Malaysia Personal Income Tax Guide

For taxpayers who are not salaried, the tax authority will issue Form CP500, listing the estimated tax payable (ETP) in installments. The payable tax is determined by the tax authority based on the previous year’s assessment. Taxpayers must make payments in installments every two months, starting from March, for a total of 6 installments, according to the tax authority’s instructions. Each installment payment and the remittance slip (Form CP501) must be paid to the tax authority within 30 days after the due date. For salaried individuals, income tax will continue to be deducted through Monthly Tax Deduction (MTD)

Under the installment payment plan, individuals can apply for changes to their installment payments by submitting Form CP502 before June 30 of the relevant year. If the application is successful, the tax authority will issue a revised installment payment notice (Form CP503) outlining the updated installments. If the revised estimated amount exceeds the installments paid so far, the difference should be paid in the remaining months of the installment plan. Additionally, if the revised estimated tax amount is less than RM 300, individuals are allowed to stop further payments from the date of submitting Form CP502

Individual:

(i) Have taxable income in a particular assessment year; 

(ii) No taxable income in the assessment year, but:

• Have taxable income in the assessment year prior to the current one; or
• Have submitted the previous year’s return; or
• Have been required to submit the previous year’s return (but have not done so)

Must submit the tax return to the Director of the Inland Revenue Board by April 30 of the following year, unless the taxpayer has no taxable income and has obtained an exemption from the Director

For individuals running a business (such as sole proprietors, partnerships, clubs, associations, and Hindu joint families), the tax return deadline is June 30 of the following year

The “Self-Assessment System” (SAS) does not require submitting any supporting documents to the Inland Revenue Board, but these documents should be kept for tax audits. Taxpayers must also indicate whether they have complied with the decisions issued by the tax authority

Individuals and their spouses must each submit a separate income tax return, regardless of whether the return is submitted individually or on a combined assessment basis. The tax return submitted by the taxpayer is considered a notice of estimated tax, and it is issued on the day it is submitted to the tax authority. If there is any outstanding tax after installment payments and salary deductions (if applicable), it must be paid to the tax authority by April 30/June 30 of the following year

The tax rate brackets apply to the taxable income of individual taxpayers. For resident individuals, the taxable income ranges from 0% (for the first RM5,000) to a maximum of 30% (for taxable income exceeding RM2,000,000), effective from the 2020 assessment year.

Non-resident individuals are taxed at a fixed rate of 30%, effective from the 2020 assessment year. Other tax rates apply to specific types of income, such as interest or royalty income.

An individual’s tax residency status depends on their physical presence in Malaysia. Generally, if a person stays in Malaysia for 182 days or more in the assessment year,

they are considered a tax resident for that year

• If a person spends fewer than 182 days in Malaysia during the assessment year, but the period is linked to another 182-day period in the adjacent year (when the person is in Malaysia), and if they temporarily leave Malaysia for work-related meetings, seminars, or overseas study (related to their work in Malaysia), or to visit close relatives for illness (totaling no more than 14 days), the time spent in Malaysia before and after the departure can be considered part of the aforementioned period, depending on the circumstances
• He has stayed in Malaysia for more than 90 days, and has been a tax resident or resident for at least 90 days in 3 out of the 4 years, including the current year
• If he/she will be residing in Malaysia for the following year and has resided in Malaysia in the three years preceding the assessment year, then that person is considered a tax resident

If a non-resident employee works in Malaysia for no more than 60 days in an assessment year or across two overlapping years, the income earned from that work will be exempt from tax. However, if there is an overlap, the 60-day period will be applied consecutively across the two years.

• Salary, wages, bonuses, director’s fees, commissions, allowances, penalties, rewards, tips, overtime pay, remuneration, employee stock options, employer-paid taxes, and other items paid in cash or cash-equivalent
• Employer-provided benefits in kind (such as cars, phones, drivers, domestic helpers, etc.)
• Value of accommodation provided by the employer
• Unapproved retirement benefits paid by the employer to the employee
• Unemployment compensation

Perquisites are cash or non-cash benefits converted into money, received from an employer or third party due to employment

The above exemptions do not apply to employees who have control over the employer

If an employee has control over their employer, any allowances, benefits, gifts, or perks they receive will be considered part of their employment income and are subject to taxation

“Control over the employer” means:

（a）As far as the company is concerned, employees have the right, by holding shares or possessing voting rights in the company or any other company related to it, or by virtue of powers granted by the company’s articles of association or other documents governing the company or any other company, that the affairs of the initially mentioned company are conducted in accordance with the employees’ wishes

（b）For a partnership, employees are partners of the employer; or

（c）For a sole proprietorship, the employee and the employer are the same person