Are you earning income in Malaysia? If so, it is important to know that you must declare your income and make income tax payments to the Inland Revenue Board (IRB) of Malaysia.
However, it is important to note that taxes may be assessed differently for different individuals and thus, the process of filing and making payments may vary.
This content will provide an overview of 7 key things to know in order to properly file your income taxes and estimate your tax payments.
1. Tax Residency
Tax residency in Malaysia is determined by physical presence, not citizenship. To be considered a tax resident, an individual must have been physically present in Malaysia for at least 182 days in a calendar year, or physically present for at least 90 days and have a residence in Malaysia.
Tax residents are required to declare and pay income tax on worldwide income to the IRB. Non-tax residents only need to declare and pay income tax on income derived from or received in Malaysia.
2. Sources of Income
As a tax resident of Malaysia, it's essential to understand the sources of income that are subject to income tax and the corresponding tax payments that must be declared to the IRB.
Sources of income that are chargeable for income tax in Malaysia include: income from business, employment, interests, dividends, royalties, premiums, pensions, discounts, and annuities.
Distinction lies in whether or not the tax resident has current business income in Malaysia.
If the tax resident has current business income in Malaysia, they must submit a B form to declare their income tax payments. If the tax resident does not have current business income in Malaysia, they must submit a BE form to the IRB.
3. Submission Deadline
Tax for a year of assessment is due and payable on the following dates in the year following that year of assessment:
30 April for individuals deriving non-business income
30 June for those having business income
Failure to pay income tax on time results in a 10% tax penalty as per subsection 103(3) of the Income Tax Act (ITA) 1967. Additionally, if you fail to pay income tax within 60 days after the respective due dates, an additional 5% tax penalty will be imposed on top of your tax payments.
4. Income Tax Rates
If you are not a tax resident, the amount of income tax is calculated based on a flat rate of 30% of your chargeable income.
If you are a tax resident, the amount of income tax is calculated based on a tier rate where the maximum tax bracket for Year Assessment (YA) 2022 is 30%.
5. Income Tax Reliefs
The income tax reliefs available for tax residents in Malaysia as determined by the Inland Revenue Board (IRB) include:
6. Payment Methods
The Inland Revenue Board (IRB) of Malaysia offers several methods for taxpayers to make their tax payments. These include:
Online via e-Filing
Over-the-counter
Electronic Funds Transfer (EFT)
Direct debit
Credit/debit card
7. Tax Agent
If you're looking for additional support in filing your income tax, it may be beneficial to hire a tax agent. Professionals can provide valuable assistance in navigating the process and can be especially helpful if your financial situation is complex or if you're a busy individual. It can be a worthwhile investment to have an expert handle your tax matters.
Get in touch with a licensed tax accountant/tax agent at JS Partners via WhatsApp https://wa.me/60143248237.