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, extended to 31 December 2027) and the exemption period is until YA 2024, extended to YA 2028.

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) employee or service director directors of controlled companies	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. Exemption available up to RM6,000 per annum if the allowances/perquisites are for official duties*
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:* long service (more than 10 years of employment with the same employer) past achievement service excellence, innovation, or productivity award

^{* 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, the 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:
Air-conditioner	8
Curtains & carpets	5
Furniture	15
Refrigerator	10
Sewing machine	15
Kitchen utensils / equipment	6
Entertainment and recreation:
Organ	10
Piano	20
Stereo set, TV, video recorder, CD / DVD player	7
Swimming pool (detachable), sauna	15
Miscellaneous	5

Under the prescribed value method the following are some values of BIK prescribed in the Ruling:

Benefits-in-kind	Value per year
Household furnishings, apparatus & appliances:
Semi-furnished with furniture in the lounge, dining room and bedroom	RM840
Semi-furnished as above and with air-conditioners or carpets or curtains	RM1,680
Fully furnished	RM3,360
Service charges and other bills (e.g. water, electricity)	Charges and bills paid by employer
Prescribed value of other benefits:
Driver	RM7,200 per driver
Domestic servants	RM4,800 per servant
Gardeners	RM3,600 per gardener
Corporate recreational club membership	Membership subscription paid by employer

The following are some exemptions for certain BIK:*

Benefits-in-kind	Exemption
Leave passages	one overseas leave passage up to a maximum of RM3,000 for fares only; or 3 local leave passages including fares, meals and accommodation
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 from 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
Cost of car (when new) (RM)	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 15^th 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.