Malaysia is an exceptionally nation in terms of taxes. Income taxes similarly low compared to other country.
All persons staying in Malaysia for more than 182 days are considered as residents under Malaysian tax law, regardless of nationality. All persons staying less than 182 are regarded non-residents and are taxed on a different scale.
The income tax of non-residents is calculated on a three-step tax rate, 27%, 15% and 10%, depending on the type of income.
Changes in Tax Rates for Resident Individuals
1. Tax rates for resident individuals whose chargeable income from RM600, 001 to RM1, 000,000 be increased 1%. For the year of assessment 2015, for the same bracket of chargeable income it was 25% and for the year of assessment 2016 it is 26%.
2. Tax rates for resident individuals whose chargeable income exceeds RM1, 000,000 be increased by 3%. For the year of assessment 2015, for the same bracket of chargeable income it was 25% and for the year of assessment 2016 it is 28%.
3. The other tax rates for resident individuals remains the same as for the year of assessment 2015.
Changes in Tax Rates for Non-Resident Individuals
1. Non-Resident individuals are charged at a fixed income tax rate of 25% in 2015. For the year of assessment 2016 it has been increased 3% to 28%.
Tax deductions in Malaysia are available in numerous cases, including medical expenses, purchase of books, computers and sport equipment or education fees.
1. BASIC SUPPORTING EQUIPMENT
The purchase of any supporting equipment for use by a disabled individual, husband, wife, child or parent, may be claimed up to a maximum of RM6,000. Basic supporting equipment includes hemodialysis machine, wheel chair, artificial leg and hearing aids but exclude optical lenses and spectacles.
2. PURCHASE OF BOOKS/MAGAZINES/ JOURNALS/SIMILAR PUBLICATIONS
An amount limited to a maximum of RM1, 000 is deductible in respect of the purchase of Books, magazines, journals or other similar publications (in a form of hardcopy or electronic). For the use of the individual, husband / wife or child.
3. PURCHASE OF PERSONAL COMPUTER FOR INDIVIDUAL
This relief is allowable as a deduction up to a maximum amount of RM 3, 000 for the purchase of personal computer Inclusive of desktop and laptop, notebook and ultra-book which are not used for the purpose of business. This does NOT cover the purchase of equipment which is capable of computer operating functions such as tablet and mobile phones. The deduction is allowable only once in every 3 years.
4. PURCHASE OF SPORTS EQUIPMENT
A relief limited to a maximum of RM300 is deductible in respect of expenses expended by the individual for the purchase of sports equipment for any sports activity as defined under the Sports Development Act 1997. Sports equipment includes equipment with short lifespan e.g. golf balls and shuttlecocks but EXCLUDING sports attire, for e.g. swimsuits and sports shoes.
5. EDUCATION AND MEDICAL INSURANCE
This relief is available with effect from the year of assessment 2012 until the year of assessment 2021. A relief not exceeding RM3, 000 is allowed for the total of contributions made to a Private Retirement Scheme (PRS) approved by the Securities Commission and premiums paid for deferred annuity. The total relief in respect of contributions to PRS and premiums paid for deferred annuity is restricted to RM3, 000 for an individual and RM3, 000 for the wife who has source of income. If the husband or wife elects for joint assessment, the relief allowed for the total of contributions to PRS and premiums paid for deferred annuity is restricted to RM3, 000.
All tax residents 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. 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% and 15%, with 5% applying to non-essential foodstuffs and building materials and 15% to cigarettes and alcohol. Basic foodstuffs, basic building materials, 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%.