Personal Income Tax

Personal Income Tax Services in Kuala Lumpur, Malaysia

Personal Income tax is imposed on individuals who are considered tax residents of the country. To be considered as such, he or she must meet the following conditions:

  • In Malaysia for at least 182 days.
  • In Malaysia for a shorter period, but has been physically present in the country for more than 182 days in the past year.
  • Resides in Malaysia

Malaysia uses a combination of flat and progressive rates to compute for Personal Income Tax. Depending on the individual’s duration and business activity in the country, the rate may vary. To help you manage your Personal Income Tax, Bestar Consulting offers the following packages and fees for Personal Income Tax services:

  • Income Tax Submission of Form BE/B/M/MT:
    • Active business operation: RM 1,800
    • Rental income: RM 1,250
    • Salary income: RM 600
  • Partnership Form P Submission: RM 600
  • Personal Income tax filing Malaysia
    NOTE: All services are subject to an additional 6% service tax.

Personal Income Tax Planning

Your income tax liability is determined by tax residency and the amount of chargeable income. Only income sourced in Malaysia is subject to the income tax, whether you’re a resident or not. Additionally, the payable tax assessed on the current year ranges from 1st of January to 31st of December.

According to the progressive personal income tax system, the rate of your tax increases as your income increases. In 2020, the government increased the maximum tax rate. Now, it starts at 0% and can reach up to 30% (which was previously 28%) only.

Now that you have a better idea of personal income tax, let’s move on to personal income tax filing. This entails the following points:

  • The employer should give Form EA to the employee no later than the last day of February the following year.
  • Employees should finish filing Forms BE, BT, M, and MT before the 30th of April the following year.
  • Employers and business owners should finish filing Form B before the 30th of June the following year.
  • For partnerships, excluding limited liability partnerships, should finish filing Form P by the 30th of June the following year.

Employer’s Responsibilities

This is the list of requirements that the employer must handle as part of the Personal Income Tax system:

  • Form CP 22: Through this form, the employer must notify IRBM on the commencement of employment of employees within one month of their employment.
  • Form CP 22A Through this form, the employer must notify IRBM about the employee’s employment termination at least 30 days before the date of termination.
  • Form CP 21: Through this form, the employer will notify IRBM of the departure of the employee, which will last for more than three months.
  • Form E: Through this form, the employer will finalize the employee’s income which must be submitted by the 31st of March the following year.
  • Form EA: This is a Statement of Remuneration that is given to the employee for the employee’s personal tax return purposes.

Employer’s Responsibilities Under MTD

The Monthly Tax Deduction (MTD) system covers the withholding tax from the employment income. The employer’s responsibilities under the MTD are as follows:

  • Deduct MTD from the employee each month, following the Schedule of Monthly Tax Deduction. The amount of which must be paid to the Director-General
  • Make additional deductions from the income of employees in compliance with Rule 4 of Monthly Tax Deductions Rules.
  • Pay to the Director-General within the first 15 days of every month.
  • Submit MTD payments alongside accurate and complete employee details:
    • Employee Name
    • Income Tax Number (if applicable)
    • Identity Card Number
    • The total amount of MTD

Employee’s Responsibilities to the Employer

Additionally, employers are responsible for informing their employees of the necessary documentation to be submitted to them (i.e., employer) as part of the Personal Income Tax regulations.

  • TP3 Form: This form contains information on an employee’s previous employment.
  • TP1 Form: to be submitted when an employee wants to receive rebates or deductions per month. This form is subject to approval by the employer.
  • TP2 Form This form is required for employees who have received benefits in kind (BIK) and value of living accommodation (VOLA) as part of monthly remuneration by MTD. This is still subject to approval by the employer.
  • Prescribed Form with the Employee’s Accurate and Complete Information

Responsibilities of Employees or Self-Employed Individuals

Employees and self-employed individuals have a different set of responsibilities to meet the requirements imposed by the Personal Income Tax System. These include the submission of the following forms:

  • Form B: Form for local residents who carry on business in Malaysia.
  • Form BE: Form for local residents who do not own or operate a business.
  • Form BT: Form for local residents who are knowledgeable or expert workers.
  • Form M: Form for non-occupants who carry on a business, employment, or other sources of income.
  • Form MT: Form for non-occupants who are knowledgeable or expert workers.

Partnership’s Responsibilities

Although partnerships don’t have to pay tax, they still need to file an annual income tax return by submitting a Form P. This shows that all the income earned and all the expenses made have been deducted by the partnership throughout the year.