Tax incentives in Malaysia can be granted through income exemptions or any allowances while unutilised allowances can be carried forward indefinitely to be utilised against future statutory income. These information and incentives are useful for both existing companies and investors who are thinking of setting up a company in Malaysia.
Tax Resident Status in Malaysia
In order to be eligible for incentives, you must be identified as a tax resident in Malaysia. Every citizen of Malaysia is automatically defined as a tax resident of the country. However, foreigners will only receive the tax resident status after they have resided in Malaysia for more than 182 days.
Here’s a quick summary of a tax resident and non-resident:
For one to be a tax resident in Malaysia, a Certificate of Residence in Malaysia is required, and the application for the certificate is free. To do so, you must contact the tax authorities and present your passport and documentations of travel into and out of Malaysia over the past year.
What are the Various Companies’ Tax Incentives in Malaysia?
There are various types of tax incentives provided in Malaysia to tax resident companies or tax resident individuals. They include, among others:
Tax Incentives for Manufacturing/Service/Trading Companies in Malaysia
Companies in these 3 sectors are entitled to tax incentives related to areas such as
Here are the benefits for some of the incentives mentioned above:
|Investment Tax Allowance||
|Approved Services Projects||
Tax Incentives for Financial Services Companies
For financial services companies, here are some tax exemptions that are available:
There are some companies under the Malaysia’s financial sector that are eligible for tax incentives, which include:
Tax Incentives for ICT Companies in Malaysia
In the ICT industry, tax incentives for tax residents are also available. These expenses will be tax exempted:
Tax Incentives for Biotechnological Companies in Malaysia
Biotech companies which have received approval as Bionexus status are eligible for a complete offset of income earned through an investment tax allowance on qualifying capital expenditure for companies which have been in operation for 10 years or less.
Here are some other incentives:
Green Incentives in Malaysia
Green technology and equipment will receive an investment tax allowance when purchased. By the Malaysian tax resident companies of any sector.
The same income tax incentive is also given for the usage of green technology and services. Companies in the healthcare and wellness sector receive a 100% tax exemption on qualifying capital expenditures incurred on statutory income for a period of up to five  years.
Regional Operations and Tax Incentives
A principal hub is a locally incorporated company that uses Malaysia as a base for its Global and Regional operations through management, control, and support of critical functions. The tax incentives which are available for Malaysian tax residents and companies who conduct their regional operations in Malaysia include:
Malaysia Income Tax Reliefs
Tax relief allows one to reduce their chargeable income, subject to different requirements and conditions. The following is a non-exhaustive list of tax reliefs that a person can claim:
1. Individual & dependent relatives
Granted automatically to an individual for themselves and their dependents.
2. Medical treatment, special needs and expenses for parents
Claim: Up to RM8000
This sum is inclusive of care and treatment by nursing homes and non-cosmetic dental treatment. It must be conducted by a registered medical practitioner or written certification of a qualified carer. Parents must reside and treatment must be provided in Malaysia.
3. Husband or Wife or Alimony
Claim: Up to RM 4000
This claim can only be made if your spouse has no source of income, or if he/she chooses to set up a joint assessment in your name. You cannot claim this relief if your spouse has a gross income of more than RM4000 derived from sources outside of Malaysia.
4. Breastfeeding equipment
Claim: Up to RM1000 per mother
This claim can be made if an individual is a breastfeeding mother and has purchased breastfeeding equipment for her own use, on her own child ages 2 years or younger. This claim can only be made once every 2 years.
5. Ordinary child relief
Claim: RM2000 per child
This claim can be made for each unmarried child below the age of 18, at any time during the year of assessment.
6. Education and medical insurance
Claim: Up to RM3000
This relief can be claimed for the payment of insurance premiums related to education or medical benefits. This is applicable to yourself, your spouse, or your child. Each of them is subjected to his/her own sum of RM3000. Couples who opt for a joined assessment, however, will face a deduction limit of RM3000.
7. Child in full-time education
Claim: RM2000 or RM8000 per child
A deduction of RM2000 can be claimed for each unmarried child of age 18 years and above, who is receiving full-time education. A deduction of RM8000 can be made if an unmarried child is 18 years of age and above, and is not in full-time education, is not serving under articles of indentures to qualify in a trade or profession in Malaysia, and is not pursuing a full-time degree outside Malaysia.
TIP: Click here to find out more on the various incentives available for Malaysia’s tax resident companies!
Yes you can! You can find out more here.
You will not be taxable if
- Employed in Malaysia for less than 60 days
- Employed on board a Malaysian ship
- Age 55 years old and receiving pension from Malaysian employment
- Receiving interest from banks
- Receiving tax exempt dividends
It is absolutely free! All you have to present is your passport and any other supporting documents
Every individual who is to be taxed is required to declare income to IRB. The taxpayer is responsible for obtaining and forwarding the Income Tax Return Form (ITRF). The taxpayer must submit an ITRF that has been duly completed before April 30 every year.