Malaysia Tax FAQs & Expert Guidance (YA 2025/2026)

In Malaysia, tax is calculated on Chargeable Income, which is your Total Gross Income minus allowable tax reliefs. Key statutory reliefs include: Individual relief of RM 9,000 (granted automatically to all tax residents); EPF and life insurance relief up to RM 7,000 (split between RM 4,000 EPF and RM 3,000 life insurance); Medical expenses for self, spouse, or child up to RM 10,000 (including dental and mental health examinations); Lifestyle relief up to RM 2,500 (books, smartphones, computers, internet subscriptions, and gym memberships); and SSPN education savings up to RM 8,000. Fully maximizing these reliefs can reduce your chargeable income by over RM 30,000, moving you into a much lower tax bracket.

An individual who spends fewer than 182 days in Malaysia in a calendar year and does not qualify under linking rules is classified as a non-resident. Non-residents are taxed at a flat rate of 30% on all employment income and are not entitled to claim the RM 9,000 personal relief or any lifestyle, medical, or family reliefs. However, if an expat works in Malaysia for 60 days or fewer during a calendar year, their employment income is completely exempt from Malaysian tax under the short-term employee exemption (provided the employer is not a Malaysian tax resident).

For Micro, Small, and Medium Enterprises (MSMEs)—defined as resident companies with paid-up capital of RM 2.5 million or less and gross annual business income not exceeding RM 50 million—the corporate income tax rate is tiered: 15% on the first RM 150,000 of chargeable income, 17% on chargeable income from RM 150,001 to RM 600,000, and 24% on any chargeable income exceeding RM 600,000. Non-SME corporations and foreign branches pay a flat rate of 24% on all chargeable profits.

Malaysia abolished GST in 2018 and reinstated the single-stage Sales and Service Tax (SST). Sales Tax is levied on manufactured goods in Malaysia and imported goods, typically at 5% or 10% (with petroleum products taxed at specific rates). Service Tax is charged on prescribed taxable services provided by registered businesses. Under recent reforms, the Service Tax rate was adjusted to 8% for most services, while essential services (food & beverage, telecommunications, vehicle parking, and domestic logistics) remain preserved at the 6% rate.