Taxation

An individual who is resident in Malaysia is taxable on all income accruing in or derived from Malaysia and on income received from outside Malaysia. The scope of taxation of an individual depends on his resident status.

However, with effect from the year of assessment 2004, income received in Malaysia from outside Malaysia is exempted from tax. Hence, an individual, either or non-resident, is taxable only on income accruing in or derived from Malaysia. Thus, every individual who is liable to tax is required to declare his income to IRBM. With effective from Year 2015, an individual with annual employment income of RM34,000 (after EPF deduction) has to register a tax file.

The taxpayer required to submit the Income Tax Return Form (ITRF) that has been duly completed before 30th April (without business income) or before 30th June (with business income) of every year. A tax year for individual is based on calendar year, i.e. 31st December. For example, the year of assessment of an individual without business income for calendar year end on 31st December 2017 will be YA 2017. The individual need to submit ITRF before or on 30th April 2018 to avoid penalty arises due to late submission.

Residency of an individual

Under Section 7(1), an individual is considered as resident if:-

• Sec. 7(1)(a) – he is in Malaysia in that basis period for a period or periods of 182 days or more;
• Sec. 7(1)(b) – he is in Malaysia in that basis year for a period of less than 182 days and that period is linked by or to another period of 182 or more consecutive days;
• Sec. 7(1)(c) – he is in Malaysia in that basis year for a period or periods amounting in all to 90 days or more, having been with respect to each of any 3 of the basis years for the 4 years of assessment immediately preceding that particular year of assessment; or
• Sec. 7(1)(d) – he is resident in Malaysia within the meaning of this Act for the basis year for the year of assessment following that particular year of assessment, having been so resident for each of the basis years for the 3 years of assessment immediately preceding that particular year of assessment.

As per Section 7(1A), an individual shall be deemed to be in Malaysia for a day if he is present in Malaysia for part of that day and in ascertaining the period for which he is in Malaysia during any year, any day (within paragraphs 1(a) and (c)) for which he is in Malaysia shall be taken into account whether or not that day forms part of a continuous period of days during which he is in Malaysia. For example, an individual leave Malaysia at 2.30am (1.1.2018), he shall be deemed as being presented in Malaysia on 1.1.2018

However, notwithstanding subsection (1), Section 7(1B) stated where a person who is a citizen and

• a. is employed in the public services or service of a statutory authority; and
• b. is not in Malaysia at any day in the basis year for that particular year of assessment by reason of –
  • having and exercising his employment outside Malaysia; or
  • attending any course of study in any institution or professional body outside Malaysia which is fully-sponsored by the employer,

He is deemed to be a resident for the basis year for that particular year of assessment and for any subsequent basis years when he is not in Malaysia.

To be noted that nationality of an individual does not affect the residency. This mean a person who is Malaysian may be non-resident if he does not fulfil the Section 7(1).

It is important to determine the residency of taxpayer as benefits are given by IRBM to resident individual. For example,

• Tax relief – a list of deduction is allowed against the business or/and non-business income (rental income, employment income, interest income, etc.)

• Tax rebate – which only applicable for resident individual with Chargeable Income less than RM35,000NoTax rebateYear of Assessment
  2001 – 2008

However, there is also allowable deduction from Aggregate Income on donations & gifts given for both resident and non-resident individual as follows:

Tax rates charged for both resident and non-resident individual are as follow:-

• Resident – from 0% up to 28% (via Form B / Form BE)
• Non-resident – from 10% up to 28% (via Form M / Form MT)