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9 Types of Taxable Income in M’sia That You Never Knew

Updated 30 Mar 2022 – By Ehsan


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*This article was translated by Sabrina Heng from "9 Jenis Pendapatan Ni Kena Cukai Rupanya, Baru Tahu Weh!".

We don’t think income tax needs an explanation. But, a little FYI - it’s imposed on individuals and companies on all income generated depending on the type of income source.

These taxes that you pay, the gomen will use for the development of our nation such as paying officials, building infrastructure, scholarships and facilities such as public recreation parks, educational institutes, health initiatives, security, defence, pensions and also science and medical studies. Since 2015, the gomen has made it mandatory to register an income tax file for any individual with an annual income of more than RM34,000 a year after deducting the Employees Provident Fund (EPF).

Ok… that's a little bit about taxes and individuals who are eligible to be taxed, but did you know what kind of income the gomen taxes? You don’t? Let’s see the list below:
 

1. Business or Profession


Source: Silver Mouse

Tax applies to all existing sorts of companies and professions that allow money to be deposited into bank accounts. For the Youtubers, instafamous, influencers or do paid product reviews, it’s best to state your income and register your business. The bank is going to chase you if they find a lot of money going into your personal account! It’s not surprising if the Inland Revenue Board of Malaysia (LHDN) also gets on your tail. That’s why before anyone reports you, hurry up and register before you get fined!
 

2. Employment

Usually, employers open files to pay for employees’ salaries. For employees who receive a salary and are eligible for the tax deduction, there is an alternative to Monthly Tax Deduction (MTD). Here are some examples: 

  • Salaries, bonuses, directors' fees, commissions, allowances, perquisites, rewards, etc. (cash or something convertible to cash).
  • Gift Benefit from Employers (cars, mobile phones, drivers, employees, etc.).
  • Value of Living Accomodation (VOLA) provided by employers.
  • Employer contribution for Employee to Pension Fund or Unauthorised Fund.
  • Compensation for job loss.

 What is Monthly Tax Deduction (MTD)?

  • An employee income tax payment 
  • Advance payment of employee income tax.
  • Not employee’s final tax
  • Calculated based on Monthly Tax Deduction Table and computerised calculation method (e-MTD, MTD Calculator, MTD Software and computerised payroll system).
 

3. Dividends and Interest

Source:  Inland Revenue Board of Malaysia

If you receive a dividend that is calculated as income, you’ll be taxed because of the dividend earned. Of course, there are dividends or benefits that are tax-exempt such as Tabung Haji, ASB or Unit Amanah. If employers provide loans to the employees, there will be tax on the interest.
 

4. Discounts

The discount here refers to income you receive that isn’t in the form of cash but benefit-in-kind. For example, you receive a discount on the purchase of a washing machine from the company you’re working for. The amount of discount received is taxable too!
 

5. Rent

You’ll be taxed if you gain profit from renting a house, land, vehicle, or even goods used by someone where you receive money in return.
 

6. Royalties

These are payments made to an individual or company for the ongoing use of their assets (e.g. works of authors, singers). That said, royalties can be tax-exempt if:


Source: Inland Revenue Board of Malaysia


7. Premium

Taxes may apply to gifts and rewards such as vacations, vouchers, telephones, cash, laptops or houses. (Bonuses do not fall here as it is considered taxable income under Employment, per LHDN)


8. Pensions

This is the payment you receive if you are a gomen servant up to your retirement age. You can also get tax-exemptions like the following:


Source: : Inland Revenue Board of Malaysia

9. Annuities

This is a type of payment received on a regular and recurring basis paid by the company for a specified period. Those who usually subscribe to annuity products aim to retire comfortably without having to work for some time. Annuities included in wills continue until the death of the recipient. 

For more information, visit this official website: Inland Revenue Board of Malaysia
 

*The above article is intended for informational purposes only. Loanstreet accepts no responsibility for loss that may arise from reliance on information contained in the articles.
 

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