Malaysia Tax Income Rate

Last Updated: Jan 05, 2009

Living There

INDIVIDUAL TAXATION Resident individuals are taxed on their Malaysian-sourced income. Married couples may file for joint assessment, but separate assessment is deemed to be more effective in lowering over-all tax liability. Foreign individuals who decide to become permanent residents of Malaysia will be permitted to purchase residential property only under certain conditions. The Foreign Investment Committee (FIC) provides the following guidelines: • • •

Each residential unit must be valued over RM60,000 (US$17,019) Your husband/wife must be a Malaysian citizen OR you must be qualified to apply for citizenship and submit the necessary applications

INCOME TAX Taxable income includes gains from a business, partnership income, employment income, dividends, interest and rental income, royalties, premiums, and other gains or profits. Taxable income is computed by deducting personal reliefs and other rebates from the gross income. Income tax is levied at progressive rates.

INCOME TAX TAXABLE INCOME, RM TAX RATE (US$) Up to 2,500 (US$709) nil 2,500 – 5,000 (US$1,418) 1% on band over US$709 5,000 - 20,000 (US$5,673) 3% on band over US$1,418 20,000 - 35,000 (US$9,928) 7% on band over US$5,673 35,000 - 50,000 (US$14,182) 13% on band over US$9,928 50,000 - 70,000 (US$19,855) 19% on band over US$14,182 70,000 - 100,000 (US$28,365) 24% on band over US$19,855 100,000 - 250,000 (US$70,911) 27% on band over US$28,365 Over 250,000 (US$70,911) 28% on all income over US$70,911 Source: Global Property Guide The following personal reliefs are granted to residents to reduce tax liability:

PERSONAL RELIEFS Types of Relief RM (US$) Self 8,000 (US$2,270) Additional relief for disabled individual 6,000 (US$1,702) Spouse 3,000 (US$851) Additional relief for disabled spouse 3,500 (US$993) Child 1,000 (US$284) -per child below 18 years old 4,000 (US$1,135) - per child over 18 years old, unmarried and receiving higher education Disabled child 5,000 (US$1,418) Additional relief for disabled child over 18 4,000 (US$1,135) 6,000 (US$1,702) Life insurance premiums max 5,000 (US$1,418) Medical expenses for parents max 5,000 (US$1,418) Medical expenses for self, spouse or child max Purchase of supporting equipment for disabled spouse, children, parent, 5,000 (US$1,418) or self max 5,000 (US$1,418) Fees expended on approved courses max Cost of purchasing books, journals or other similar publications for 700 (US$199) max enhancing knowledge If the resident individual’s chargeable (taxable) income is less than RM35,000 (US$9,928), additional rebates of RM350 (US$99) can each be claimed by the taxpayer and his spouse. These additional rebates apply for married couples, whether the couple is opting for either joint or separate assessment. A taxpayer or his spouse can claim a rebate of RM500 (US$142) for the purchase of a personal computer once every five years. The tax rebate is deducted from the tax payable for individuals earning less than RM3,500 (US$993). CAPITAL GAINS TAX As of 01 April 2007, there is no tax on capital gains because the Real Property Gains Tax (RPGT) is suspended indefinitely. Before April 2007, disposals of real property by residents are subject to capital gains tax at the following rates:

REAL PROPERTY GAINS TAX HOLDING PERIOD Up to 2 years 2 years – 3 years 3 years – 4 years 4 years – 5 years Over 5 years

TAX RATE 30% 20% 15% 5% nil

Citizens and permanent residents are entitled to an exemption of RM5,000 (US$1,418) or 10% of the gain, whichever is higher.

PROPERTY TAX Assessment Tax on Residential Property The assessment tax is a local tax based on the annual rental value of the property, as assessed by the local authorities. It is generally levied at a flat rate of 6% for residential properties and payable in two installments.

Quit Rent The quit rent is a local tax levied on all landed properties, payable annually at a rate of 1 sen (US$0.003) to 2 sen (US$0.006) per square foot, wherein RM1 is equal to 100 sen (cents). The quit rent liability is generally estimated to be less than RM100 (US$28) per year.