Employment income - Gross income from employment includes wages, salary, remuneration, leave pay, fees, commissions, bonuses, gratuities, perquisites or allowances (in money or otherwise) arising from employment.
An individual employed in Malaysia is subject to tax on income arising from Malaysia, regardless of where the employment contract is signed or the remuneration is paid. Gross income also includes income for any period of leave attributable to employment in Malaysia and income for any period during which the employee performs duties outside Malaysia incidental to the employment in Malaysia.
Employee benefits and amenities not convertible into money are included in employment income.
Short term visitors to Malaysia enjoy a tax exemption on income derived from employment in Malaysia if their employment does not exceed any of the following periods:
- a period totalling 60 days in a calendar year
- a continuous period or periods totalling 60 days spanning two calendar years
- a continuous period spanning two calendar years, plus other periods in either of the calendar years, totalling 60 days
Non-citizen individuals working in Operational Headquarters (OHQs), Regional Offices, International Procurement Centres (IPCs) and Regional Distribution Centres (RDCs) are taxed only on that portion of income attributable to the number of days that they were in Malaysia until the expiration of the incentive (generally 10 years) granted by the Malaysian Investment Development Authority. The incentive is granted to the company and begins with the year of assessment stipulated in the approval letter issued by the Malaysian Investment Development Authority.
Effective 1 May 2015, the new Principal Hub incentive scheme has been implemented to replace these OHQ, IPC and RDC incentives. This new scheme allows multinational companies to enjoy several benefits including hiring expatriates based on their business requirements.
Self-employment and business income - All profits accruing in Malaysia are subject to tax.Remittances of foreign-source income into Malaysia by tax residents of Malaysia were not subject to Malaysian income tax until 31 December 2021. For the period from 1 January 2022 to 31 December 2026, conditional tax exemption applies to foreign income received by a person resident in Malaysia, excluding any source of income from partnership business in Malaysia.
Income from any business source is subject to tax. A business includes a profession, a vocation or a trade, as well as any associated manufacture, venture or concern.
Contract payments to non-resident contractors are subject to a total withholding tax of 13% (10% for tax payable by the non-resident contractor and 3% for tax payable by the contractor’s employees).
Income derived in Malaysia by a non-resident public entertainer is subject to a final withholding tax at a rate of 15%.
Individuals may carry forward business losses indefinitely.
Investment income - Interest income received by individuals from monies deposited in approved institutions is exempt from tax.
Other interest, dividends, royalties and rental income are aggregated with other income and taxed accordingly. Dividends received by individuals are exempt from tax, effective from the 2008 year of assessment.
For the 2018 year of assessment,a 50% exemption applies to rental income received from residential homes if the following conditions are met:
- rental income does not exceed MYR 2,000 per month for each residential home.
- the residential home must be rented under a legal tenancy agreement between owner and tenant
For the 2020 to 2022 years of assessment, property owners who offer at least 30% rental discounts to small and medium enterprise tenants from January 2021 to June 2022 are entitled to a special deduction for the rental reduction.
Certain types of income derived in Malaysia by non-residents are subject to final withholding tax at the following rates:
