Personal Income Tax Malaysia 2023: The Definite FAQ Guide - YH TAN & ASSOCIATES PLT (2024)

Personal income tax in Malaysia (aka. Individual income tax Malaysia) can be a complex and confusing process, especially for those who are new to the system or filing for the first time. With so many questions and uncertainties, it can be difficult to know where to start.

That’s why we have created the “Personal Income Tax Malaysia 2023: The Definite FAQ Guide.” This guide provides comprehensive answers to the most frequently asked questions about personal taxation in Malaysia so that you can file taxes with confidence and ease.

If you want to get the answer to any particular question, just click on that question from the following list, which will take you directly to that section.

List of Questions

What is Personal Income Tax in Malaysia?
What is the Progressive Tax System?
What is the Minimum Salary to Pay Income Tax in Malaysia for Individual?
How much is Personal Income Tax in Malaysia?
How much is Personal Income Tax in Malaysia in 2023?
How to Calculate Chargeable Income or Taxable Income?
When you Can File Personal Income Tax in Malaysia?
What is the Personal Income Tax Due Date 2023?
What Types of Income is Taxable in Malaysia?
What are the Personal Income Tax Reliefs you Can Claim in Malaysia in 2023?
What Income is Not Taxable in Malaysia?
Do you Need to File Taxes if you Have No Job?
How to Declare Personal Income Tax in Malaysia 2023?
How to Calculate Individual Income Tax or Personal Income Tax?
How to Pay Personal Income Tax In Malaysia?
How to Pay your Income Tax in Installments?
What’s the Penalty for Late Income Tax Payment?
How to Appeal for Late Payment Penalty?
What is the Income Tax Payment Code?
What are the Income Tax Exemptions for 2023?
What are the Income Tax Rebates 2023?

Now, let’s dive into the main content!

What is Personal Income Tax in Malaysia?

In simple words, the personal income tax in Malaysia, or Individual income tax in Malaysia is levied on the salaries, wages, dividends, interests, and other types of income that an individual earns during a year. This tax is levied by the Malaysian government and is calculated based on a progressive tax rate system.

Note: A person becomes a Malaysian tax resident if he/she stays for 182 days in Malaysia in a calendar year.

What is the Progressive Tax System?

Income tax in Malaysia is a progressive tax system as tax increases as the income of individuals increases. One can benefit from special tax rates for certain types of income, like dividends and capital gains. You only need to pay taxes on the income you earn within the country, thanks to the “territorial” income tax system.

What is the Minimum Salary to Pay Income Tax in Malaysia for Individual?

Individuals who earn a minimum of RM34,000 (approximately RM2,833 per month or RM3,000 net income after EPF deductions) from all sources of income, including but not limited to salary, must register for a tax file.

How much is Personal Income Tax in Malaysia?

If you are curious to know about the Malaysia personal income tax rate, it starts from 0% and goes up to 30%. The amount of tax payable for this year, 2023, can be calculated by considering your chargeable income for YA 2022.

How much is Personal Income Tax in Malaysia in 2023?

With the announcement of the Malaysia Budget 2023, an individual with a taxable income of between RM50,001 and RM70,000 can enjoy a reduction in tax from 13% to 11%. The tax rate for those falling within the RM70,001 to RM100,000 bracket is also reduced from 21% to 19%.

New and updated personal income tax rates/individual income tax rates are as follows:

Personal Income Tax Rates Malaysia 2023

Resident Individuals

• The term ‘Qualified Person’ is defined as a knowledge worker living in Iskandar, Malaysia, who is taxed at 15% on income earned through employment in a designated company. Such a company should be engaged in a qualified activity within that specified area or region.
• Under the Returning Expert Programme, an approved individual is a resident who is taxed for 5 consecutive years at a rate of 15%.
• A non-citizen is an individual taxed at a flat rate of 15% for 5 consecutive years. Such a person must be holding C-Suite positions/key positions and should be receiving a minimum monthly salary of RM25,000. This incentive is only available to 5 non-resident persons who are employed in a company. Such a company must have received a relocation tax incentive under PENJANA initiative.
• The foreign-sourced income received by a tax-resident person is exempted from tax from 1 January 2022 to 31 December 2026 (referred to as a transitional period). However, this exemption isn’t available for the income received via a partnership business operating in Malaysia.

Non-resident Individuals

If you want to know about tax changes in budget 2022, here is our detailed blog post on “Malaysia’s Budget 2022: The Key Tax Changes“.

How to Calculate Chargeable Income or Taxable Income?

Here’s the simple formula for calculating your chargeable income:

Total Chargeable Income = Total Annual Income – Total Exemptions – Tax Reliefs

If a person earns RM34,000 (after EPF deduction) as an annual employment income, he/she must register a tax file. This rule is applicable with effect from 2015. For instance, an individual earning at least RM3,000 a month must register a tax file.

When Can you File Personal Income Tax in Malaysia?

The deadline for filing your taxes online of an employed individual normally is April 30 yearly. Although there is a 15-days grace period, you are encouraged to file your income tax on time to avoid penalties. Do check ahead if the government has announced an extension.

What is the Personal Income Tax Due Date 2023?

The personal income tax due date (without business income) was 30 April. The income tax for individual in malaysia filing deadline for the year 2023 has been extended. Due to the April 30 deadline falling on a Sunday, taxpayers have until May 1, 2023 to file their 2022 return and pay any owed taxes without incurring interest or penalties.

The personal income tax due date (with business income) for submission of Form B for the YA 2022 is 30 June 2023. The grace period is given until the 15th of July 2023 for the e-Filing of Form B (Form e-B).

What Types of Income is Taxable in Malaysia?

Listed below are the different types of income that are taxable in Malaysia:

Business or Profession: This tax applies to all types of existing professions and companies, which allow depositing money into bank accounts. As a Youtuber, Freelancer, or influencer, it’s highly recommended to state your income and register the business. If you don’t do it, the bank will chase you when finding that a lot of money is going into your account.

Employment: Normally, employers open files in order to pay for the salaries of their employees. For those employees who are receiving a salary and are deemed eligible for the tax deduction, there is a substitute for Monthly Tax Deduction (MTD).

Rent: Gaining profit by renting land, a house, a vehicle, or even goods is also taxable when someone uses them, and the owner receives money in return.

Royalties: These include the payments received by a company or individual for the ongoing use of their assets, such as singers or works of authors.

Interests & Dividends: If you are receiving a dividend, which is calculated as income, the dividend you earned are taxable. However, there are some benefits or dividends that are exempted from tax, including ASB, Unit Amanah, Tabung Haji. Also, the interest obtained on the loans an employer provides to the employees is taxable.

Discounts: These discounts are referred to as an income you don’t receive in the form of cash but as a benefit-in-kind. For instance, if you receive a discount when purchasing a refrigerator from the company you are working for, the discounted amount is also taxable.

Premiums: Taxes could also apply to rewards and gifts like vouchers, vacations, cash, telephones, laptops, or even houses. (Bonuses aren’t considered premiums as per LHDN rules).

Pensions: This is an amount received by retired government servants.

Annuities: These are the regular and recurring payments received by employees and are paid by the company for a specific period. Those employees who subscribe to an annuity product can retire comfortably without any need to work for some time. Annuities included in a person’s Will’ might continue until the recipient’s death.

Perquisites: This includes company credit cards, bill claims, sponsored club memberships, loans from the company, personal driver, sponsored child tuition fee, and any other benefits offered by the employer, which are cashable.

What are the Personal Income Tax Reliefs you Can Claim in Malaysia in 2023?

When it comes to tax reliefs in Malaysia, personal reliefs and deductions can be helpful for reducing your taxable income. This, in turn, can lower your taxes. If you plan it successfully and properly, you can save a considerable amount of taxes.

Every taxpayer in Malaysia is allowed to deduct their personal reliefs once their income reaches a taxable level. Apart from this, you can also take benefits of various other reliefs that are deductible from your chargeable income if your money is spent in a particular category for the year.

Listed below are the Personal Income Tax Reliefs you can claim in Malaysia for YA (2023).

What Income is Not Taxable in Malaysia?

The amount received as a death gratuity is not taxable in Malaysia. Besides, the money paid to an individual as a scholarship is also exempted from tax, no matter whether it is not related to the employment of such an employee.

Do you Need to File Taxes if you have No Job?

Yes! Even if you haven’t earned the taxable amount, you are bound to file your taxes each year once you have registered your tax file.

How to Declare Personal Income Tax in Malaysia 2023?

For this purpose, you can take advantage of “The Inland Revenue Board (IRB) Return Form (RF) Filing Programme for 2023”. It is now available on the official portal of HASiL. This program serves as a reference for taxpayers when it comes to submitting individual income tax malaysia in 2023.

How to Calculate Individual Income Tax or Personal Income Tax?

If you earn RM 70,000 each year while living in Malaysia, your payable tax would be RM 10,789. After deducting the tax, your net pay will be RM 4,934/month or RM 59,211/year. Your marginal tax rate is 23.7%, and the average tax rate is 15.4%. Your immediate additional income would be taxed in accordance with the marginal tax rate.

How to Pay Personal Income Tax In Malaysia?

If you have paid additional income tax through monthly tax deductions, the excess amount is reimbursed into your bank account.

If the bank account details of an individual aren’t available, the excessive amount will be reimbursed through a cheque or BBBC (a tax refund voucher system).

On the other hand, tax dues can be paid through a wide range of methods like collection agents, e-banking, credit card, ATMs, etc.

Here are the various ways to pay income tax in Malaysia for personal:

1) Pay Income Tax via FPX Services

By using the FPX (Financial Process Exchange) gateway, you can pay your individual tax in Malaysia online.

First, you must have an internet banking account in a bank compatible with FPX.

Here is the list of participating banks:

• Alliance Bank & Alliance Islamic Bank
• Affin Bank & Affin Islamic Bank
• AmBank & AmBank Islamic Bank
• Bank Rakyat
• Bank Islam
• Bank Muamalat
• Bank Simpanan Nasional
• CIMB Bank & CIMB Islamic Bank
• HSBC & HSBC Amanah (Not available for Retail)
• Hong Leong Bank & Hong Leong Islamic Bank
• Kuwait Finance House
• Maybank & Maybank Islamic Bank
• OCBC Bank
• Public Bank & Public Islamic Bank
• RHB Bank & RHB Islamic Bank
• Standard Chartered & Standard Chartered Saadiq
• Deutsche Bank (not available for Retail)
• UOB Bank

To pay your tax in Malaysia, visit ByrHASiL at https://byrhasil.hasil.gov.my/

2) Pay Income Tax via Credit Card

It’s possible to pay your income tax via a credit card issued by the FPX participating bank at https://byrhasil.hasil.gov.my/

All Mastercard, VISA, and American Express credit cards issued in Malaysia can be used for paying personal taxation in Malaysia.

3) Pay Income Tax via LHDN Agents

You can choose from various payment methods when paying through an appointed agent.

a) Pay your tax over the counter at bank branches: You can pay for your Income Tax, Monthly Tax Deduction (MTD), and Real Property Gains Tax (RPGT) by cheque and cash at the following nationwide branches of LHDN agents:

• Affin Bank
• Bank Rakyat
• Bank Simpanan Nasional
• CIMB Bank (MTD)
• Maybank
• Public Bank (MTD)
• POS Malaysia (cash payment only)
• RHB Bank

When filling out the payment slip, make sure to provide the following information:

1. Year of assessment of the respective payment/Year and month of the MTD payment
2. Payment Code
3. Income tax number/Employer number
4. Name of Taxpayer/Employer
5. Identity card number
6. Payment amount

b) Pay your income tax online: The following agents have been designated with the capability to accept tax payments through electronic means.

Taxpayers receive their tax returns through various banks, including

• Al-Rajhi Bank
• Affin Bank
• Bank Islam
• Bank Rakyat
• CIMBClicks
• Hong Leong Online
• MEPSCASH
• RHB Bank

c) Pay your tax at the ATM: It’s possible to pay income tax for individual in Malaysia and RPGT through ATMs at appointed agent banks, including

• Maybank Berhad
• Public Bank Berhad
• CIMB Bank Berhad

For this purpose, you should possess an ATM card from any of the banks listed above. And to complete the transaction, you are required to provide your income tax reference number.

d) Pay your tax via Telebanking: The payment of RPGT and Individual Income Tax can also be made through telebanking service only at Maybank Berhad – Kawanku Phone Banking (1-300-88-6688).

e) Payment via Cheque Deposit Machine (CDM): It’s also possible to pay your Personal Income Tax and RPGT payment via a CDM at Public Bank Berhad.

f) Payment via Cash Deposit Machine (CAM): If you want to pay your Individual Income Tax in cash, you can use a Cash Deposit Machine (CAM). These machines are available at CIMB Bank Berhad.

How to Pay your Income Tax in Installments?

If you don’t have the money to pay the full amount of your personal taxation and cannot make this payment until April 30 (the payment deadline). In that case, it’s possible to apply for your tax payment in installments.

For this purpose, you must file a ‘Letter of Appeal’ to the Collection Unit of your LHDN branch. This is the branch where your income tax file is physically kept and maintained. The Collection Unit should receive your ‘Letter of Appeal’ before April 30.

It’s important to note that even if the appeal is granted, a penalty for late payment will still be applied.

What’s the Penalty for Late Income Tax Payment?

If you cannot pay your income tax on April 30, you will have to pay the 10% penalty on the unpaid tax balance. In addition, if the tax balance and the penalty aren’t paid within 60 days of the date when this penalty was imposed, a 5% additional penalty will also be imposed on the total payable amount.

How to Appeal for Late Payment Penalty?

If you disagree with the imposition of a late payment penalty, you can file an appeal in writing against it. The appeal is filed to the relevant branch within 30 days from the issuance date of the Notice of Increased Assessment.

Even if the appeal is made, it is obligatory to pay the penalty. If your appeal is successful, LHDN will refund the penalty amount paid by you.

What is the Income Tax Payment Code?

Providing the income tax payment code is required when making your tax payment. If you don’t know your payment code, just take a look at the list given below showing all the payment codes:

What are the Income Tax Exemptions for 2023?

Malaysia’s Budget for 2023 offers Several Tax Incentive Extensions and Certain Tax Rate Changes:

On 7 October 2022, Malaysia announced its Budget for 2023. The noticeable tax measures of this budget include the extension/expansion of several tax incentives and certain tax rate changes.

A few of these noticeable measures are:

The individual income tax Malaysia brackets are revised as follows. This involves reductions and increases in certain tax rates. The revised rates for the assessment year 2023 are as follows:

• MYR 0 to 5,000 – 0%
• MYR 5,001 to 20,000 – 1%
• MYR 20,001 to 35,000 – 3%
• MYR 35,001 to 50,000 – 8%
• MYR 50,001 to 70,000 – 11% (down from 13%)
• MYR 70,001 to 100,000 – 19% (down from 21%)
• MYR 100,001 to 250,000 – 24%
• MYR 250,001 to 400,000 – 25% (up from 24.5%)
• MYR 400,001 to 600,000 – 25%
• MYR 600,001 to 1,000,000 – 26%
• MYR 1,000,001 to 2,000,000 – 28%
• over MYR 2,000,000 – 30%

The 15% reduction of the tax rate is also introduced for qualifying SMEs. These rates for the assessment year 2023 are as follows:

• First MYR 100,000 in taxable income – 15% (new rate)
• Taxable income of MYR 100,001 to 600,000 – 17% (current reduced rate)
• Taxable income exceeding MYR 600,000 – 24% (standard rate)

A tax deduction of up to MYR 1.5 million for three assessment years is also extended for listing expenses incurred by technology-based companies in the Access, Certainty, Efficiency (ACE) Market and SMEs in the Leading Entrepreneur Accelerator Platform (LEAP) Market starting from the assessment year 2023 till the assessment year 2025.

Also, the scope of the deduction is also expanded to cover the cost of listing the technology-based companies on the BURSA Main Market;

The new schedule for the reinvestment allowance of up to 60% is also introduced. It applies to capital expenditure for 15 consecutive years, granted only to selected agricultural and manufacturing sectors. This 60% allowance might also be granted to selected tourism and hospitality projects for 5 consecutive years. The reinvestment allowance is applicable to expansion, renovation, and modernization activities for the following:

• 1-to-5-star hotels that are registered with the Malaysian Ministry of Tourism, Arts, and Culture (MOTAC); and
• Selected tourism projects, including conference centers and theme parks, projects registered with MOTAC;

The tax incentives for health tourism are also extended for the applications received by MIDA from 1 January 2023 to 31 December 2025. This includes an investment tax allowance of 100%, which is applicable only to eligible capital expenditure for 5 years. This can be deducted up to 100% of the statutory income by private healthcare companies that qualify and are carrying out expansions, making new investments, or carrying out renewal/modernization activities;

The incentives for exporting private healthcare services are also extended from the assessment year 2023 to the assessment year 2025. The incentives include an income tax exemption, which is equal to 100% of the total value of the increased export of services. It can be deducted up to 70% of statutory income gained through the export of healthcare services to foreign health tourists;

The tax incentives for tourism operators are also extended for the assessment year 2023. The revised conditions include a 100% tax exemption for the statutory income earned through a business offering package tours in Malaysia. These package tours must be joined by not less than 200 foreign tourists each year or 400 local tourists each year;

The green technology tax incentives are also extended and revised for the applications received by the Malaysian Investment Development Authority (MIDA) from 1 January 2024 to 31 December 2025. These incentives include:

• A Green Investment Tax Allowance (GITA) of 60% for solar activities and 100% for other qualifying activities. It can be deducted up to 70% of the statutory income for 3 assessment years for solar activities and 5 assessment years for other qualifying activities;
• A Green Income Tax Exemption (GITE) up to 70% of the statutory income for eligible green service activities for 3 assessment years for solar activities and 5 assessment years for other qualifying activities; and
• A GITE up to 70% of statutory income for up to 10 assessment years for solar leasing activities;

New tax incentives for investment in the manufacturing of Electric Vehicle (EV) charging equipment are also introduced. The companies who have submitted their applications to MIDA from 8 October 2022 to 31 December 2025 can enjoy the following incentives:

• A 100% Income Tax exemption for statutory income from the assessment year 2023 to the assessment year 2032. This exemption is for companies who have made initial investments in EV charging equipment manufacturing; or
• An investment tax allowance of 100% for 5 years, which can be deducted up to 100% of statutory income for each assessment year;

New tax incentives are also introduced to encourage investment in Carbon Capture and Storage (CCS). If the applications are received by the Ministry of Finance from 1 January 2023 to 31 December 2027, the companies applying can have the following incentives:

• For companies which perform in-house CCS activities:
  • An investment tax allowance of 100% for an eligible capital expenditure that is incurred within 10 years, which can be deducted up to 100% of the statutory income;
  • Full exemption from sales tax and import duty on equipment for CCS technology from 1 January 2023 to 31 December 2027; and
  • A tax deduction for pre-commencement expenses that are allowed within 5 years from the date a company starts its operations;

• For companies that perform CCS services:
  • An investment tax allowance of 100% for eligible capital expenditure, which is incurred within 10 years and can be deducted for up to 100% of the statutory income;
  • A tax exemption of 70% for the statutory income for 10 years; and
  • A full exemption from sales tax and import duty on equipment for CCS technology from 1 January 2023 to 31 December 2027;

For companies that use CCS services, the fee paid for CCS services is considered a tax deduction;

The tax incentives for the food production projects are extended for the next 3 years. These incentives are applicable to the applications that are received by the Ministry of Agriculture and Food Industry (MAFI) from 1 January 2023 to 31 December 2025. The scope is also expanded to include agricultural projects that rely on controlled environment agriculture techniques. These incentives include:

• Companies investing in subsidiary companies, which also carry out new food production projects, can obtain a tax deduction. This equals the amount of investment made in the base year, and
• Companies carrying out food production projects can obtain tax exemption for existing or new company expansion projects:
  • Companies with new expansion projects can obtain 100% income tax exemption for statutory income for 10 assessment years; and
  • The company working on existing expansion projects can obtain 100% income tax exemption for statutory income for 5 assessment years;

The income tax exemption is also increased from 70% to 100% for the statutory income of companies having a BioNexus status. The application period for BioNexus status incentives is also extended by two years. This extension is applicable to the applications received by the Malaysian Bioeconomy Development Corporation from 1 January 2023 to 31 December 2024;

Tax incentives for intellectual property (IP) development are also extended for 3 years. These incentives are available for the applications received by MIDA from 1 January 2023 to 31 December 2025. The incentives include 100% income tax exemption for up to 10 years on qualifying IP income. This income needs to be derived from the qualifying copyrighted and patented software by companies engaged in R&D activities in Malaysia;

Tax incentives for investment in automation in the manufacturing and service sector are also extended and revised. These incentives are also offered to the agriculture sector if the applications are received by the Ministry of Agriculture and Food Industry and MIDA from 1 January 2023 to 31 December 2027. These incentives include

• A 100% accelerated capital allowance (ACA) for eligible capital expenses incurred for buying automation equipment (up to MYR 10 million). The expenditures could be fully claimed within 1 year and;
• A 100% income tax exemption equivalent to the ACA, which is also claimable within 1 year;

Tax incentives for companies producing pharmaceutical products are also extended by three years. These incentives are for the applications received by MIDA from 1 January 2023 to 31 December 2025. The incentives offered are as follows:

• A tax rate of 0% up to 10% for the first 10 years; and
• A tax rate of 10% for the next 10 years;

The Principal Hub 3.0 incentives are also extended by 3 years for applications received by MIDA from 1 January 2023 to 31 December 2025. These incentives include reduced tax rates of 0%, 5%, or 10% for 5 years. The tax rate reduction depends on the nature of the applicant company;

The incentives under the Global Trading Center scheme are also extended up to three years for the applications received by MIDA from 1 January 2023 to 31 December 2025. The incentives include a 10% income tax rate for 5 years, which can be renewed for another 5 years;

Tax incentives for companies carrying out shipbuilding and ship repair (SBSR) activities in Malaysia are extended for another 5 years. These incentives are for applications received by MIDA from 1 January 2023 to 31 December 2027. The incentives are as under:

• For new companies:
  • Pioneer status with a 70% income tax exemption of statutory income for 5 years; or
  • An investment tax allowance of 60% on eligible capital expenditure (incurred within 5 years) and can be deducted up to 70% of statutory income for each assessment year;

• Existing companies can enjoy an investment tax allowance of 60% on eligible capital expenditure (incurred within 5 years) and can be deducted up to 70% of statutory income for each assessment year;

The incentives for new and existing aerospace companies are also extended. These companies must have been carrying out high-value activities in Malaysia for 3 years. The application should be received by MIDA from 1 January 2023 to 31 December 2025. The incentives are as follows:

• For new companies:
  • A 70% to 100% income tax exemption for 5 to 10 years; or
  • An investment tax allowance of 60% to 100% for 5 years, and it can be deducted for up to 70% to 100% of statutory income for each assessment year;

• Existing companies can also obtain an investment tax allowance of 60% for 5 years, which can be deducted for up to 70% of statutory income for each assessment year.

In addition to the above incentives and extensions, it is also confirmed that the Government will introduce the minimum effective tax rate at the global level, which is also recommended under Pillar 2 of the BEPS Action Plan 1. The Government is also planning to implement the Qualified Domestic Minimum Top-up Tax after studying the targeted implementation in 2024.

What are the Income Tax Rebates 2023?

Here are the Tax rebates 2023 for the resident individuals:

The above rebate granted is deducted from tax charged, and any excess is not refundable.

Final Words

Whether you’re a seasoned taxpayer or new to the system, this guide will help you understand the basics of personal income tax in Malaysia. From tax brackets and deductions to filing and compliance, we have covered all the important information you need to know.

With this guide, you can ensure that you’re paying the right amount of tax, avoid penalties and fines, and minimize the hassle of filing individual income tax in Malaysia. With its clear and concise answers to the most common questions, this FAQ Guide about Personal Income Tax Malaysia 2023 or Individual income tax Malaysia 2023 is a must-read for anyone who wants to stay informed and control their personal income tax obligations.