People who reside here are subjected to paying taxes on all income sourced locally. A taxpayer is considered a resident if such a person is bodily present in the country for 182 days or more during the calendar year. Alternatively, for a minimum of 90 days and have been living in Malaysia for at least three months in any three of the four preceding years. When determining residency, a temporary presence is counted as a whole day. Interested in learning about foreign taxes, here is a guide on the tax system and exemptions to note.
Types of Taxes
There are several kinds of tax that applies to residents and non-residents living within the state. They include personal income tax, corporate income tax, withholding tax, etc. each tax has its specific rates.
Personal Income tax
The total income paid by an employer including wages, salary, remuneration, leave pay, fees, commissions, bonuses, gratuities, allowance, etc. is charged for taxes. A person working in the country has to pay taxes on money earned, irrespective of where the work contract is authorized or payment is made.
| Taxable income band MYR | Tax rate |
| 0 to 5,000 | 0% |
| 5,001 to 20,000 | 1% |
| 20,001 to 35,000 | 3% |
| 35,001 to 50,000 | 8% |
| 50,001 to 70,000 | 14% |
| 70,001 to 100,000 | 21% |
| 100,001 to 250,000 | 24% |
| 250,001 to 400,000 | 24.5% |
| 400,001 to 600,000 | 25% |
| 600,001 to 1,000.000 | 26% |
| 1,000,001 to 2,000,000 | 28% |
| 2,000,001+ | 30% |
Corporate Income tax
Revenues obtained from a legal business source are subjected to tax a tax rate. A business in this sense includes a profession, a vocation, or a trade, as well as any associated manufacture, or venture. All revenues accrued in the nation from self-employment or business are levied.
Withholding tax
Non-residents pay withholding taxes on specific kinds of income. They do not pay the same taxes as locals. Contractors who are non-residents have to pay a withholding tax of 13% for all contract payments; 10 percent for the non-resident contractor and 3% for the contractor’s employees. When a non-resident public entertainer earns money within the state, he or she pays a final withholding tax at a 15% tax rate.
| Types of income | Rate |
| use of movable property | 10% |
| technical advice, assistance, or services | 10% |
| Installation services for the delivery of machinery, equipment, and similar assets | 10% |
| Personal services relating to the utilization of intangible assets | 10% |
| Royalties for the utilization or transfer of intangible assets | 10% |
| Interest | 15% |
| Other income | 30% |
Tax Exemptions
There are a few tax exemptions permitted in Malaysia. The short-term visitors’ exemptions allow foreigners residing here for a short while to enjoy tax-exempt on money earned from working, provided such employment does not go beyond 60 days in a calendar year, 60 days covering two calendar years, or 60 days continually traversing two calendar years, and more. Other exemptions include:
- Interest income is taken by a person from funds saved in standard institutes
- Income from employment paid to female employees who were previously unemployed for at least two years as of 27 October 2017 ( up to 12 consecutive months)
- Dividends paid to shareholders
A 50% exempt rate for 2018 to 2020 years of assessment affects rental income obtained from residential homes if it does not exceed MYR 2,000 per month for each residential home. Or, the residential home has to be rented under a legal tenancy agreement between owner and tenant. The tax exception is accessible for three consecutive years max, of assessment from 2018 to 2020.
For the 2020 year of assessment, owners of properties in the state who give out at least 30% rental discounts to small and medium enterprise tenants from April 2020 to September 2020 receive a special reduction.
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