Malaysia has its own taxation system and the country’s taxes are evaluated on a current year basis. Learn more about the various taxes in Malaysia below!
Tax Eligibility
Since Malaysia’s tax is territorial, taxable income include all income accrued in, derived or remitted to Malaysia which is liable to tax. Any income from outside of Malaysia and received in Malaysia is exempt from tax. This is applied with the exception for other than a resident company carrying on the business of insurance, banking, sea or air transport.
However, Malaysia has many double tax agreements (link to DTAs in Malaysia article) with countries, so companies and individuals can avoid double taxation.
As a foreign national planning on relocating to Malaysia, and if you wish to draw up budget and have a better idea of your net salary, there are various taxes that you will need to bear in mind.
The main different types of taxes here include:
- Income tax
- Property tax
- Corporate tax
- Consumption tax
- Road tax
Individual Income Tax
Depending on an individual’s employment, their income will be subjected to different tax rates:
| Tax Resident Taxed based on progressive rate between 0% to 30% based on their income. | Anyone who has lived and worked in Malaysia for at least 182 days of a given calendar year |
| Non-residents Taxed at flat rate of 30% | Those who have lived and worked in Malaysia for between 60 and 182 days of a given calendar year |
| Tax-exempted | Anyone who has lived and worked in Malaysia for fewer than 60 days of a given calendar year |
When you resign from your job or come to the end of your employment contract or leave Malaysia for more than 3 months, you will need to apply for tax clearance.
Corporate Income Tax
In Malaysia, every corporation is subject to various taxes, such as, among others:
Any resident or non-resident organisations doing business and generating taxable income in Malaysia will be taxed on income from Malaysia.
For resident organisations carrying out business of air transport, sea transport, insurance and banking will be taxable on their global income. That said, there are exemptions for resident banks, insurance companies and Takaful companies but is subject to specified conditions.
Here are the corporate tax rates:
| Company Type | Corporate Tax Rate |
|---|---|
| Resident companies | 24% |
| Resident companies with paid-up capital of RM2.5 million or less | 17% for first RM600,000 and 24% for earnings in excess of RM600,000 |
What are the Benefits and Exemptions for Taxes in Malaysia
Not all expatriates in Malaysia are required to file personal income tax. Other individuals exempted from tax are:
- Expats working in Malaysia for less than 60 days
- Employees on board a Malaysian ship
- Aged over 55 years old who are receiving pension from employment in Malaysia
Malaysia has signed agreements on numerous double tax agreements which mean that certain nationalities will be exempted from paying personal income tax in Malaysia on a condition that their earned income is taxed in their country.
The Malaysian government also offers several tax deductions and benefits for the expatriate workers who qualify as tax residents. These include:
- Tax relief for a spouse that does not earn an income anywhere
- Tax relief for those who must pay parental care
- Tax relief for each child below 18 years old
- Tax relief for children studying at a tertiary level
Sales and Service Tax (SST)
Sales and Service Tax (SST) is the tax system that administered tax rates ranging from 5% to 10%, essentially modelling the old SST system with some modifications in hopes to increase disposable income of the population due to the lower cost of goods and services.
As the SST system in Malaysia is a single-stage tax system, goods which are sold and manufactured by a taxable person(s), which is defined as someone who provides a taxable service in Malaysia, will be charged a taxable amount. There is an exception for export of goods which are manufactured, they will not be subjected to sales tax.
Real Property Gains Tax
For every property purchased in Malaysia, you will be subject to the Real Property Gains Tax (RPGT) when you sell it.
This RPGT is a tax on the profit gained from the sale of a property and this tax is payable to the Inland Revenue Board. Do note that this tax will vary depending on the duration of the property owned.
Additionally, if you buy properties in Malaysia, you will also need to pay a Stamp Duty, which is a tax that is levied on the legal recognition of the Sales & Purchase Agreement and Loan Agreement when you buy a house. To know the amount of stamp duty you will owe on a property, you can calculate it on the government’s Valuation and Property Services Department official website.
Road Tax
In Malaysia, road tax and car insurance are compulsory. The road tax structure here varies depending on the car type, its engine capacity, the region and type of ownership.
To calculate how much you will owe for your road tax, the Road Transport Department will need to know the type of vehicle, registration number, engine capacity, year of manufacture and sum insured.
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