BASIS OF TAXATION
Income tax is generally imposed on a territorial basis in that only income accruing in or derived from Malaysia is liable to tax. However, resident individuals and other non-corporate entities are also taxed on foreign-sourced income remitted into Malaysia. Foreign-sourced income received by resident companies are not subject to tax even if such income is remitted to Malaysia.
Income derived by tax residents from businesses of banking, insurance and air/sea transport operations are assessable on a world income scope.
Relief from double taxation of foreign-sourced income is available by means of bilateral credit if there is a tax treaty or unilateral relief if there is no tax treaty. The relief is restricted to the lower of Malaysian tax payable on the foreign-sourced income or foreign tax paid if there is a treaty or one-half of the foreign tax paid there is no treaty.
Sources of Income Liable to Tax
Sources of income which are liable to income tax are as follows:
Gains and profits from trade, profession and business
Salaries, remunerations, gains and profits from an employment
Dividends, interests or discounts
Rents, royalties or premiums
Pensions, annuities or other periodic payments/li>
Other gains or profits of an income nature not mentioned above.
Chargeable income is arrived at after adjusting for expenses incurred wholly and exclusively in the production of the income. Specific provisions or reserves for anticipated losses or contingent liabilities are not tax deductible. No deduction for book depreciation is allowed although capital allowances are granted. Unabsorbed losses may be carried forward indefinitely to offset against future income.
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.
Income derived by tax residents from businesses of banking, insurance and air/sea transport operations are assessable on a world income scope.
Relief from double taxation of foreign-sourced income is available by means of bilateral credit if there is a tax treaty or unilateral relief if there is no tax treaty. The relief is restricted to the lower of Malaysian tax payable on the foreign-sourced income or foreign tax paid if there is a treaty or one-half of the foreign tax paid there is no treaty.
Sources of Income Liable to Tax
Sources of income which are liable to income tax are as follows:
Gains and profits from trade, profession and business
Salaries, remunerations, gains and profits from an employment
Dividends, interests or discounts
Rents, royalties or premiums
Pensions, annuities or other periodic payments/li>
Other gains or profits of an income nature not mentioned above.
Chargeable income is arrived at after adjusting for expenses incurred wholly and exclusively in the production of the income. Specific provisions or reserves for anticipated losses or contingent liabilities are not tax deductible. No deduction for book depreciation is allowed although capital allowances are granted. Unabsorbed losses may be carried forward indefinitely to offset against future income.
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.
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