Personal Income Tax

Malaysia Personal Tax Information

In order to determine the Malaysia income tax liability of an individual, you need to first determine the tax residency and amount of chargeable income and then apply the progressive tax rate to it. Key points of Malaysia’s income tax for individuals include:

  • Personal Income tax is payable on the taxable income of residents at the progressive rates from 0% to 25% with effective Year of Assessment 2015. Nonresidents are subject to withholding taxes on certain types of income. Other income is taxed at a rate of 26%.
  • Residents and non-residents are subject to tax on Malaysian-source income only. Effective from 1 January 2004, remittances of foreign-source income into Malaysia is exempted from Malaysia Income Tax
  • Tax rules differ based on the tax residency of the individual.
  • Income tax is assessed on a current-year basis. The tax year, commonly called the year of assessment (YA), runs from January 1 to December 31.

Kindly take note of the following key dates which related to the filing of personal tax.

  • Delivery of Form EA by the employer to employee no later than last day of February of the following year
  • The deadline for filing of Form BE, BT, M, MT by the a person not carrying business (generally refer to employee) is by 30 April of the following year
  • The deadline for filing of Form B by the a person carrying a business such as sole proprietor is by 30 June of the following year
  • The deadline for filing Form P by a partnership excluding limited liability partnerships, LLPs is by 30 June of the following year

Employers’ Responsibilities

Form CP 22Notification of New Employee – an employer is required to notify the Inland Revenue Board (IRB) via Form CP22 of the commencement of employment of its employees in Malaysia within one month of the date of commencement of employment.
Form CP 22ACessation of Employment – an employer is required to notify the IRB of the cessation of employment of an employee by the completion of Form CP22A at least 30 days before the date of cessation unless the employee is subject to the Monthly Tax Deduction (MTD) and deduction has been made by the employer or whose income is below the minimum amount subject to MTD, and employer is aware that the employee is to be employed elsewhere in Malaysia.
Form CP21Departure from Malaysia for a Period Exceeding 3 Months – an employer is required to notify the IRB of departure of an employee (most of the case will be expatriate) from Malaysia for a period of more than 3 months by the completion of Form CP21. The employer is required to withhold any money in the employer’s possession owing to the expatriate who has ceased or is about to cease employment until 90 days after the IRB receives the Form CP21 or upon receipt of the tax clearance letter, whichever is earlier. The employer can then release the balance of money withheld from the employee after the settlement of the outstanding taxes (if any) as shown in the tax clearance letter.
Form EEvery employer must furnish the Form E of its employees’ employment income no later than 31 March of the following year.
Form EAStatement of remuneration (Form EA) completed and provided to the employee on or before the last day of February of the following year for employee’s personal income tax purpose. Form EA is not required to be sent to IRB.

Monthly Tax Deduction (MTD) scheme

 Tax withholdings from employment income are covered by the MTD system.

Employer’s responsibilities under the MTD Rules are as follows:

  • Deduct the MTD from the remuneration of employee in each month or the relevant month in accordance with the Schedule of MTD or Computerised Calculation Method and pay to the Director General.
  • Make additional deductions from employee’s remuneration in accordance with the direction given by the Director General under Rule 4 of MTD Rules.
  • Employer shall pay to the Director General, not later than the fifteen day of every calendar month, the total amount of tax deducted or should have been deducted by him from the remuneration of employees during the preceding calendar month.
  • Furnish a complete and accurate employee’s information in a return (Form CP39/CP39A) when submitting MTD payments/additional deductions.
  • Keep and retain in safe custody sufficient documents for a period of seven years from the end of the calendar year in which the remuneration is deducted in respect of his employee according to the MTD Rules.
  • Inform every employee of his following responsibilities:
    • to submit a TP3 Form to the employer to notify information relating to his employment with previous employer in the current year.
    • to submit a TP1 Form to the employer if employee wishes to claim deductions and rebates in the relevant month. The deductions and rebate will be effected subject to approval by employer.
    • to submit a TP2 Form if employee wishes to include benefits in kind (BIK) and value of living accommodation (VOLA) as part of his monthly remuneration in ascertaining the MTD amount subject to approval by employer.
    • to keep and retain in safe custody each and every receipt relating to claims of deductions for a period of seven years from the end of that year of assessment under the Act.
    • to furnish complete and accurate personal information and update any changes of his personal particulars to the employer.
    • to furnish correct information in a prescribed form relating to his own chargeability to tax and failure by the employee to do so constitutes an offence

Employees/ Sole Proprietorship/Self Employed Responsibilities

Form typeCategoryDue Date for Submission
Form BEResident Who Does Not Carries On Business30 Aprilof the following year
Form BTResident individual (Knowledge/Expert Worker)
Form MNon-resident individual
Form MTNon resident individual (Knowledge/Expert Worker)
Form MNon-resident individual (with business income)30 Juneof the following year
Form MTNon resident individual (Knowledge/Expert Worker with business income)
Form Bresident individual who carries on business
Form PPartnership

 

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