Tax Structure

Topics: Tax, Taxation, Income tax Pages: 25 (6889 words) Published: July 8, 2011

Tax Structure in Malaysia

Generally, all income of companies and individuals accrued in, derived from or remitted to Malaysia are liable to tax. However, income remitted to Malaysia by resident companies (other than companies carrying on the business of banking, insurance, air and sea transportation), non-resident companies and non-resident individuals are exempted from tax.

Apart from income tax, there are other direct taxes such as real property gains tax, and indirect taxes such as sales tax, service tax, excise duty and import duty.

Currently, income tax is assessed on the income earned in the preceding year according to the Official Assessment Systems.

As a measure to modernise and streamline the tax administration system, the assessment of income tax will be changed to the current year assessment from the year 2000. The present Official Assessment System will be changed to the Self-Assessment System in stages as follows:

|Group |Year of Implementation | |Companies |2001 | |Businesses, partnerships and cooperatives |2003 | |Salaried group |2004 |

To facilitate the changeover, all income received in 1999 will be waived from income tax and losses incurred 1999 will be allowed to be carried forward.


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, interest or discounts
· Rents, royalties or premiums
· Pensions, annuities or other periodic payments
· 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.


A company, whether resident or not, is assessable on income accrued in or derived from Malaysia. Income derived from sources outside Malaysia and remitted by a resident company is not subject to tax, except in the case of banking and insurance business and sea and air transport undertakings. A company is considered a resident in Malaysia if the control and management of its affairs are exercised in Malaysia. Places of control and management are considered on the basis of where meetings of the Board of Directors are held.

A tax rate of 28% is applicable to both resident and non-resident companies. In the case of a company carrying on petroleum production, the applicable tax rate is 38%.

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 RM 2,500 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 :| |· Personal |RM5,000 (a further...
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