Income Tax Law: Part II

Personal Income Tax

All individuals are liable to tax on income accrued in, derived from or remitted to Malaysia. The rate of tax depends on the resident status of the individual which is determined by the duration of his stay in the country (as stipulated under Section 7 in the Income Tax Act 1967).
Resident Individual
A resident individual is taxed on his chargeable income at graduated rates from 2% to 30% after the deduction of tax reliefs. However, an individual with chargeable income of less than RM2,500 is taxed at zero rate. Personal Reliefs
    The chargeable income of an individual resident is arrived at by deducting from his total income the following personal reliefs:
      (a) Personal = RM5,000 (a further relief of RM5,000 if the taxpayer is a disabled person)

      (b) Wife = RM3,000 (a further relief of RM2,500 if the wife is a disabled person)

      (c) Medical expenses of parents up to a maximum of RM5,000. Medical expenses for serious illnesses for individual, wife or child up to a maximum of RM5,000.

      (d) Expenditure for purchase of basic support equipment for the individual, his wife, child or parent who is disabled the up to a maximum of RM5,000

      (e) Unmarried children below the age of 18 = RM800 per child

      The maximum relief for unmarried children (regardless of age) receiving full-time education in universities and institutions of higher education in Malaysia is four times the normal relief.

      (f) Incapacitated children RM5,000 per child

      (g) Contributions to the Employees Provident Fund and insurance or takaful premiums for life policies are allowed a maximum total tax relief of RM5,000.

      A further tax relief of RM2,000 is given for insurance or takaful premiums with respect to medical and educational purposes.

A married woman whose income is separately assessed generally has her overall tax liability reduced, although this may not always be the case. The separate assessment covers all her income sources. She may, however, elect for joint assessment, in which case, the husband is given a wife relief of RM3,000.
Tax rebate
    Tax liability of a resident individual is reduced by rebates which are granted as follows:

      (a) For an individual with a chargeable income not exceeding RM10,000, a rebate of RM110 is given. A further rebate of RM60 is given for his wife. A wife who is assessed separately will be entitled to a rebate of RM110 if her chargeable income does not exceed RM10,000.

      (b) The equivalent of amount paid in respect of any zakat, fitrah or other Islamic religious dues which are obligatory.

      (c) A sum of RM400 for the purchase of a computer by an individual or wife.

      (d) The amount of fee paid to the government for the issue of an employment pass, visit pass or work permit.

Non-resident Individual

Generally, a nonresident individual is liable to tax at the rate of 30% and he is not entitled to any personal relief. He is entitled to claim tax rebate only for item (d) as stated in para 4.1 above. However, for the following types of income, nonresident individuals are subject to a withholding tax which is a final tax:
(a)Special classes of income
- use of moveable property
- technical advice, assistance
or services
- installation services on the
supply of plant, machinery, etc.
- personal services associated
with the use of intangible
(b)Services of a public entertainer15%

An employee on a short-term visit to Malaysia enjoys tax exemption in respect of his income from an employment exercised in Malaysia when his presence does not exceed 60 days in a calendar year.

However, the income of a nonresident individual who performs independent services such as consultancy services is not exempted from tax.

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Knowledge Base ID :   1338
Last Reviewed :   May 31, 2001

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