Malaysia’s Personal Income Tax

The tax year in Malaysia runs in accordance with the calendar year and a current year basis of assessment is applied, from which the calendar year begins 1 January and ends on 31 December.

Income tax is imposed on a territorial basis. In other words, an individual, whether tax resident or non-resident in Malaysia will be taxed on any income derived from Malaysia.

 

General Tax Guide

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

  1. Resident in Malaysia for at least 182 days of the tax year;
  2. 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. 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; or
  4. Resident in Malaysia in the year following and has been resident in Malaysia in the three years preceding the one being taxed.

 

Responsibilities of Individual

Malaysia’s personal income tax system operates under the self-assessment tax system (SAS). It is the individual’s legal responsibility to compute tax liability to file his or her tax return before the stipulated deadline.

Registering yourself as a taxpayer is rather straightforward. It could be done either online, or at a branch of the Malaysian Inland Revenue Board (IRBM).

Be sure to prepare the following documents for registration:

  1. A copy of the latest payroll;
  2. A copy of the Identification Card or Passport; and
  3. A copy of the marriage certificate (if applicable).

 

Malaysia Personal Income Tax Rate

Malaysia adopts a progressive income tax rate system, meaning that taxpayers pay a higher rate on amounts above different thresholds. The income tax rates are calculated on Chargeable Income, that is the amount after deducting tax exemptions and tax reliefs.

The tax rate is structured in a way that the more you earn, the higher the percentage of tax you will pay. That higher percentage is applicable to the amount higher than the income threshold. However, tax payers will never end up with less net income after tax, even if they earn more.

 

 

Tax Planning for Individual Income Tax in Malaysia

Understanding how effective tax planning works can have a significant impact your financial position. Every individual who are liable to pay tax requires professional advice if they are looking to optimise their tax position, while ensuring that they comply to all legal requirements. It is best to review your tax plan at least annually to scope for possible new approaches that can best meet your financial goals and to preserve your wealth.

 

Personal Tax Reliefs in Malaysia

Every Ringgit saved on income tax basically means more income at your disposal. Hence, it is important for tax payers to be familiar with the different tax relief made available to them, so that the would be able to take full advantage of these tax-saving opportunities. Here’s a list of tax exemptions for the year assessment of 2017 for your calculation – Personal Tax Reliefs in Malaysia.

http://www.hasil.gov.my/bt_goindex.php?bt_kump=5&bt_skum=1&bt_posi=3&bt_unit=1&bt_sequ=1&bt_lgv=