remuneration” for MTD. Employers should be aware that for certain employees who have an income tax liability in Malaysia, their compliance responsibilities have changed. For information, please refer Important Changes to Monthly Tax Deduction Rules
|Form type||Category||Due Date for Submission|
|Form BE||Resident Who Does Not Carries On Business||30 Aprilof the following year|
|Form BT||Resident individual (Knowledge/Expert Worker)|
|Form M||Non-resident individual|
|Form MT||Non resident individual (Knowledge/Expert Worker)|
|Form M||Non-resident individual (with business income)||30 Juneof the following year|
|Form MT||Non resident individual (Knowledge/Expert Worker with business income)|
|Form B||resident individual who carries on business|
You may file your tax return using any of the following modes:
- You can e-File your tax returns via ezHASil e-Filing. The e-filling system is convenient, fast and more accurate – system computes the tax payables automatically after you key-in your income, deduction, relief and rebate.
- You may also e-filing your tax return by using your smart phone or tablet. The taxpayers can access the system at mfiling.hasil.gov.my from the supported devices such as iPhone and iPad with iOS version 4.0 and above; Android version 2.2 (Froyo) and above; BlackBerry (OS 6 and above) and Playbook; Windows Phone version 7.0 and above and 5 (Mango) recommended
- Generally, the IRB will grant 2 weeks extension on the Tax Return’s filling deadline vide e-filling to encourage more e-filing. To ensure you file your Tax Return before the deadline, please always check the current YA’s filling deadline at IRB official website www.hasil.gov.my
- The lRB now has to pay interest to taxpayers if they do not process their refund within 90 days from the due date (electronic filing) or 120 days from the due date (manual filing). Therefore, filling your tax electronically also means you can get your refund faster
- View ezHASiL Centralized Interface User Manual.
- If you yet register for a tax-file, you can register at the nearest or any other LHDN branch of your convenience or register online through e-Daftar. Please click here for more information on tax registration for individuals
- Filing using a paper-based tax return:
- You should have received the Tax Return Form from IRB by mail 2 months before the filling deadline if you filed your Tax Return using paper-based form for prior years.
- If you don’t receive the relevant Form, you may collect the form at any LHDN branch or print the softcopy of the form from IRB website. Only Malay version of the form can be used for tax submission purpose and must fulfil the printing requirements specified by IRB.
Filing income Tax
While a partnership does not pay tax, it still has to file an annual income tax return (called the Form P) to show all income earned and business expenses deducted by the partnership during the year. The partnership could file Form P through paper-form submission or e-filling.
The deadline for filing Form P is 30 June.
The precedent partner is responsible for filling out the Form P and issuing the Form CP30 to each and every partner. The Form CP30 (Apportionment Of Partnership Income) has to be provided to each partner so as to enable them to declare their partnership income within the stipulated period i.e. 30 June for individual and 7 months after closing of financial year for companies.
A1: Generally, resident individuals are taxed on a progressive tax rate basis from 0% to 25% with effective Year of Assessment 2015. Non-residents are subject to withholding taxes on certain types of income. Other income is taxed at a rate of 26% without personal relief. A detailed chart of progressive tax rates is available for resident individuals and non-resident individuals.
Effective YA 2010, the employment income of an individual who is a knowledge worker and residing in specific region (Iskandar, Malaysia) exercising employment with a person who carries on any qualifying activity (namely green technology, biotechnology, educational services, healthcare services, creative industries, financial advisory, and consulting services, logistic services, and tourism) would be taxed at the rate of 15 percent of his chargeable income. (Applicable for knowledge workers who apply and commence employment in Iskandar, Malaysia between 24 October 2009 and 31 December 2015.) However, prior approval from the Ministry of Finance is required before a knowledge worker could enjoy the tax rate of 15 percent.
Effective from YA2012, the employment income of an approved individual under the Returning Expert Programme will be taxed at the rate of 15 percent. Based on the Talentcorp’s Web site (which is the authority handling the Returning Expert Programme), the approved individual could opt to be taxed under the scale rates instead of 15 percent. The concession is for a period of five years.
A2: You are liable to file a tax return in Malaysia, if you were resident in Malaysia for more than 60 days during the calendar year and your Malaysia income exceeded S$22,000. The 60 day rule does not apply if you are a director of a company, a public entertainer or exercising a profession in Malaysia.
A3: The residence of an individual is determined by his/her physical presence in Malaysia. Generally, an individual becomes a tax resident for the tax year if the aggregate number of days the individual stays in Malaysia during the basis year is 182 days or more.
An individual may also qualify as a resident for the basis year for a particular year of assessment under any one of the following circumstances:-
- The individual is in Malaysia for less than 182 days in that basis year and that period is linked by or to another period of 182 or more consecutive days (hereinafter referred to in this paragraph as such period) throughout which the individual is in Malaysia in the adjoining year. Temporary absences from Malaysia due to service matters, attending conferences, seminars, or study abroad connected with the services in Malaysia, ill-health involving the individual or any immediate member of the family and social visits not exceeding 14 days in aggregate shall be taken to form part of such period or that period, as the case may be, if he/she is in Malaysia immediately prior to and after that temporary absence.
- The individual is in Malaysia for a total of 90 days or more in the basis year and in any three out of four immediately preceding basis years, the individual was either resident or in Malaysia for at least 90 days.
- The individual will be a resident for the year if he/she is resident the following year and has been resident for the immediately preceding three years.
A4: For Malaysia resident/non-resident directors, normal tax rule is applied except that certain tax exemptions are not extended to directors of controlled companies (a company having not more than fifty members and controlled, in the manner described by section 139, by not more than five persons).
Generally, there are 2 options are available for receiving the employment income, either he/she can receive director’s salary (subjected to EPF) or director’s fee (not subjected to FPF). Please note that payment of directors’ fees can generally only be made if approved by the company in general meeting. Directors’ fees are taxed in the YA of the directors’ fee are received.
A5: Director’s fees are assessed in the year that a director received the payments.
A7: Generally, foreign source income received by individual is not subjected to Malaysia income tax. However, it is subjected to tax if your income was accrued in or derived from Malaysia, as a result of employment exercised in Malaysia, regardless of whether it is paid in Malaysia or outside Malaysia.
In addition, your overseas employment income will be subjected to income tax if your overseas employment is incidental to your Malaysia employment. That is, as part of your work here, you need to travel overseas.
Q8: Am I considered a tax resident in Malaysia if I travel for work outside Malaysia for more than half the year?
A8: Most likely you will be taxed as a resident in Malaysia since your travel is incidental to your Malaysia employment (assuming you are holding a valid work pass in Malaysia). That is, as part of your work here, you need to travel overseas. Generally, an individual is considered a Malaysia tax resident if in a calendar year, he is physically present in Malaysia for at least 183 days.
A9: Generally, the following types of dividends are exempt from taxation in Malaysia:-
- Dividends from Malaysia companies to its shareholders – with effect from 1 January 2014, all companies will be on the single-tier system and all dividends received will be exempted from tax in the hands of the shareholders.
- Foreign dividends received in Malaysia – foreign source income received by individual is exempted from Malaysia income tax
Q10: Is tax clearance required from IRB for a non-Malaysia citizen employee who is assigned to an overseas subsidiary within the group?
A10: It is the employer’s obligation to notify the IRB of the termination of employment of an employee who is leaving Malaysia for more than three months. The notification is via filing of Form CP21 at least 30 days before the expected date of departure or date of cessation (whichever is earlier) of the employee from Malaysia. A schedule of entries and departures from Malaysia and his/her original passport have to be submitted to the IRB for verification of his/her residence status together with the Form CP21.
In practice, upon receipt of the Form CP21, the IRB would issue a tax return to the employee to enable him/her to file his/her latest tax return before he/she leaves Malaysia. Upon submission of his/her latest year’s tax return, the IRB would issue a tax clearance letter to inform the employee of any outstanding taxes to be paid and have on records his date of departure. The employer is also required to withhold any money in its possession owing to an employee who has ceased employment or is about to cease employment until the earlier of 90 days after the IRB has received the Form CP21 or upon receipt of the tax clearance letter from the IRB.
Tax clearance is not required if the employee is away from Malaysia for training or business purposes (excluding overseas posting). Please refer Public Ruling No. 1/2011 on Taxation of Malaysian Employees Seconded Overseas
A11: As a general rule, all employees whether local or expatriate, are subjected to Pay-As-You-Earn (PAYE). It is mandatory for an employer to deduct tax on a monthly basis from the employee’s remuneration under the MTD scheme.
Q12: Would director’s fees declared to a non-resident director by a Malaysia incorporated company but not remitted to the director subject to withholding tax?
A12: No, Director’s fees are assessed in the year that a director received the payments. However, It is mandatory for an employer to deduct tax on the director fees during the month of payment for the director’s fees