Malaysia (MY)
Multicultural, English-friendly Malaysia offers affordable living, world-class street food, tropical lifestyle, and a well-developed expat infrastructure in Kuala Lumpur and Penang.
Tax & Payslip Guide
Understanding your taxes in Malaysia — tax year Calendar year: January 1 to December 31.
📊 Income Tax Brackets
| Income from | Income to | Rate | Notes |
|---|---|---|---|
| 0 | 5,000 | 0% | Chargeable income after personal relief (RM9,000 individual deduction). Residents earning below RM34,000 gross (after EPF deduction) effectively pay no tax in most cases. |
| 5,000 | 20,000 | 1% | Resident individual income tax — second bracket. |
| 20,000 | 35,000 | 3% | Resident individual income tax — third bracket. |
| 35,000 | 50,000 | 6% | Resident individual income tax — fourth bracket (rate reduced from 8% effective 2026 per LHDN). |
| 50,000 | 70,000 | 11% | Resident individual income tax — fifth bracket (rate reduced from 13% effective 2026). |
| 70,000 | 100,000 | 19% | Resident individual income tax — sixth bracket (rate reduced from 21% effective 2026). |
| 100,000 | 400,000 | 25% | Resident individual income tax — seventh bracket. Most senior professionals fall in this range (rate increased from 24% effective 2026). |
| 400,000 | 600,000 | 26% | Resident individual income tax — eighth bracket (rate increased from 24.5% effective 2026). |
| 600,000 | 2,000,000 | 28% | Resident individual income tax — ninth bracket (rate increased from 25% effective 2026). |
| 2,000,000 | ∞ | 30% | Top rate for resident individuals — income exceeding RM2,000,000. Introduced in Budget 2023 to tax ultra-high earners. Non-residents: flat 30% on all Malaysian-source income, no personal relief. 3-year non-resident rate reduction for qualified expatriates holding Residence Pass-Talent: 15% flat rate on Malaysian income. |
🏛️ Social Contributions
Malaysia's mandatory retirement savings fund. Covers all Malaysians and permanent residents automatically. Foreign nationals with Employment Passes must also have employer contributions (employee contribution voluntary). EPF balance split: Account 1 (70% — retirement), Account 2 (20% — housing, education, medical), Account 3 (10% — flexible withdrawal from 2024). Current dividend yield: approximately 5.5–6.5% annually (2026 estimate). Withdrawals: Account 2 for housing loan repayment, education, medical; Account 3 at any time from 2024 (new flexible account). Full withdrawal at age 55 or 60 depending on scheme.
Mandatory for all employees earning RM4,000/month or below (both employee and employer) AND mandatory for all employees earning above RM4,000 under the Employment Injury Scheme. Foreign nationals with Employment Passes are required to contribute since January 2019. Covers: employment injury insurance (EIS — Employment Insurance System, separate), industrial accident medical costs, permanent disability compensation, death benefit for dependents, and invalidity pension. Apply for claims at perkeso.gov.my.
Malaysia's unemployment insurance scheme launched January 2018. Provides benefits to employees who lose jobs due to retrenchment, VSS (Voluntary Separation Scheme), or contract expiry. Benefits: 3–6 months of 80% income replacement (tapering), job placement assistance, training reimbursement up to RM6,000. Foreign employees contribute to EIS but are generally NOT eligible for EIS benefits — check with SOCSO.
Compulsory levy paid by employers to fund employee training and development. Employers can claim back HRD Corp funds for approved training courses, conferences, and skills development. Not a deduction from employee salary. Employees may benefit indirectly through employer-funded training programmes.
🛒 VAT Rates
Malaysia replaced the 6% GST with SST in September 2018. Sales Tax: 10% on most manufactured goods, 5% on selected goods (food, selected building materials), 0% on essential food items. Service Tax: 6% on taxable services (hotels, restaurants, professional services, digital services). Restaurant bills: 6% SST applies, plus any service charge. Digital services from foreign providers (e.g., Netflix, Spotify, Google): subject to 6% SST from January 2020. Low-Value Goods (LVG) imported into Malaysia below RM500: subject to 10% Sales Tax from January 2024.
🧾 Sample Payslip Decoder
🌍 Special Expat Tax Rules
Tax residency: an individual is a Malaysian tax resident if they are in Malaysia for 182 days or more in a calendar year (or linked days in two consecutive years). Non-residents are taxed at a flat 30% on all Malaysian-source income with no personal relief or deductions. Qualified Knowledge Workers holding the Residence Pass-Talent (RP-T) in Iskandar Malaysia (Johor) may enjoy a preferential 15% income tax rate on employment income — confirm with LHDN. Expatriates on Employment Passes are typically tax residents after spending 182+ days in Malaysia. Overseas income remitted to Malaysia: from January 2022, all Malaysian tax residents are taxed on foreign-sourced income remitted to Malaysia (with exemptions for employment income and pensions — verify current rules as this policy has been subject to amendments). Capital gains: no general capital gains tax. RPGT (Real Property Gains Tax) applies only on property disposals.
📋 Double Tax Treaties
Malaysia has Double Taxation Agreements (DTA) with 75+ countries including the UK, USA, Germany, Australia, France, Japan, South Korea, Singapore, Indonesia, China, UAE, and most OECD nations. DTAs reduce withholding tax on dividends (typically 5–15%), interest (typically 10–15%), and royalties (typically 10%). Under the Single-Tier tax system, dividends paid by Malaysian companies to shareholders are exempt from further taxation at the shareholder level. Treaty benefits are claimed via LHDN and tax clearance processes. The Malaysia-Singapore DTA is particularly relevant for Johor residents working in Singapore.
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