Personal Income Tax
Rising Global Consultants
Personal income tax guide
The “Self-Assessment System” (SAS) for individuals (including employees and sole proprietors) and partnerships has been implemented since the 2004 tax year.
Personal income tax rates
Progressive tax rates apply to the taxable income of individual taxpayers. For resident individuals, the taxable income rates from the 2020 tax year are 0% (up to RM 5,000) to a maximum of 30% (for taxable income exceeding RM 2,000,000).
Personal Income Tax
Tax relief planning
Personal income tax planning
To determine whether you need to pay income tax in Malaysia, you must first establish your tax residency status (whether a person is a Malaysian tax resident depends on the number of days they reside in Malaysia. Generally, if a person resides in Malaysia for 182 days or more within the assessment year, they are considered a tax resident for that year) and the amount of taxable income, then apply the progressive tax rates. Key points of Malaysian personal income tax include:
- In the 2020 assessment year, resident taxpayers’ taxable income is taxed at progressive rates from 0% to 30%. Non-residents need to pay withholding tax on certain types of income, with other income taxed at 30%
- Residents and non-residents are only required to pay tax on income earned in Malaysia. Starting from January 1, 2004, foreign income remitted into Malaysia is exempt from income tax
- Tax rules depend on an individual’s tax residency status
- Income tax is calculated on a yearly basis, with the tax year, also known as the assessment year (YA), running from January 1 to December 31
Key dates related to submitting personal income tax returns:
- Employers must provide Form EA to employees no later than the last day of February of the following year.
- For non-business taxpayers (typically employees), the deadline for submitting Forms BE, BT, M, and MT is April 30 of the following year.
- For business taxpayers (such as sole proprietors), the deadline for submitting Form B is June 30 of the following year.
- For business taxpayers (such as sole proprietors), the deadline for submitting Form B is June 30 of the following year.
The Monthly Tax Deduction (MTD) system covers the withholding tax on employment income.
Employer's responsibilities
According to the Monthly Tax Deduction rules, the employer's responsibilities are as follows:
Deduct taxes from employees' salaries each month or in the relevant months based on the Monthly Tax Deduction rules or computerized calculation methods, and remit them to the Inland Revenue Board.
Deduct additional amounts from employees' salaries as specified under Section 4 of the Monthly Tax Deduction rules.
Pay the deducted taxes or those due for the previous month to the Inland Revenue Board by the 15th of each month or earlier.
Provide complete and accurate employee information in the declaration form (Form CP39/CP39A) when making Monthly Tax Deduction/additional deductions.
Retain all relevant documents related to deductions for 7 years after the deductions are made.
Inform each employee of the following responsibilities:
Submit Form TP3 to inform the employer of details regarding previous employers for the current year.
Submit Form TP1 to the employer if the employee wishes to apply for deductions and refunds for the relevant months. Deductions and refunds will be processed with the employer's approval.
Submit Form TP2 if the employee wishes to include benefits-in-kind (BIK) and the value of accommodation (VOLA) as part of their monthly salary to determine the Monthly Tax Deduction amount, and seek approval from the employer.
Retain all receipts related to the tax deduction application for 7 years after the assessment year.
Provide complete and accurate personal information and notify the employer of any changes.
Provide correct information related to their tax obligations in the prescribed format; failure to do so constitutes an offense.
Form CP22
New Employee Arrival Notification – Employers must notify the Inland Revenue Board (IRB) of a new employee's arrival using Form CP22 within one month of the employee's start date.
Form CP21
Leaving Malaysia for More Than 3 Months – Employers must notify the IRB using Form CP21 if an employee (often a foreign national) will be leaving Malaysia for more than 3 months. After the IRB receives Form CP21, the employer must withhold tax from any amounts owed to the employee until either 90 days have passed or the employee receives a tax clearance letter (whichever is earlier). Once the employee receives the tax clearance letter listing any outstanding tax (if applicable), the employer can then release the previously withheld amounts.
Form CP 22A
Termination of Employment – Employers must notify the IRB of an employee's termination using Form CP22A at least 30 days before the termination date, unless the employee must pay Monthly Tax Deduction (MTD) and the tax has already been deducted by the employer, or if the employee's income is below the MTD minimum amount and the employer is aware that the employee will be working elsewhere in Malaysia.
Form E
Employers must provide employees with Form E, listing the employee’s income, before March 31 of the following year.
Form EA
Employers must provide employees with the salary statement (Form EA) by the last day of February of the following year, allowing employees to file their personal income tax returns. Form EA does not need to be submitted to the IRB.
Employees/sole proprietors/self-employed individuals' responsibilities:
Electronic Tax Filing:
You can submit your tax return online through the ezHASiL electronic tax filing system. The electronic tax filing system is convenient, fast, and accurate, automatically calculating the tax amount due after you enter your income, deductions, reliefs, and refunds.
You can also submit your tax return online using a smartphone or tablet. Generally, the Inland Revenue Board extends the electronic tax filing deadline by two weeks to encourage more people to file online. To ensure you submit your tax return before the deadline, please check the current assessment year’s tax filing deadline on the Inland Revenue Board's official website at www.hasil.gov.my.
If the Inland Revenue Board does not process your refund within 90 days after the electronic filing deadline or within 120 days after the manual filing deadline, interest must be paid to the taxpayer.
Please refer to the ezHASiL unified interface user manual.
If you have not registered your tax file, you can register at the nearest Inland Revenue Board branch or register online through e-Daftar. Click here for details on individual tax registration.
Using Paper Tax Returns:
If you previously filed using paper tax returns, you should receive a tax return form mailed to you by the Inland Revenue Board two months before the submission deadline.
If you have not received the paper tax return form, you can request the form at any Inland Revenue Board branch or print the form from the Inland Revenue Board's website.
Only the Malay version of the form can be used for tax filing, and it must meet the printing requirements specified by the Inland Revenue Board.
Form BE
Residents without business operations
Form BT
Residents (knowledge workers/experts)
Form B
Residents with business operations
Form M
Non-resident individuals (with business income)
Form MT
Non-resident individuals (knowledge workers/expert with business income)
Form P
Partnerships
Partnerships Responsibilities
Form P
Although partnerships are not required to pay taxes, they must still submit the annual income tax return (Form P) to report the income earned and business expenses incurred during the year. Partnerships can submit Form P either through paper filing or electronic filing. The deadline for submitting Form P is June 30.
Form CP30
The principal partner must be responsible for completing Form P and providing each partner with Form CP30 (Partnership Income Distribution) so they can declare their partnership income within the stipulated deadline (June 30 for individuals and 7 months after the end of the financial year for companies).
Common Questions about Personal Income Tax
What are the personal income tax rates in Malaysia?
Generally, starting from the 2020 assessment year, resident individuals‘ income is taxed at a progressive rate of 0% to 30%. Non-residents need to pay withholding tax on certain types of income, with other income taxed at 30% without personal deductions. A detailed chart of progressive tax rates for residents and non-residents is provided
Starting from the 2010 assessment year, knowledge workers residing in specific areas (Iskandar Malaysia) and working with entities involved in designated activities (e.g., green technology, biotechnology, educational services, medical services, creative industries, financial consulting, consulting services, logistics services, and tourism) will have their taxable income taxed at a rate of 15% (applicable to knowledge workers who applied and were employed in Iskandar Malaysia from October 24, 2009, to December 31, 2020). However, knowledge workers must obtain approval from the Ministry of Finance to enjoy the 15% rate
Starting from the 2012 assessment year, employment income of individuals approved under the Talent Corporation Malaysia’s Talent Reinvestment Program will be taxed at a rate of 15%. According to the Talent Corporation Malaysia’s website, approved individuals can choose to be taxed at rates other than 15%, with a duration of 5 years
How to determine an individual's tax residency status in Malaysia?
Whether a person is a tax resident in Malaysia depends on their number of days of stay in Malaysia. Generally, if a person stays in Malaysia for 182 days or more in a calendar year, they are considered a tax resident for that tax year
Under any of the following circumstances, a person may also qualify as a tax resident for a specific assessment year:
- If a person stays in Malaysia for less than 182 days in the base year, but the period is connected to another continuous period of 182 days or more in Malaysia during the adjacent year (hereinafter referred to as the relevant period), they may qualify as a tax resident. If the person temporarily leaves Malaysia for reasons related to service matters, attending meetings or seminars, studying abroad related to services in Malaysia, health issues of themselves or any direct relatives, or social visits not exceeding 14 days, but was in Malaysia before and after the trip, the days spent abroad are also considered part of the relevant period or the period in question (as applicable)
- If a person stays in Malaysia for 90 days or more in the base year and has stayed in Malaysia for at least 90 days in 3 out of the preceding 4 years
- If a person has resided in Malaysia continuously for 3 years and will continue to reside in the following year, they will be considered a tax resident for that year
If I work outside Malaysia for more than six months, will I be considered a tax resident of Malaysia?
If working abroad is a condition of your employment in Malaysia (assuming you hold a valid Malaysian work permit), meaning that overseas assignments are part of your job, you may be considered a Malaysian resident and subject to tax. Generally, if a person resides in Malaysia for at least 183 days within a calendar year, they are considered a tax resident of Malaysia
When a non-Malaysian employee is seconded to a foreign subsidiary of the group, is it necessary to apply for a tax clearance letter from the Inland Revenue Board (IRB)?
Employers are obligated to notify the Inland Revenue Board (IRB) if an employee will be leaving Malaysia for more than 3 months. This must be done by submitting Form CP21 along with the employee’s entry and exit records and passport to the IRB at least 30 days before the employee’s expected departure date or resignation date, whichever is earlier, so that the authorities can verify the employee’s residency status
Upon receiving Form CP21, the IRB will issue a tax return to the employee to ensure that the most recent year’s tax return is submitted before leaving Malaysia. After the employee submits the tax return, the IRB will issue a tax clearance letter, detailing any outstanding tax and the departure date. Employers must withhold tax from the employee’s payments within 90 days of receiving Form CP21 or before the employee receives the tax clearance letter
If the employee is leaving Malaysia for training or business purposes (excluding employment abroad), a tax clearance letter is not required. For details on the taxation of Malaysian employees seconded abroad, refer to Public Ruling No. 1/2011
In Malaysia, who is responsible for declaring personal income tax?
All taxable residents are required to submit a personal income tax return. Generally, individuals are obligated to file if their monthly net income (after deducting Employees Provident Fund) is RM3,141 or more, or if married individuals with a non-working spouse have a monthly net income of RM4,001 or more.
Non-residents who work in Malaysia for more than 60 days are also responsible for submitting a personal income tax return. Additionally, if non-residents work in Malaysia for more than 60 days in overlapping periods or in overlapping periods with one or more periods exceeding 60 days, they must file a return.
The 60-day rule does not apply if you are a company director, a public performer, or engaged in a profession in Malaysia.
As a company director in Malaysia, will the tax rate be different?
In Malaysia, residents and non-residents directors are subject to the general tax rules, but some tax exemptions do not apply to directors of controlled companies (companies with no more than 50 members and controlled by no more than 5 people as described in Section 139)
Generally, company directors have two options for receiving employment income: director’s salary (subject to Employees Provident Fund) or director’s fees (not subject to Employees Provident Fund). Note that director’s fees are typically only paid upon approval at the company’s annual general meeting and are taxed in the assessment year in which the payment is received
I received tangible benefits from the company, will this affect my taxes?
Yes, it is subject to personal income tax, but many benefits are taxed at a lower rate: Public Ruling No. 3/2013 on tangible benefits
Will Malaysia tax income received by employees from abroad?
Income received from abroad by individuals is not subject to income tax in Malaysia. However, if your income is earned or accrued in Malaysia, it needs to be taxed regardless of whether it is paid within or outside Malaysia or at the location of the employer.
Additionally, if working abroad is a condition of your employment in Malaysia, meaning that overseas assignments are part of your job, your foreign employment income will be subject to income tax.
Do I need to pay tax on dividend income paid to me by a Malaysian company?
The following types of dividends are exempt from tax in Malaysia:
- Dividends paid by Malaysian companies to shareholders—starting from January 1, 2014, all companies operate under a single-tier system, and all dividends received by shareholders are tax-exempt
- Foreign dividends received in Malaysia—income received from abroad by individuals is not subject to income tax in Malaysia
Is income paid to directors subject to withholding tax?
According to general rules, all employees (whether local or foreign) must comply with the income tax withholding regulations (PAYE). Under the monthly tax deduction (MTD) system, employers must deduct taxes from employees’ salaries each month.
Can a Malaysian-registered company pay director's fees to non-resident directors without withholding tax?
No, director’s fees must be assessed in the year they are received by the director, but the employer must withhold tax at the time of payment.
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