Changes to Personal Tax in Malaysia Budget 2020 – More Benefits for Society
Malaysia Budget 2020 proposed a series of enhancements to the existing personal tax regime. Budget 2020 will do more to support the community with extension of tax exemption for women returning to work, increase the limit of tax relief for fees paid to childcare centres and kindergartens and expand the scope of income tax relief for medical expenses. The personal income tax rate will increase for those earning chargeable income of more than RM2 million per year by 2% to 30%. Meanwhile, personal income tax rate for non-residents will see a 2% increase to 30% and they will be taxed at the flat rate of 30%. Now let us have a closer look at the specific changes to Personal Income Tax in Malaysia Budget 2020.
Change of Income Tax Rates for Individual (Effective: Year of Assessment 2020)
The government will impose a higher tax rate on the wealthy. The income tax rate for a resident individual with chargeable income band more than RM2 million will see a 2% increase to 30%.
Expansion of the Scope of Income Tax Relief for Medical Expenses (Effective: Year of Assessment 2020)
The existing income tax relief on medical expenses for serious diseases in respect of self, spouse, and child is capped at RM6,000. Under Budget 2020, the scope of income tax relief on medical expenses will be expanded to cover medical cost incurred from fertility treatment.
Increase in the Limit of Tax Relief for Fees Paid to Childcare Centres and Kindergartens (Effective: Year of Assessment 2020)
Income tax relief for fees paid to childcare centres and kindergartens will be increased from the existing RM1,000 to RM 2,000.
Extension of Tax Exemption for Women Returning to Work (Effective: for Applications Received by Talentcorp From 1 January 2020 to 31 December 2023)
To encourage more women to return to the workforce, women who return to work after a career break will be entitled to income tax exemption on employment income for a maximum of 12 consecutive months. The current exemption is eligible as a claim in the Year of Assessment 2018 to 2020. Budget 2020 has proposed that the existing tax exemption be extended for a period of 4 years.
Tax Rebate for Departure Levy Imposed on Outbound Air Passengers Performing Umrah and Pilgrimage to Holy Places (Effective: Year of Assessment 2019)
Ever since the departure levy came into the picture, the departure levy for outbound air passengers performing Hajj is borne by Lembaga Tabung Haji. That said, the departure levy for performing umrah and pilgrimage to holy places are borne by the passengers.
The Malaysia Budget 2020 has proposed that the personal income tax rebate equivalent to the amount of levy paid be given, and could be claimed twice in a lifetime. The tax rebate reimbursement must be substantiated by proof of boarding pass and subject to either one of the following:
- Umrah visa, or
- Confirmation letter on pilgrimage to the holy place from a religious body recognised by the Committee for the Promotion of Inter Religious Understanding and Harmony Among Adherents, Department of National Unity and Integration, Prime Minister’s Department.
Enhancement of Tax Treatment for Donation for Charitable and Sports Activities and Projects of National Interest (Effective: Year of Assessment 2020)
Individuals who donate to charity will enjoy more tax savings as Budget 2020 proposed to increase the tax deduction from 7% to 10%. The scope of charitable donation has also been widened to include the following:
- cash wakaf contribution to state religious authority,
- public university approved by state religious authority to receive wakaf, and
- cash endowment contribution to public university.