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Any individual who has income derived from Malaysia, received in Malaysia or from outside Malaysia, for a year of assessment is liable to tax in Malaysia. All persons staying in Malaysia for more than 182 days are considered as residents under Malaysian tax law, regardless of nationality.

Expatriates who are in Malaysia under the 'Malaysia My Second Home Programme' are not required to pay tax on their pension or income remitted from abroad.

Individual Taxes in Malaysia

The Inland Revenue Board of Malaysia is the institute for taxation and provides clear and detailed information about all tax issues.

The income tax of non-residents is calculated on a three-step tax rate, 27%, 15% and 10%, depending on the type of income.

The income tax rate for residents is calculated on the amount of income and is much more precise. The income is classified into 8 different tax groups ranging from 0% to 26%.

Tax deductions are available, including medical expenses and education fees.

Malaysian Tax Returns

All who are subject to taxation must file a Malaysian tax return. The submission deadline is the 30th of April for the preceding tax year. This deadline cannot be extended. A tax year equals a calendar year.

You will receive an Income Tax Return Form from the Inland Revenue Board of Malaysia. Residents have to fill in a BE Form, non-residents an M Form. You have to fill the respective forms completely and to return them within 30 days to an IRBM (Inland Revenue Board of Malaysia) office. After your declaration has been processed, your credit in the account will be refunded to you automatically.

Sales Tax in Malaysia

Instead of V.A.T., there are two other types of consumption taxes, namely service tax and sales tax. It is planned to introduce a combined Goods and Services Tax (GST) but this step has been currently put on hold.

The sales tax has 3 rates:

• 5% - 10% - Non-essential foodstuffs and buliding materials
• 15% - cigarettes and alcohol
• Basic foodstuffs, books and certain tourist and sports goods are exempted

Service tax is imposed in Malaysia on certain services and goods, like food and drinks, which is provided in establishments like restaurants and hotels. It is currently fixed at 5%.