Tax is imposed on every individual as a compulsory contribution to state revenue, levied by the government on working people’s income and business profits.
In Malaysia, you are liable to yearly tax payment if your income is accrued or derived from Malaysia. While you are preparing to file your taxes, you should understand the following terms:
What is taxable income?
It is the base upon which the income tax system imposes tax.
What is tax exemption?
Tax exemptions are certain monetary exemptions that can be claimed to reduce your taxable income. These items are completely removed from your taxable income, unlike tax reliefs which are deducted from your taxable income.
What is tax relief?
It is the amount which can be deducted from your annual income to reduce your taxable income. To get a better understanding on the categories where you can receive tax relief, read our article Understanding Tax Reliefs
Some of the changes and additions made to tax relief are as follows:
| Item | Tax Relief Amount |
| Spouse Relief | Increased from RM 3,000 to RM 4,000 |
|
Ordinary child relief for age 18 years or below |
Increased from RM 1,000 to RM 2,000 |
| Child relief 18 years or above receiving higher education in respect of diploma or above OR serving under article of indentures in a trade or profession in Malaysia or degree level or above outside Malaysia | RM 8,000 |
| Physically/mentally disabled child over 18 receiving higher education | RM 14,000 |
| Parental care relief |
Father – RM 1,500 Mother – RM 1,500 |
| Employee’s contribution to social security organization | RM 250 |
| Fees expended for any tertiary level course at Masters or Doctorate level for the purpose of acquiring any skill or qualification | RM 7,000 |
What is tax rebate?
Tax rebates also known as tax returns is a reduction in your tax expenditure after you have calculated your tax for the year.
-
If your chargeable income does not exceed RM 35,000 you will receive a rebate of RM 400.
-
Rebate for Zakat, Fitrah, or other Islamic religious events are also applicable for rebate.
Now that you are familiar with the above terminologies, you can use the following questions as a guide to file your taxes:
Are you a tax resident?
Yes, if you are residing in Malaysia for at least 182 days in a calendar year.
Are you taxable?
You are, if your income is more than RM 5,000 per year.
How much tax is imposed if you are a resident individual?
The tax rates changes according to the level of your chargeable income as shown below:
| Chargeable Income (RM) | Rate (%) | Tax Payable (RM) | |
| On the first | 5,000 | 0 | |
| On the next | 15,000 | 1 | 150 |
| On the first | 20,000 | 150 | |
| On the next | 15,000 | 5 | 750 |
| On the first | 35,000 | 900 | |
| On the next | 15,000 | 10 | 1,500 |
| On the first | 50,000 | 2,400 | |
| On the next | 20,000 | 16 | 3,200 |
| On the first | 70,000 | 5,600 | |
| On the next | 30,000 | 21 | 6,300 |
| On the first | 100,000 | 11,900 | |
| On the next | 150,000 | 24 | 36,000 |
| On the first | 250,000 | 47,900 | |
| On the next | 150,000 | 24.5 | 36,750 |
| On the first | 400,000 | 84,650 | |
| On the next | 200,000 | 25 | 50,000 |
| On the first | 600,000 | 134,650 | |
| On the next | 400,000 | 26 | 104,000 |
| On the first | 1,000,000 | 238,650 | |
| Above | 1,000,000 | 28 |
Now, you must be wondering what is chargeable income?
It can be simplified into a formula as follows:
Chargeable Income = Taxable income – Tax exemptions – Tax Reliefs
Are there any changes in tax rate for resident individuals from the previous year?
Yes, for the year 2016, tax rates for resident individuals whose chargeable income is from RM 600,001 to RM 1,000,000 has increased by 1% and chargeable income exceeding RM 1,000,000 has increased by 3%.
How much tax is imposed if you are a non-resident individual?
| Type of income | Tax rate |
| Public entertainer’s professional income | 15% |
| Interest | 15% |
| Royalty | 10% |
| Rental of movable property or service charge from use of property/plant/machinery | 10% |
| Business and employment income | Increased from 25% to 28% |
| Income other than the above | 10% |
What other items are taxable?
-
Perquisites - benefits or perks that come with your employment that can be converted into monetary value are taxable including bill claims, company credit cards, company loans, sponsored club memberships, sponsored child tuition fee, personal driver and any other benefits offered by your employer that could be converted into cash.
-
Benefits in kind (BIK) are also taxable. Benefits in kind are benefits or perks that come with your employment that could not be converted into monetary value like cars, lodging, electronics and home furnishing.
What is the deadline for filing your taxes? Which form should you fill?
| Form | Type | Due Date |
| BE Form | Individuals without business source | 30th April every year |
| B Form | Individuals with business source | 30th June every year |
| M Form | Non-resident without business source | 30th April every year |
| M Form | Non-resident with business source | 30th June every year |
| P Form | Partnership | 30th June every year |
What documents should you prepare before filing your taxes?
-
Form EA/EC: This form is collected from your employer that mentions the amounts of tax you need to pay and how much tax have been paid by your employer on your behalf.
-
To Choose Form BE or Form B?
Your source of income will determine the type of form you have to fill up. You can now also do this online at www.hasil.gov.my -
What records should you keep?
Receipts for preceding 7 years from the date of filing, which have been used as evidence of tax reliefs.
Where can you file your tax return in the quickest possible way?
In the e-filing website from www.hasil.gov.my
What do you need if you are filing your tax return for the first time?
-
You have to obtain PIN number from Tax Return Form
-
You have to provide the following details and documents for PIN number application:
(1) Tax Reference Number
(2) Latest Address
(3) Copy of IC/Passport
(4) Telephone Number
-
For email application, send all 4 required documents to pin@hasil.gov.my
-
Register for e-Filing in the nearest Inland Revenue Board (LHDN) branch, mail, fax or e-mail.
-
After first time login, you do not need to register again for subsequent year tax return. Just remember your password and continue to complete the form only.
Where can you get assistance and more info on filing taxes?
-
To assist taxpayers especially on e-Filing service, Inland Revenue Board of Malaysia (IRBM) has opened an e-Filing service counter at every branch nationwide. Please contact the nearest IRBM branch for your e-Filing consultation.
-
If you do not receive your refund automatically, you should send an email to callcentre@hasil.gov.my
