Personal Income Tax Malaysia – Tax Rates and Chargeable Income

Personal Income Tax Malaysia - Tax Rates and Chargeable Income

Income tax season has arrived in Malaysia, so let’s see how ready you are to file your taxes. Have you gotten your EA form from your employer(s) yet? Do you know how to figure out your income tax rate, add up your tax reliefs, and calculate your tax refund? Have you registered as a taxpayer with LHDN, logged yourself into e-Daftar, and familiarised yourself the right e-Borang to fill? Do you even know what any of these income tax terms mean?

If you’re still in the dark, here’s our complete guide to filing your income taxes in Malaysia 2020 for the year of assessment (YA) 2019.

Who Needs To Pay Income Tax?

Any individual earning more than RM34,000 per annum (or roughly RM2,833.33 per month) after EPF deductions has to register a tax file. You must pay income tax on all types of income, including income from your business or profession, employment, dividends, interest, discounts, rent, royalties, premiums, pensions, annuities, and others.

So, Tax for salaried employees, this not only includes your monthly salary, but also things like bonuses, overtime, commissions, and all other taxable income. If you’re not sure what counts as income that you have to declare for tax purposes or not, scroll down to our section on stating your income below.

You don’t have to pay taxes in Malaysia if you have been employed in the country for less than 60 days or for income that is earned from outside Malaysia.

Income Taxes in Malaysia For Foreigners

What about foreigners or expatriates who are working and earning income in Malaysia? Any foreigners who have been working in Malaysia for more than 182 days are eligible to be taxed under normal Malaysian income tax laws and rates, just like Malaysian nationals. According to LHDN, foreigners employed in Malaysia must give notice of their chargeability to the Non-Resident Branch or nearest LHDN branch within 2 months of their arrival in Malaysia.

Understanding Tax Rates and Chargeable Income

Here are the income tax rates for personal income tax in Malaysia for YA 2019.

Chargeable Income (RM)Calculations (RM)Rate %Tax (RM)
0 – 5,000On the first 5,00000
5,001 – 20,000On the first 5,000 Next 15,000  10 150
20,001 – 35,000On the first 20,000 Next 15,000  3150 450
35,001 – 50,000On the first 35,000 Next 15,000  8600 1,200
50,001 – 70,000On the first 50,000 Next 20,000  141,800 2,800
70,001 – 100,000On the first 70,000 Next 30,000  214,600 6,300
100,001 – 250,000On the first 100,000 Next 150,000  2410,900 36,000
250,001 – 400,000On the first 250,000 Next 150,000  24.546,900 36,750
400,001 – 600,000  On the first 400,000 Next 200,000  2583,650 50,000
600,001 – 1,000,000On the first 600,000 Next 400,000  26133,650 104,000
1,000,001 – 2,000,000On the first 1,000,000 Next 1,000,000  28237,650 280,000
Exceeding 2,000,000On First 2,000,000 Next ringgit  30517,650 ………..

For example, let’s say your annual taxable income is RM48,000. Based on this amount, the income tax to pay the government is RM1,640 (at a rate of 8%). However, if you claimed RM13,500 in tax deductions and tax reliefs, your chargeable income would reduce to RM34,500. This would enable you to drop down a tax bracket, lower your tax rate to 3%, and reduce the amount of taxes you are required to pay from RM1,640 to RM585. That’s a difference of RM1,055 in taxes!

Based on this table, there are a few things that you’ll have to understand. First of all, you have to understand what chargeable income is. Chargeable income is your taxable income minus any tax deductions and tax relief. It’s very important you know how it works because as you can see, the tax rate you are charged with increases as your chargeable income does. The more you reduce your chargeable income (through tax reliefs and such), the lesser your final tax amount will be.

Income Taxes in Malaysia For Non-Residents

You are regarded as a non-resident under Malaysian tax law if you stay in Malaysia for less than 182 days in a year, regardless of nationality. You’ll still need to pay taxes for income earned in Malaysia and will be taxed at a different rate from residents.

Therefore, whether you are a Malaysian or a foreign national, as long as you reside in Malaysia for less than 182 years in a year, any income you earn in Malaysia is taxable under non-resident income tax rates.

Here are the income tax rates for non-residents in Malaysia.

Types of IncomeRate (%)
Business, trade or professionEmploymentDividendsRent  28
Public entertainerInterest15
RoyaltyPayments for services in connection with the use of property or installation, operation of any plant or machinery purchased from a non-residentPayments for technical advice, assistance, or services rendered in connection with technical management or administration of any scientific, industrial or commercial undertaking, venture, project or schemeRent or other payments for the use of any movable property      10

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