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Malaysia – Tax Structure
Tax Payable :-
Malaysian taxation is territorial in scope, whereby income derived from sources in Malaysia is subject to tax. With effect from the YA 2004, income received in Malaysia by any person other than a resident company carrying on the business of banking, insurance, sea or air transport derived from sources outside Malaysia is exempted from tax.
Malaysia currently adopts a Self-Assessment tax regime (SAS) whereby taxpayers have the responsibility to assess the extent of their tax liability and bear the onus of disclosure and representation of information. Under the SAS, the tax authorities will conduct tax audits on taxpayers to ensure proper compliance in respect of returns submitted, failing which penalties will be imposed on tax adjustments made. Based on the Budget 2014 announcement, GST would be implemented from 1 April 2015 and standard GST rate is fixed at 6%. The proposed GST will replace the Sales Tax and Service Tax.
Corporate Tax :-
Resident and non-resident companies in Malaysia are generally subject to corporate tax at the rate of 25% (will be reduced to 24% with effect from YA 2016). However, if a resident company meets the requirements of a small and medium enterprise (SME), it will enjoy a lower tax rate for its first MYR 500,000 of its chargeable income (CI).

Summary of Tax Rates

 

Corporate Tax Rates

YA 2009 to YA 2015

Corporate Tax Rates

YA 2016 and onwards

SMEs (Resident Company)

 

 

-          First MYR 5,00,000of chargeable income (CI)

20%

19%

-          Chargeable Income >MYR 5,00,000

25%

24%

Non – SMEs and Non – Resident Companies

25%

24%

 A company is tax resident in Malaysia if its management and control is exercised in Malaysia. Management and control is normally considered to be exercised at the place where directors' meetings are held.
To qualify as a SME, the paid up capital of the resident company in respect of ordinary shares must be not more than MYR 2.5 million at the beginning of the basis period; and is not part of a group of companies where any of its related companies has a paid up capital in ordinary shares of more than MYR 2.5 million at the beginning of the basis period.
Under the SAS, every company is required to provide an estimate of its tax payable for a YA, 30 days before the beginning of the basis period. The estimate submitted for a particular YA cannot be less than 85% of the estimate/revised estimate of tax payable for the immediate preceding YA. The company is required to pay the estimated tax payable in equal monthly instalments according to the number of months in its basis period. Following from the Budget 2015 announcement, in order to be exempted from filing of a tax estimate for a period of 2 years commencing from the YA in which SME commences operations, the SME must be a tax resident and incorporated in Malaysia.
All companies must file the annual corporate tax returns within 7 months from the end of the accounting period. Effective from YA 2014, it is mandatory for companies to submit tax returns via e-filing and the said return must be based on audited financial statements certified by the approved accountants
Real Property Gains Tax :-
Malaysia does not impose capital gains tax on disposal of capital assets or related transactions, except for the disposal of real property or shares in Real Property Companies which fall within the ambit of Real Property Gains Tax Act 1976.
The Real Property Gains Tax (RPGT) has been re-introduced with effect from 1 January 2010. Gains arising from the disposal of real property and any interest, option or other right in or over such land or shares in real property companies (collectively known as chargeable assets) would be subject to RPGT. Certain disposal of real property assets between family members or within the group of companies may qualify for relief, subject to the conditions met. The determination of RPGT rates depend on the holding period of real properties and shares in real property companies as follows:

 

Date of Disposal from the date of acquisition

Rate provided under Schedule 5 of RPGT Act 1976

 

 

 

Old Rates

With effect from 1.1.2010

With effect from 1.1.2012

With effect from 1.1.2013

Companies

Individuals & Non – Corporate Entities

All Categories of owner

All Categories of owner

All Categories of owner

Within 2 years

30%

30%

5%

10%

15%

3rd year

20%

20%

5%

5%

10%

4th year

15%

15%

5%

5%

10%

5th year

5%

5%

5%

5%

10%

6th year

5%

NIL

Nil

NIL

NIL

 

With effect from 1 January 2014, the RPGT rates on the gains from disposal of real properties and shares in real property companies are reviewed as follows:

Date of Disposal

Real Property Gains Tax Rates

Companies

Individual (Citizen & Permanent Resident)

Individual (Non – Citizen)

Within 3 Years

30%

30%

30%

In the 4th Year

20%

20%

30%

In the 6th Year

15%

15%

30%

In the 7th Year & following Years

5%

0%

5%

 Indirect Taxes :-

Currently, service tax and sales tax are the two major types of consumption taxes levied and charged on certain taxable services and taxable goods in Malaysia. It has been announced by the Malaysian government in the Budget 2014 that the service tax and sales tax will be abolished and replaced by the GST of which the implementation date is 1 April 2015.

Goods & Service Tax (GST) :-

An overview of the proposed GST model to be implemented in Malaysia is summarized as follows:

Scope of Tax:-

• GST is to be charged on goods and services at all levels starting from production, manufacture, wholesale and retail;

• GST is to be charged on goods and services supplied within the country or imported into the country;

• Supplies made by the Federal and State Government departments are not within the scope of GST except for some services prescribed by the Minister of Finance;

• Supplies made by the local authorities and statutory bodies in relation to regulatory and enforcement functions are not within the scope of GST; and,

• GST charged on all business inputs such as capital assets and raw materials is known as input tax while GST charged on all supplies made (sales) is known as output tax.

SERVICE TAX (TO BE ABOLISHED W.E.F. 1 APRIL 2015) :-

• Service tax is a single stage tax applicable to certain prescribed services in Malaysia and the current rate of service tax is 6%. The Royal Malaysian Customs Department (Customs) is the enforcement agency which is responsible for the implementation of existing service and sales system in Malaysia.

• Generally, the imposition of service tax is subject to a specific threshold of the annual turnover (i.e. ranging from MYR 150,000 to MYR 300,000 and etc.) based on the types of taxable services supplied by a taxable person. The threshold would not be applicable for certain prescribed professional and consultancy services.

• A taxable person which meets the requirements set would need to be licensed under the Service Tax Act 1975 before it could collect the service tax from its customers and remit it to the Customs.

• Professional services provided by a company to companies within the same group will generally be exempted from service tax, subject to meeting certain terms and conditions.

• Any service tax that falls due during any taxable period, which is two calendar months, shall be paid to the Customs within 28 days from the expiry of the taxable period.

SALES TAX (TO BE ABOLISHED W.E.F. 1 APRIL 2015) :-

• Sales tax is a single stage tax imposed on taxable goods manufactured locally and/or imported. "Taxable goods" means goods of a class or kind not for the time being exempted from sales tax. Generally, all exports are exempted from sales tax.

• Sales tax is an ad valorem tax and can be computed based on the value of taxable goods sold, used, disposed of, or imported.

• Manufacturers of taxable goods are required to be licensed as a licensed manufacturer and registered with the Royal Malaysian Customs Department and to levy, charge and collect the tax from their customers. For imported goods, sales tax is collected from the importer upon the release of taxable goods from customs control.

• Any sales tax that falls due during any taxable period, which is two calendar months, shall be paid to the Customs within 28 days from the expiration of the taxable period.

IMPORT DUTIES :-

• Import duties are levied on goods that are subject to import duties and imported into the country.

• Import duties are generally levied on an ad valorem basis but may also be imposed on a specific basis.

• The rate of import duty on dutiable goods is dependent on the classification of the goods under the Customs Duties Order 2007. Malaysia adopts a coding or classification system commonly referred to as the Harmonised System which was established under the International Convention on the Harmonised Commodity Description and Coding System. Malaysia may enjoy preferential rates of duty under the relevant free trade agreements.

• Qualifying goods originating from China, Japan, Korea, Pakistan, Australia, New Zealand, India, Chile and ASEAN countries imported into Malaysia may enjoy preferential rates of duty under the relevant free trade agreements.

• The ad valorem rates of import duties range from 0% to 60%. Raw materials, machinery, essential foodstuffs, pharmaceutical products and certain tourism related and daily use products are generally non-dutiable or subject to duties at lower rates.

 

EXCISE DUTIES :-

• In Malaysia, excise duties are imposed on a selected range of goods manufactured in Malaysia and selected imported goods, including motor vehicles.

• Unless exempted from licensing, a manufacturer of tobacco, intoxicating liquor or goods subject to excise duties must have a licence to manufacture such goods. A warehouse licence is required for storage of goods subject to excise duty.

 Goods which are subject to excise duty include:

• Beer, stout and other intoxicating liquors {e.g. cider and perry, rice wine, mead, brandy, whisky, rum and tafia, gin);

• Cigarettes containing tobacco;

• Motor vehicles;

• Playing cards.

 As a general rule, duty is payable at the time the goods leave the place of manufacture or any other place under excise control.

 No excise duty is payable on dutiable goods that are exported.

Personal Tax :-

Income tax in Malaysia is imposed on income accruing in or derived from Malaysia. As such, every individual is subject to tax on income earned in Malaysia or received in Malaysia from outside Malaysia. Income earned overseas, remitted to Malaysia by a resident or individual is exempted from tax. Income is assessed on a current year basis and individuals must comply with the self-assessment scheme. The year of assessment is the year coinciding with the calendar year.

Tax residency status of an individual person in Malaysia is generally determined by the number of days the individual is present in Malaysia during a particular calendar year. Generally, an individual is a tax resident in Malaysia if the individual is present in Malaysia for 182 days or more during a particular calendar year. An individual tax resident is entitled to several tax reliefs, tax rebates, scaled tax rates and exemptions,

Tax Reliefs (Effective YA 2013)

MYR

 

Tax Payer

9000

 

Husband/wife/alimony payments

3000

(Limited)

Disabled taxpayer

6000

(Further Deduction)

Disabled wife/husband

3500

 

Child relief (>18 years old per child)

1000

 

Child aged 18 years old and above, not married and receiving full-time tertiary education

1000

 

Child aged 18 years old and above, not married and pursuing diploma or above qualification in Malaysia / bachelor degree or above outside Malaysia (per child)

6000

 

Disabled child

- Additional exemption of MYR 6,000 for every disabled child aged 18 years old and above, not married and pursuing diploma or above qualification in Malaysia / bachelor degree or above outside Malaysia

6000

 

Medical expenses for parents

5000

(Limited)

Medical expenses for serious diseases

6000

(Limited) Note no 1

Basic supporting equipment for disabled

6000

(Limited) Note no 2

Life insurance and Employees Provident Fund

6000

(Limited)

Private Retirement Scheme and annuity premium

3000

(Limited)

Insurance premiums for education or medical benefits

3000

(Limited)

Education fees incurred on qualifying courses

5000

(Limited)

Purchase of books, journals, magazines and publications

1000

(Limited)

Purchase of computer

3000

(Limited)

Net savings in Skim Simpanan Pendidikan Nasional

6000

(Limited) Note no 3

Purchase of sports equipment

300

(Limited)

 

Tax Rebates (Effective YA 2009)

MYR

Rebate given to taxpayer with chargeable income not exceeding MYR 35,000

400

Additional rebate for spouse with no income and elects for combined assessment

400

Zakat, Fitrah and any other Islamic religious dues

Full Rebate

 

Notes :-

1. With effect from YA 2015, it is proposed that the relief for medical expenses for taxpayer, spouse and children on serious diseases be increased from MYR 5,000 to MYR 6,000.

2. With effect from YA 2015, it is proposed that the relief for expenses incurred for basic supporting equipment for disabled taxpayer, spouse, child and parent be increased from MYR 5,000 to MYR 6,000.

3. The relief of up to MYR 6,000 is given for amounts deposited into Skim Simpanan Pendidikan Nasional established under the Perbadanan Tabung Pendidikan Tinggi Nasional Act 1997 for his or her child. This is applicable from YA 2012 to YA 2017.

Non-residents are not eligible to claim relief and rebates and are subject to a tax of 26% on his/her taxable income (will be reduced to 25% effective from YA 2015 onwards).

With effect from YA 2013, the tax rates for resident individual are as follows:

Taxable Income

YA 2013 onwards

YA 2013 onwards

MYR

Tax Rate (%)

Tax Payable MYR

Tax Rate (%)

Tax Payable MYR

on the first 2,500

 

0

 

0

on the next 2,500

0

0

0

0

on the first 5,000

 

0

 

0

on the next 5,000

2

100

1 (Note 1)

50

on the first 10,000

 

100

 

50

on the next 10,000

2

200

1 (Note 1)

100

on the first 20,000

 

300

 

150

on the next 15,000

6

900

5 (Note 1)

750

on the first 35,000

 

1,200

 

900

on the next 15,000

11

1,650

10  (Note 1)

1,500

on the first 50,000