Question

The method of Malaysian resident individuals to reduce their personal income tax 2020 in Malaysia.
(2000 words)

Answer 1

Cosider higlighted exemption and deduction allowed by govt.

Tax Base For Residents and Non-Residents

Generally, an individual is considered resident in Malaysia for tax purposes if he/she stays in the country for a period or periods amounting to 182 days or more in a calendar year.

Tax Rate

Individual income tax (2020)	Progressive rates from 0% to 30%
Up to MYR 5,000	0%
MYR 5,000 - 20,000	1%
MYR 20,001 - 35,000	3%
MYR 35,001 - 50,000	8%
MYR 50,001 - 70,000	14%
MYR 70,001 - 100,000	21%
MYR 100,001 - 250,00	24%
MYR 250,001 - 400,000	24.5%
MYR 400,001 - 600,000	25%
MYR 600,001 - 1,000,000	26%
MYR 1,000,001 - 2,000,000	28%
Above 2,000,000	30%
Qualified knowledge worker	15% Applies to workers in the Iskandar Malaysia, from employment with a designated company engaged in a qualified activity (e.g. green technology, educational services, healthcare services, creative industries, financial advisory and consulting services, logistics services, tourism)
Non-resident individuals	30% flat rate on total taxable income
	In light of the COVID-19 crisis, individual taxpayers have been granted an extension of 2 months for the submissions of individual tax returns.

Allowable Deductions and Tax Credits

Employees are allowed a deduction for any expenditure incurred wholly and exclusively in the performance of their duties, but no allowance is given for tax depreciation. Donations to approved institutions or organisations are deductible (limits apply). Contributions and donations in cash and in kind by individuals and corporates to the Covid-19 Fund and the Ministry of Health are officially tax-deductible.
Mortgage interest incurred to finance the purchase of a house is deductible only if income is derived from the house.

Several personal allowances apply: standard allowance of MYR 900, MYR 400 for a spouse, MYR 2,000 for each child below 18 years of age, extra allowances for disabled persons.

Other deductions include: medical expenses, pension/provident funds and insurance premiums, education fees, childcare, etc. For a detailed list, consult the Inland Revenue Board guide.

Special Expatriate Tax Regime

From fiscal year 2020, individuals who do not meet the residence requirements are taxed at a flat rate of 30% on total taxable income.

Capital Tax Rate

Capital gains are not taxed, except for gains derived from the disposal of real property or on the alienation of shares in a real property company. Gains from disposals of real property are subject to a real property gains tax (RPGT). The rate is 30% for disposals of real property made within three years of the date of acquisition. The rates are 20% and 15% for disposals in the fourth and fifth years after acquisition, respectively, and 10% for disposals in the sixth year after acquisition and thereafter. For companies incorporated outside Malaysia, the rate is 30% for disposals made within five years and 10% thereafter.
Malaysia does not levy inheritance, estate, or gift taxes.

Stamp duty is levied at rates ranging from 1% to 4% of the value of property transfers, and at 0.3% on share transaction documents.

Employees have to contribute to the Employees’ Provident Fund at 11% of the salary, and to the Employment Injury Insurance Scheme (EIIS) and the Invalidity Pension Scheme (IPS) (maximum MYR 19.75 per month). The contribution to the Employment Insurance System (EIS) is limited to 0.2% of the salary. Due to the COVID-19 emergency, individuals are allowed to make withdrawal from Private Retirement Scheme (PRS) of up to RM1,500 during the period from 1 April 2020 to 31 December 2020 from sub-account B, with no withholding tax being applied (normally at 8%).