Chapter 1
Introduction to Malaysian
Income Taxation System
Dr Aryati Juliana Sulaiman
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Definition of Taxation
“A compulsory financial contribution imposed by a government
to raise revenue, levied on income or property, on the prices of
goods and services, etc. and to levy a tax on persons,
companies, etc.”
The Collins Concise English Dictionary
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What is Income Tax?
“A tax charged for each year of assessment
upon the income of any person accruing in or
derived from Malaysia or received in Malaysia
from outside Malaysia”
Section 3, ITA 1967
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Neutrality
Efficiency
Principles of
Good
Taxation
Certainty
Simplicity
Effectiveness
Equity
Flexibility
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 Generate income
 Maintain economic
equality
Objectives of
Taxation
 Encourage production
and distribution of basic
needs
 Discourage production
and consumption of
harmful products
 Discourage imports and
protect national
industries
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 Administering, assessing,
collecting and enforcing payment
of tax,
Function of
Inland Revenue
Board of
Malaysia (IRBM)
 Advice the Government on
matters pertaining to taxation,
liaise with the appropriate
ministries and statutory bodies
 Participate in meetings,
discussions and agreements in or
outside Malaysia
 Collection agent on behalf of any
lending body for the recovery of
loans due for repayment to that
body under written law
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Legal Framework
Income Tax Law in Malaysia:
a. Statute Law
• Statute law is also known as legislation.
• The principal legislations are:
• (i) Income Tax Act 1967; (ii) Petroleum Income
Tax Act 1967; (iii) Labuan Offshore Business
Activity Tax Act 1990; (iv) Real Property Gains
Tax Act 1976; and (v) Promotion of Investments
Act 1986.
b. CaseLaws
• accumulated decisions of the courts
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 Direct Taxes

Sources of
Revenue
Company income tax,
individual income tax and
petroleum income tax.
 Indirect Taxes

Sales and service tax
 Non-Tax Revenue

Interest and returns on
investment, licenses, service
fees, road tax, fines and
penalties, rental, petroleum
royalties
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Types of Taxes and Tax Rates
Tax Rates
Types of Taxes
Income Tax:
 Personal (Resident)
 Personal (Non-resident)
Corporate (paid-up capital of not more than
RM2.5 million and gross income of not more
than RM50 million)
Corporate
 0-30%
 30%
17% on the first RM600,000
24% on the subsequent balance
24%
Sales Tax
5%, 10% or on a specific rate
Service Tax
6%
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Basis of Tax
Income
Tax is charged on
person’s income
derived from
employment,
business or
investment.
Consumption
Tax is charged on
the expenditure
incurred. Example
of consumption tax
is SST.
Property
Tax imposed on
person earning
income from
property, i.e RPGT.
Transaction
Services
Tax is charged on
transaction
incurred. To
protect domestic
products/industries
from international
competitors.
Tax is imposed on
the provision of
services to certain
groups of taxpayers.
For instance, Quit
Rent and
Assessment
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Scope of Tax
Income tax is charged on income accruing in or derived from
Malaysia by a chargeable person. Prior YA 2022, foreign income
remitted into Malaysia by a person is exempted from tax. Budget
2022: from 1 January 2022, foreign income of tax residents will no
longer be exempted when remitted to Malaysia. However, on 30
December 2021, MoF announced to continue exemption on foreign
income for individual taxpayer for a period of five (5) years from 1
January 2022 to 31 December 2026.
”
Section 3, ITA 1967
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Sec. 4, ITA 1967:
Classes of
Taxable
Income
 S4(a) Gains or profit from a
business;
 S4(b) Gains or profits from
employment;
 S4(c) Dividends, interest or
discounts;
 S4(d) Rents, royalties or premiums;
 S4(e) Pensions, annuities or other
periodical payments not falling
under any of the foregoing
paragraphs; and
 S4(f) Gains or profits not falling
under any of the foregoing
paragraphs.
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Taxable Person
 Sec.2 of ITA defines ‘person’ to include a
company, a body of persons and a corporation sole.
• Body of person - trust body, club, trade
association, co-operatives, etc.
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Basis Period,
Basis Year,
Year of
Assessment
Z Z A BKAT2013 A222
 Basis Period
 Basis period refers to
the period when the
income is derived.
 Basis Year
 Basis year refers to the
year when the income
is derived.
 Year of Assessment
 YA refers to the year in
which income is
assessed
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BP, BY, YA
An individual whose income is obtained from 1 January
2022 till 31 December 2022 shall be assessed in YA 2022
(CYA).
 Basis year: 2022
 Basis period: 1 January 2022 - 31 December 2022.
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 Implemented
beginning from 2001
Self
Assessment
System (SAS)
 The responsibilities to
compute tax payable
shifted from the IRBM
to taxpayers
 OAS: The duty to
compute tax payable
was with the IRBM.
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 No Goods and Services Tax (GST)
but introduce:
 Luxury Tax on items such as
watches and fashion goods;
Latest Budget
Highlights
(Budget 2023)
 Excise duties on liquid nicotine
used in e-cigarettes and vapes.
 Introduction on a capital gains tax on
the sale of shares in private companies
in 2024.
 Increase 0.5% tax rate for chargeable
income (CI) between RM100,000 to
RM1 million
 Decrease 2% tax rate for CI between
RM35,000 to RM100,000.
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 Donation to non-profits undertaking
grassroot
sports
development
programme will qualify for a tax cut of
up to 10% on aggregate income.
Latest Budget
Highlights
(Budget 2023)
 Tax relief of up to RM3,000 for
voluntary
contributions
to
the
Employees Provident Fund (EPF)
account.
 Under a special voluntary disclosure
programme from June 1, 2023 until May
31, 2024, the govt will provide 100%
waiver on additional taxes for taxpayers
who declare unreported taxes.
 Tax relief on medical treatment raised to
RM10,000 from RM8,000, including
relief of up to RM4,000 on treatments
for conditions such as autism, Down
syndrome
and
specific
learning
disabilities.
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Thank you
Please read Chapter 2:
Individual Residence Status
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