A Short Guide to Tax in Malaysia: Tax Rates & Filling Dates

The tax system in Malaysia is composed of different taxes at the state and federal levels. Whether you’re an expat or a resident, it’s important to understand the different tax regulations to avoid mistakes and get the most out of tax time.

If you’re considering moving to Malaysia or about to enter the workforce, in this article, we’ll cover the basic regulations governing tax in Malaysia, including taxes for expatriates.

Income Tax

Taxes in Malaysia are applied to any income from employment, business, rent, interest, or pension. What is the minimum salary to pay income tax in Malaysia? Anyone earning more than RM 34,000 with a monthly tax deduction can be taxed. These can be salaries, wages, bonuses, and allowances received by anyone from their employment.

The tax rate is progressive and ranges from 0% to 30%. Your tax rate in Malaysia is based on your income level. The median Malaysian salary, at RM 70,000, is taxed at 11%, while non-residents and those making over 2,000,000 pay 30% tax. You may be entitled to a tax refund in Malaysia if you have monthly tax deductions but a low final payable tax.  

Some of the deductions available to taxpayers include medical expenses, charitable contributions, fees for childcare, and education. Exemptions are similar to deductions in reducing taxable income and include things like household appliances, maternity expenses and even gardeners. There are many more, so it’s important to check Malaysia's official website for tax to find out exactly what you qualify for.

Goods and Services Tax (GST) / Sales and Service Tax (SST)

GST was a consumption tax in Malaysia placed on taxable goods or services. Services like childcare and healthcare were exempt from GST, along with residential property and public transport. 

However, GST was replaced by SST in 2018. Sales Tax is placed on manufactured or imported goods, between 5 and 10%, while Service Tax is for services like hospitality, accounting, insurance, advertising, and more. Services are taxed at 6%. 

While the SST was meant to relieve some of the burdens that the flat rate of GST introduced, it nonetheless has impacted individuals and businesses. Consumers pay a hidden price as businesses adjust their fees to accommodate for taxes paid. Service Tax in Malaysia may increase to 8% soon, compounding existing issues. 

Corporate Tax

The corporate tax rate in Malaysia is less flexible than personal income tax, at 24%. Some companies qualify for a lower tax rate in Malaysia, depending on their paid-up capital and whether they control or are controlled by another organisation. 

There are many incentives and exemptions for businesses paying tax in Malaysia. Companies working in green technology, in research and development, and in promoted activities in special zones qualify for tax incentives. The same is true for export and venture capital companies and many more. These exemptions can change, so be sure to check out the official tax website for detailed information. 

Tax planning for corporations in Malaysia should be done thoughtfully. Consider your business structure, maximize deductions, and always comply with SST.  

Tax in Malaysia for Expats

An expat is a resident for tax purposes if they have been present in Malaysia for 182 days of the calendar year. Short-term absences due to illness or social visits of less than 2 weeks still count towards this time as a resident. 

If you are in Malaysia for less than 182 days, you are still considered a resident if you were present for the final 6 consecutive months of the previous year or the first 6 months of the next year. You are also considered a Malaysian tax resident if you have been present for the last three years and will be present next year. Hence, your intention to stay is an important factor in determining residency.  

Although there are some special cases, in general, foreigner’s tax in Malaysia is 30%, while Malaysian residents have progressive rates based on their income. 

You can check this article for a detailed breakdown of the tax rate in Malaysia for non-residents by income type. Employment income, rent, and dividends are taxed at 30% for expats. Your income from interest or as a public entertainer is taxed at 15%, and for royalties and payments for services, tax in Malaysia is 10%. 

There are several important dates for filing taxes in Malaysia. For residents and non-residents without business income, the filing date for tax in Malaysia is April 30th. For those with business income, it’s June 30th. Not filing your taxes before the deadline could lead to a fine between RM 200 and RM 20,000 and even prison time, so it’s essential to understand your tax obligations and know your filing date. 

The filing date for corporate tax in Malaysia is less straightforward. Corporate taxes should be filed within 7 months of closing the accounting year. 

To file taxes in Malaysia, you must self-assess your income and taxes and submit one of the forms available on the Malaysian tax website. The form you choose is based on your status as a resident and whether you have employment income or operate a business. You can use the e-filing system or mail your forms manually. For help filling out Malaysian tax forms you can visit an Inland Revenue Board branch. 

Tax filing can be overwhelming, so getting your information straight from the source on the Inland Revenue Board of Malaysia website is important. 

The Malaysian tax website indicates that the tax rate in Malaysia is progressive and based on income. In contrast, the foreigner tax in Malaysia is a flat 30%, so it’s important to understand whether you are a resident for tax purposes. If you own a business, corporate tax planning is essential to make the most of available deductions. 

If you are filing taxes in Malaysia, professional advice is valuable, especially when it comes to tax planning. It’s important to check the Malaysian tax website for all official tax updates to avoid misinformation.

--- Originally Written by Tiffany Quinn ---