When you file your personal income taxes, a main section of your form will be devoted to declaring the income you earn. This can beas simple as simply checking the figure on your EA form and filling it in. But when things like additional allowances and benefits come into play, it may seem a little more complicated.
What counts as “income from employment?”
Statutory income from employment refers to not only your monthly salary, but also any commission, bonus, allowances, perquisites, benefits-in-kind, and even accommodation. Of course, there are certain types of income within this list that does not have to be included in your income for tax purposes – in other words, income that is exempted from tax. If you are given a tax exemption up to a certain value, you don’thave to include that amount in your declaration of income.
Perquisites, benefits-in-kind, and tax exemptions
A perquisite is a perk or benefit given to you by your employer, like travel and medical allowances. Benefits-in-kind are also a type of benefit received by employees which are not included in their salary, such as cars, furniture, and personal drivers. Regardless of what they’re called, you have to keep track of the additional benefits given to you because they may either be taxable or tax exempt. Here is a list of perquisites and benefits-in-kind that you can exclude from your employment income.
| Perquisite/Benefit-in-kind | Tax Exemption Limit (per year) |
| Petrol, travel, toll allowances | Up to RM6,000. If the amount exceeds RM6,000, further deductions can be made in respect of amount spent for official duties. |
| Parking allowance, including parking rate paid by employer directly | Fully exempted |
| Meal allowance received on a regular basis | Fully exempted |
| Medical benefits (including traditional medicine and maternity expenses) | Fully exempted |
| Child care allowance for children up to 12 years old | Up to RM2,400 |
| Benefit, whether in money or otherwise, for past achievements, service excellence, or long service award, etc | Up to RM2,000 |
| Gift of fixed line telephone, mobile phone, etc registered in employee’s name | Limited to 1 unit for each asset |
| Monthly bills for phone or broadband line registered in employee’s name | Limited to 1 line for each category of asset |
| Company goods provided free or at a discount to employee, spouse, or unmarried children | Up to RM1,000 |
| Company goods provided free or at a discount to employee, spouse, or unmarried children | Amount of discount or amount of services provided free |
| Subsidised interest for housing, education, or car loan | Fully exempted if total loan amount does not exceed RM300,000. For exceeding amounts, there is a calculation formula that you can find in the public ruling for this allowance. |
| Leave passage (vacation time paid for by employer) | Exempted up to 3x in a year for leave passage within Malaysia (fares, meals, accommodation) and 1x outside Malaysia (up to RM3,000 for fares only) |
| Income tax borne by employer | Total amount paid by employer |
*These tax exemptions are not applicable for directors of controlled companies, sole proprietors, and partnerships.
What happens if you need to declare a benefit-in-kind as part of your employment income? You can’t exactly put down “one car and one driver” on your form as part of your income, so you’ll have to prescribe it a monetary value in order to be taxed. This can be done through the formula method or the prescribed method. If you would like to know more about these methods of calculation, PwC offers a good explanation in its Malaysian Tax Booklet.
Other tax exemptions and sources of income
You are required to pay taxes for your income arising from any rent received. However, under previous Covid-related economic stimulus packages and subsequently Budget 2022, property owners who rent their properties are entitled to a special tax exemption (for SME and non-SME tenants) if they provide a rental reduction of at least 30% to their tenants. This exemption is applicable for the period until June 2022.
Interest earned from the following institutions are tax exempt: licensed banks, Islamic banks, or finance companies, developed financial institutions, Lembaga Tabung Haji, the Malaysia Building Society Berhad (MBSB), and the Borneo Housing Finance Berhad. Dividends received from exempt accounts of companies, cooperative societies, and approved unit trusts are also exempt from tax.
Women returning from the workforce are eligible for income tax exemption under TalentCorp’s Career Comeback Programme if they were away from the workforce for at least two years. This is applicable until 2023, as announced in Budget 2020.
Other tax exemptions you may take advantage of are:
- Compensation for loss of employment
- Death gratuities
- Income derived from research findings (50% exemption)
- Pensions after the age of retirement or ill health
- Retirement gratuity after the compulsory age of retirement after 10 years of continuous service or ill health
- Scholarships
Don’t overpay your taxes
Malaysia operates on a self-assessment system when it comes to income tax, so the taxpayer is responsible for calculating their own chargeable income and payable tax. That’s why you need to be aware of which parts of your income is taxable or exempt. Hopefully, this article has helped highlight some tax exemptions you weren’t aware of before so you can file your taxes more accurately.
If you have any questions, do let us know in the comments! You can also check out our annual income tax guide for 2023 (YA 2022), and other tax-related articles, such as:
- Everything You Should Claim As Income Tax Relief Malaysia 2023 (YA 2022)
- Income Tax Malaysia: What’s New For YA 2022?
- MyTax: One-Stop Portal To Make Tax Filing More Convenient
- Malaysia Income Tax: An A-Z Glossary
- How To File Your Taxes For The First Time
- How To File Your Taxes As A Freelancer
- How To File Income Tax For Your Side Business
- How To File Your Taxes If You Changed Or Lost Your Job Last Year
Find more income tax related content in our Income Tax page.
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Jacie Tan
Jacie Tan
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Calvin
3 years ago
If my EA form total income includes travel allowances, can i deduct my travel allowances out from that total income in my income tax form?
275
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Norasyikin Abas
3 years ago
hi i would to know whether or not i should do my tax filing for YA2020 as i just returned to workforce after 5 yrs of not working. I am a woman and was an accountant and just resumed working as a chartered accpuntant starting from Dec2019.On a related note, should I pay the MTD as well?Thanks in advance for your valuable advice as I need to know what should be done.
34
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Vignesh M
3 years ago
Any tax benefits / relief applicable for foreign workers in malaysia (Expats) ?
1
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jack
2 years ago
hi, if my employer gives me an allowance for my car loan and housing, is it tax exempt?
16
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Yap Kim Yeong
2 years ago
Bought a vehicle under staff’s purchase, is the discounted amount taxable?
My employer has lump this amount to car allowance in the EA form
-2
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Anonymous
2 years ago
If my salary is pay by cash how to submit?
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Gina
1 year ago
Hi, may i know can i deduct the benefits in kind (B3)(company car)from my total employment income ?
-1
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Hilda Vandermeulen
1 year ago
Im an ex pat… Under M2H programme.. Is interest earned from islamic dividend tax exempt
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Pang Tun Yau
1 year ago
Reply to Hilda Vandermeulen
Dividends are tax exempt in Malaysia.
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