Malaysia

Global Employer Services

Malaysia personal tax brief

Introduction
An individual who is exercising employment in Malaysia
will have a Malaysian tax filing obligation notwithstanding
his residence status in Malaysia. He will be liable to
Malaysian income tax unless he is exempted under
domestic laws or treaty.
The assessment of income tax on an individual is based on the individuals tax residence status and the
threshold of his chargeable income. The date of commencement and cessation of an assignment may also
have an impact on the residence status and thereby on the computation of the tax liability of an individual.

Self assessment
Basis of taxation
Malaysia adopts a territorial scope of taxation, where any income sourced from Malaysia is subject to
Malaysian income tax. The place where the remuneration is paid or the place where the employment contract
is signed is not relevant. Foreign sourced income is exempted from tax in Malaysia.
Taxable income
Employment income which is subjected to tax in Malaysia includes any wages, salary, remuneration, leave
pay, fee, commission, bonus, gratuity, perquisite or allowance (whether money or otherwise) in respect of
having or exercising the employment. Apart from cash payouts, any benefits, amenities or living
accommodation provided for the employee, contribution from an unapproved pension or provident fund,
scheme or society, and any amount received as compensation for loss of employment is also subjected to
Malaysian tax.
The exercise of share options or vesting of shares whilst on Malaysian assignment even though the award was
received prior to the Malaysia assignment can also have an impact on taxation in Malaysia. Further discussion
should be made with the tax consultants to deliberate on the factors on the tax implication.
Where an individual derives personal income from Malaysia such as rental income and dividend income (other
than single tiered dividends), these will be subject to Malaysia tax.

Tax return and compliance

The Malaysian tax year is on a calendar year basis, i.e. Year of Assessment (YA) 2016 will relate to an individuals
income for the calendar year 2016.
The due date for the submission of the tax return to the Malaysian Inland Revenue Board (MIRB) for individual
with employment income and individuals with business sourced income is 30th April and 30th June respectively
of the following year. Any balance of tax payable is to be settled by the same date. Therefore, the submission
of, for example, YA 2016 tax return and settlement of tax liability must be made no later than 30th April 2017
(employment income) or 30 th June 2017 (business sourced income).

Tax residence status

The tax residence status of an individual is determined by purely a quantitative test (i.e. the number of days an
individual is physically present in Malaysia in the calendar year for a year of assessment).
Generally, an individual will qualify as a tax resident in Malaysia if the individual is physically present in
Malaysia in a calendar year for a period or periods amounting to 182 days or more. There are also other
circumstances regulated under the Malaysian Income Tax Act, 1967 (the Act) in which the individual may
qualify for tax residence, even if the individual is physically present in Malaysia for less than 182 days in a
calendar year. Please refer to Appendix A.
In the event that the individual does not qualify as a tax resident, the individual will be treated as a non-tax
resident for Malaysian income tax purposes.

Self assessment
The tax residence status of an individual does not eliminate the obligation to file a Malaysian tax return.
Rather, the difference in tax residence status would accord different tax rates and the eligibility of an individual
to claim personal reliefs.
Resident
Resident individuals are taxed at progressive rates, ranging from 0% to 28% with effect from YA 2016 with
entitlement to claim for personal reliefs. Please refer to Appendix B for information on the tax rates and Appendix
C for the types of personal reliefs available.
Non resident
Non-resident individuals are taxed at a flat rate of 28% with effect from YA 2016 without any claims for personal
reliefs.

Employee Provident Fund (EPF)

EPF is the Malaysian provident fund scheme. EPF contributions are mandatory for all Malaysian citizens and
permanent resident working in Malaysia. Expatriate individuals are not required to contribute to EPF but may do so
on a voluntary basis.

Related links
Malaysian Inland Revenue Board (www.hasil.gov.my)
Employee Provident Fund (www.kwsp.gov.my)

People to contact
If you have any questions concerning to the above, please contact one of the tax professionals at our Deloitte
office in Malaysia as follows:
Ang Weina
angweina@deloitte.com
Tel: +603 7610 8841
Michelle Lai
michlai@deloitte.com
Tel: +603 7610 8846

Lee Lai Kuen

lailee@deloitte.com
Tel: +603 7610 8881

Melissa Vong
mvong@deloitte.com
Tel: +603 7610 8155

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Malaysia
Global Employer Services
APPENDIX A

Tax residence status in Malaysia

Tax residence: individuals
An extract of Section 7 of The Malaysian Income Tax Act, 1967 [the Act].

(1)

For the purposes of this Act, an individual is resident in Malaysia for the basis year for a particular
year of assessment if
(a)

he is in Malaysia in that basis year for a period or periods amounting in all to one
hundred and eighty-two days or more;

(b)

he is in Malaysia in that basis year for a period of less than one hundred and eighty-two days
and that period is linked by or to another period of one hundred and eighty-two or more
consecutive days (hereinafter referred to in this paragraph as such period) throughout which
he is in Malaysia in the basis year for the year of assessment immediately preceding that
particular year of assessment or in that basis year for the year of assessment immediately
following that particular year of assessment:
Provided that any temporary absence from Malaysia (i)

connected with his service in Malaysia and owing to service matters or attending conferences
or seminars or study abroad;

(ii) owing to ill-health involving himself or a member of his immediate family; and
(iii) in respect of social visits not exceeding fourteen days in the aggregate,

shall be taken to form part of such period or that period, as the case may be, if he is in
Malaysia immediately prior to and after that temporary absence;

(c)

he is in Malaysia in that basis year for a period or periods amounting in all to ninety days or
more, having been with respect to each of any three of the basis years for the four years of
assessment immediately preceding that particular year of assessment either
(i)

resident in Malaysia within the meaning of this Act for the basis year in question; or

(ii) in Malaysia for a period or periods amounting in all to ninety days or more in the basis
year in question; or

(d)

he is resident in Malaysia within the meaning of this Act for the basis year for the year of
assessment following that particular year of assessment, having been so resident for each of
the basis years for the three years of assessment immediately preceding that particular year
of assessment.

(1A) For the purposes of subsection (1), an individual shall be deemed to be in Malaysia for a day if he is
present in Malaysia for part or parts of that day and in ascertaining the period for which he is in
Malaysia during any year, any day (within paragraphs (a) and (c) of subsection (1)) for which he is in
Malaysia shall be taken into account whether or not that day forms part of a continuous period of days
during which he is in Malaysia.

(1B)

Notwithstanding subsection (1), where a person who is a citizen and

(a) is employed in the public services or service of a statutory authority; and

(b) is not in Malaysia at any day in the basis year for that particular year of assessment by reason of
(i)

having and exercising his employment outside Malaysia; or

(ii)

attending any course of study in any institution or professional body outside Malaysia which
is fully-sponsored by the employer,

he is deemed to be a resident for the basis year for that particular year of assessment and for
any subsequent basis years when he is not in Malaysia.

Illustrations of tax residence status

(a)

Section 7(1)(a) of the Act

An individual must be physically present in that calendar year, amounting to a minimum of 182 days.
The 182 days can be made up of one period or multiple periods during that particular calendar year.

In the following illustrations, the individual is a tax resident in Malaysia:-

(i) Single period

Year 2016

Jan 1

182 days

Dec 31

(ii) Multiple periods

Year 2016

Jan 1

b
a + b + c 182 days

= Present in Malaysia

Dec 31

(b)

Section 7(1)(b) of the Act

There are two circumstances where an individual can be regarded as tax resident under this section.
(i)

The individual is in Malaysia for less than 182 days and that period is linked by a period of 182
days or more consecutive days; or
(ii) The individual is in Malaysia for less than 182 days and that period is linked to a period of 182
days
or more consecutive days.
An illustration of linked by a period of 182 or more consecutive days is given below:Residence status in
question

182 days

Jan 1

Jan 1

Year 2015

Year 2016

An illustration of linked to a period of 182 or more consecutive days is given below:-

Residence status in
question

Jan 1

Dec 31
Year 2016

182 days
Year 2017

= Present in Malaysia
Temporary absence from Malaysia:(i)

connected with the employees service in Malaysia and owing to service matters or
attending conference or seminars or study abroad;

(ii) owing to ill-health involving himself or a member of his immediate family;

(iii) in respect of social visits not exceeding 14 days in the aggregate.

shall be taken to form part of the period of 182 or more consecutive days. In addition, for the
periods to be linked by, the individual does not need to be in Malaysia on 31 st December of that
year and 1st January of the following year if he is in Malaysia immediately prior to and after that
temporary absence. The said absences (i.e. 31 st December and 1st January) will be taken to be
part of the temporary absences.

(c)

Section 7(1)(c) of the Act

To qualify as a resident for a year of assessment under Section 7(1)(c),

(i)

the individual must be in Malaysia for a period or periods of 90 days or more in the year
of assessment; and
(ii) in 3 out of 4 immediately preceding basis years he is either:
a resident; or

in Malaysia for a period or periods of 90 days or more.

A simple illustration for this section is as follows:90 days period(s) and

3 out of 4 immediately
preceding years
(i) Resident

(ii) 90 days period(s)

OR

For example, the individual below is resident for year 2016.

Resident

2012

2013

2014

2015
x

2016
90 days

x = Resident or in Malaysia for a period/periods of 90 days or more

(d)

Section 7(1)(d) of the Act

For an individual to qualify as a resident under this section, he must be a resident in,
(i)

the following year; and

(ii) 3 immediately preceding years.

In the illustration below, the individual is resident for year 2016.

Resident

2013

2014

2015

R = Resident

2016

2017
R

Malaysia
Global Employer Services
APPENDIX B

Tax rates in Malaysia

Tax rates: individuals

Tax
Payable
RM

NON-TAX
RESIDENT
Tax
Payable
28% *

TAX RESIDENT
Chargeable Income

Tax Rate

RM
0 5,000
5,001 20,000
20,001 35,000
35,001 50,000
50,001 70,000
70,001 100,000
100,001 250,000
250,001 400,000
400,001 600,000

600,001 1,000,000

Exceeding 1,000,000

First

2,500

700

Next

2,500

700

First

5,000

1,400

Next

15,000

150

4,200

First

20,000

150

5,600

Next

15,000

750

4,200

First

35,000

900

9,800

Next

15,000

1,500

4,200

First

50,000

2,400

14,000

Next

20,000

3,200

5,600

First

70,000

5,600

19,600

Next

30,000

6,300

8,400

First

100,000

11,900

28,000

Next

150,000

36,000

42,000

First

250,000

47,900

70,000

Next

150,000

36,750

42,000

First

400,000

84,650

112,000

Next

200,000

50,000

56,000

First

600,000

134,650

168,000

Next

400,000

104,000

112,000

First

1,000,000

238,650

280,000

Next

10

16

21

24

24.5

25
26

28

*For YA 2015, the highest marginal tax rate for resident and non-resident individuals is 25%.
**For YA 2016 onwards, the highest marginal tax rate for resident and non-resident individuals is 28%. In addition, the tax rate for
resident is increased by 1 % for chargeable income from RM 600,001 to RM 1,000,000 and 3 % for chargeable income exceeding
RM 1,000,000.

Malaysia
Global Employer Services
APPENDIX C

Personal reliefs and deductions in Malaysia

Deductions / claims: individuals
The following reliefs are available to tax resident individual only:-

No.

Type of Reliefs

Maximum
Deduction
(RM)*

1.

Taxpayer (Self)

9,000

2.

Spouse relief (wife / husband who has no source of income or elects for combined
assessment)

4,000

- Claim for spouses disability

3,500

Additional

Children (claimed by either husband or wife)

3.

Per child (below 18 years old)

2,000

Disabled child (unmarried)

6,000

Per child (above 18 years old)

- Per child (above 18 years old)

4.

5.

2,000 or

- Studying in local / overseas universities, colleges or similar establishments

8,0001

- Disabled child pursuing tertiary education

6,0001

Additional

Medical expenses for parents paid to medical practitioner (doctor) registered with the
Malaysian Medical Council (MMC). The relief is only claimable where the parents are tax
resident in Malaysia
Medical expenses for self / wife / children with serious illness paid to medical practitioner
(doctor) registered with the MMC. This is extended to include expenses for a complete
medical examination for the taxpayer, spouse and children not exceeding RM 500 p.a.

5,000

6,000

6.

Claim for personal disability

6,000

7.

Expenses for purchase of supporting equipment for own use, or used by wife, child and
parent, who is disabled

6,000

8.

Life insurance premiums or contributions to approved provident funds / private pensions

funds

6,0002

9.

Private Retirement Scheme / Annuity Premium

3,0003

10.

Insurance premiums for education or medical benefits

3,000

Unmarried child above the age 18 years, who is studying at tertiary level with a recognized local institution of higher learning at diploma level or above;
or a recognized institution of higher learning abroad at degree level and above, would be eligible for relief of RM 8,000. The entitlement of the child relief
is subject to the course and educational establishment being recognized by the Government of Malaysia (https://app.mohe.gov.my/iktiraf/).
2

With effect from the year of assessment 2012, tax relief on deferred annuity premium is combined with the relief for contribution to approved private
retirement scheme. The relief of RM6,000 will only be applicable to contributions made for life insurance premium and/or scheme approved by the
Malaysian Inland Revenue Board (MIRB).
3

With effect from the year of assessment 2012, relief of RM3,000 is given to contributions made by individuals to approved Private Retirement Scheme
and/or deferred annuity. This is applicable from the year of assessment 2012 to year of assessment 2021.

Deductions / claims: individuals (contd)

11.

Fees expended to all fields of studies at post graduate level in a recognized institution or
professional body in Malaysia by the Government or approved by the Minister of
Finance (i.e. masters and doctorate level)
Qualifying fields of studies also include: law, accounting, Islamic financing technical,
vocational, industrial, scientific or technological skills or qualification

7,000

12.

Purchase of books, journals, magazines and other similar publications for the purpose of
enhancing knowledge or for the use of taxpayer, spouse or child (does not include
newspaper)

1,000

13.

Purchase of a personal computer (complete set) for non-business purposes (personal

computer includes laptop and desktop but does not include tablet, palmtop, Personal
Digital Assistant (PDA) and its equivalent) (given once in every 3 years)

3,000

14.

Deposits made by an individual in respect of his child in Skim Simpanan Pendidikan

Nasional account established under the Perbadanan Tabung Pendidikan Tinggi
Nasional Act 1997. Balance brought forward is not taken into account. Any withdrawal
made during the year will reduce the relief claimable

6,0004

15.

Purchase of sports equipment (does not include attire and shoes)

16.

Housing loan interest (maximum relief is RM10,000)

17.

Parental care (subject to certain conditions)

18.

Contributions to social security protection scheme (SOCSO) (maximum relief is RM250)

19.

The relief is provided to resident taxpayers earning up to RM8,000 a month (aggregate

income of up to RM96,000 per annum). This is applicable to YA2015

300
10,0005
1,5006
2507
2,000

* Amount of maximum deduction given for each relief against the total income.

Effective YA 2012 to YA 2017.

A tax deduction of up to RM10,000 per year on housing loan interest for a house purchased from a developer or third party will be given for 3
consecutive years from the first year the housing loan interest is paid) subject to the following conditions:
(i) The taxpayer is a Malaysian citizen and a resident;
(ii) Limited to one residential house including flat, apartment or condominium;
(iii) The sale and purchase agreement is executed between 10 March 2009 and 31 December 2010; and
(iv) The taxpayer has not derived any income in respect of that residential property
6

Effective YA 2016 to YA 2020, a tax deduction of up to RM1,500 per year on parental care expenses is given for a father and a mother respectively
subject to the following conditions:
(i) The taxpayer does not claim the relief for expenses incurred on medical treatment and care of parents;
(ii) Parents are the legitimate natural parents and foster parents in accordance to the respective law subject to a maximum of 2 persons;
(iii)Parents are aged 60 years and above;
(iv)Parents are resident in Malaysia in the current year of assessment; and
(v) Parents have annual income not exceeding RM24,000 per annum for each parent.
This relief can be shared with other siblings provided that the total relief claimed shall not exceed RM 1,500 for each parent
7

A tax deduction of up to RM250 per year on contribution made to SOCSO.

Donations / gifts / contributions: individuals

No.

Type of Deductions

Maximum
Deduction
(RM)

1.

Gift of money to Government, State Government or Local Authorities or approved

institutions or organisations

2.

Gift of money or contribution in kind for any approved sports activity or sports body

3.

Gift of money or contribution in kind for any project of national interest approved by the
Minister of Finance

4.

Gift of artifacts, manuscripts or paintings to the Government / State Government

5.

Gift of money for the provision of library facilities or to libraries

6.

Gift of money or contribution in kind for the provision of facilities in public places for the
benefit of disabled persons

Refer to
Note 2

7.

Gift of money or medicine equipment to any healthcare facility approved by the Ministry
of Health

20,000

8.

Gift of paintings to the National Art Gallery or any State Art Gallery

Restricted
to 7%
of the
aggregate
income
Refer to
Note 1
20,000

Refer to
Note 3

Note 1: An amount equal to the value of the gift as determined by the Department of Museums Malaysia or the
National Archives
Note 2: An amount equal to any gift of money contribution in kind (its value to be determined by the relevant local
authority) for the provision of facilities in public places for the benefit of disabled persons
Note 3: An amount equal to any gift of painting to the National Art Gallery or any state gallery

Tax rebates
No.

Type of Deductions

Maximum
Deduction
(RM)

1.

Given to taxpayer (self) with chargeable income not exceeding RM 35,000

400

2.

Additional rebate for spouse whose chargeable income does not exceed RM 35,000 and
where taxpayer elects for joint assessment

400

3.

Zakat / Fitrah / other Islamic dues which is obligatory and paid to appropriate religious
authority established under any written law in Malaysia (e.g. Pusat Pungutan Zakat,
Majlis Ugama Islam Negeri)

Amount
paid in the
basis year

Tax exempted allowances, benefits-in-kind and perquisites received from employers

(effective YA 2008)

Travel allowance exemption of up to RM 6,000 for official travel duties8

Medical benefits extended to include expenses on traditional medicine such as acupuncture, maternity
and ayurvedic treatment

Interest subsidies by employer on housing, motor vehicles and education loans not exceeding RM
300,000

Mobile phones, telephones, PDAs, pagers provided by the employer and bills registered in the employer
or employees name

Staff discounts of up to RM 1,000 a year on company traded goods

Staff discounts on services rendered by the company

Childcare allowance of up to RM 2,400 per year

Parking fees / allowances

Meal allowance

Service excellence awards, innovation awards or productivity awards, past achievement awards, long
service awards (for more than 10 years of employment) not exceeding RM 2,000 a year

*updated in February 2016

Further reduction can be made if official travel expenses exceed RM6,000 provided that the claims can be substantiated.