Employment Income
Derivation
Employment income is regarded as derived from Malaysia and subject to Malaysian tax where the employee:
- exercises an employment in Malaysia;
- is on paid leave which is attributable to the exercise of an employment in Malaysia;
- performs duties outside Malaysia which are incidental to the exercise of an employment in Malaysia;
- is a director of a company resident in Malaysia; or
- is employed to work on board an aircraft or ship operated by a person who is resident in Malaysia.
Exemption (short-term employees)
Income of a non-resident from an employment in Malaysia is exempt:
- if the aggregate of the period or periods of employment in Malaysia does not exceed 60 days in a calendar year; or
- where the total period of employment which overlaps 2 calendar years does not exceed 60 days.
Employees of regional operations
Non-Malaysian citizens who are based in Malaysia working in Operational Headquarter (OHQ) or Regional Office (RO), or International Procurement Centre (IPC), or Regional Distribution Centre (RDC) or Treasury Management Centre (TMC) status companies would be taxable on employment income attributable to the number of days they exercise employment in Malaysia.
Women returning to work after career break
The employment income for women returning to work after a career break of at least 2 years is exempted for up to a maximum of 12 consecutive months (application to Talent Corporation Malaysia Berhad by 31 December 2023) and the exemption period is until YA 2024.
Types of employment income
Type of employment income |
Taxable Value |
Cash remuneration, e.g. salary, bonus, allowances / perquisites |
Total amount paid by employer. Certain allowances / perquisites are exempted from tax. Please refer to “Perquisites” below |
Benefits-in-kind, e.g. motorcar and petrol, driver, gardener, etc |
Based on formula or prescribed value method. Certain benefits are exempted from tax. Please refer to “Benefits-in-kind” below |
Housing accommodation (unfurnished)
|
Lower of 30% of cash remuneration* or defined value of accommodation Defined value of accommodation |
Hotel accommodation for employee or service director |
3% of cash remuneration* |
Withdrawal from unapproved pension fund |
Employer’s contribution |
Compensation for loss of employment |
Total amount paid by employer. Exemption is available under specified conditions |
* Cash remuneration does not include equity-based income
Perquisites
The IRB issued Public Ruling 5/2019 for the valuation of perquisites given to employees. Below are some examples of perquisites:
Perquisites |
Taxable Value |
Petrol card / petrol or travel allowances and toll rates |
Total amount paid by employer. |
Childcare subsidies / allowances |
Total amount paid by employer. Exemption available up to RM2,400 per annum* |
Parking fees / allowances |
Fully exempted* |
Meal allowances |
Fully exempted* |
Interest on loan subsidies |
Loans totalling RM300,000 for housing / passenger motor vehicles and education* |
Income tax borne by employer |
Total amount paid by employer |
Award |
Total amount paid by employer. Exemption available up to RM2,000 per annum for the following types of award:*
|
PTPTN loan repayment borne by employer |
Fully exempted (for repayments made by employer during the year 2019 to 2021) |
* Exemptions are not extended to directors of controlled companies, sole proprietors and partnerships
Benefits-in-kind (BIK)
The IRB has issued Public Ruling 11/2019 for the valuation of BIK provided to employees.
The value of BIK provided for an employee may be determined by either of the following methods:
- formula method, or
- prescribed value method
Under the formula method, annual value of BIK provided to an employee is computed using the following formula:
The prescribed life span for various benefits are as follows:
Benefits-in-kind |
Prescribed average life span (Years) |
Motorcar |
8 |
Furnishings: |
|
|
8 |
|
5 |
|
15 |
|
10 |
|
15 |
Kitchen utensils / equipment |
6 |
Entertainment and recreation: |
|
|
10 |
|
20 |
|
7 |
|
15 |
|
5 |
Under the prescribed value method the following are some values of BIK prescribed in the Ruling:
Benefits-in-kind |
Value per year |
|
|
|
RM840 |
|
RM1,680 |
|
RM3,360 |
|
Charges and bills paid by employer |
|
|
|
RM7,200 per driver |
|
RM4,800 per servant |
|
RM3,600 per gardener |
|
Membership subscription paid by employer |
The following are some exemptions for certain BIK:*
Benefits-in-kind |
Exemption |
Leave passages |
|
Employers’ goods provided free or at a discount |
Exemption is available up to RM1,000 per annum. Any benefit exceeding RM1,000 will be subject to tax |
Employers’ own services provided full or at a discount |
Fully exempted |
Maternity expenses & traditional medicines |
Fully exempted |
Telephone (including mobile telephone), telephone bills, pager, personal data assistant (PDA) and broadband subscription |
Fully exempted, limited to one unit for each asset |
Exemption for mobile phones, laptops, and tablets provided by employers to employees (Flexible Work Arrangement Incentive) |
Exemption is available up to RM5,000 for YA 2020 |
* Exemptions are not extended to directors of controlled companies, sole proprietors and partnerships
Standard rates for motorcar and fuel provided:
Cost of car (when new) (RM) |
Annual prescribed benefit |
|
Motorcar (RM) |
Fuel* (RM) |
|
Up to 50,000 |
1,200 |
600 |
50,001 – 75,000 |
2,400 |
900 |
75,001 – 100,000 |
3,600 |
1,200 |
100,001 – 150,000 |
5,000 |
1,500 |
150,001 – 200,000 |
7,000 |
1,800 |
200,001 – 250,000 |
9,000 |
2,100 |
250,001 – 350,000 |
15,000 |
2,400 |
350,001 – 500,000 |
21,250 |
2,700 |
500,001 and above |
25,000 |
3,000 |
* Employee is given a choice to determine fuel benefit based on annual prescribed rates or exemption available for petrol usage
Collection of tax
- Taxes are collected from employees through compulsory monthly deductions from remuneration by the 15th of the following month under the Monthly Tax Deduction (MTD) system.
- Total remuneration including BIK and value of accommodation provided to employees is subject to MTD.
- Individuals receiving non-employment income are required to pay by compulsory bi-monthly instalments.
This publication is a quick reference guide outlining Malaysian tax information which is based on taxation laws and current practices. This booklet also incorporates in coloured italics the 2022 Malaysian Budget proposals based on the Budget 2022 announcement on 29 October 2021 and the Finance Bill 2021. These proposals will not become law until their enactment and may be amended in the course of their passage through Parliament.
This booklet is intended to provide a general guide to the subject matter and should not be regarded as a basis for ascertaining the liability to tax in specific circumstances. No responsibility for loss to any person acting or refraining from acting as a result of any material in this publication can be accepted by PricewaterhouseCoopers. Readers should not act on the basis of this publication without seeking professional advice.
Published by
PricewaterhouseCoopers Taxation Services Sdn Bhd (464731-M)
Level 10, 1 Sentral, Jalan Rakyat, Kuala Lumpur Sentral,
P.O. Box 10192, 50706 Kuala Lumpur, Malaysia
Tel: 03-21731188 Fax: 03-21731288
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