Payroll Compliance Updates- Malaysia
A. Update

Finance Minister of Malaysia, Tengku Datuk Seri Zafrul Tengku Abdul Aziz unveiled Budget for 2021 on November 6, 2020 amidst much anticipations. The proposals have now been tabled before the parliament for approval and will be gazetted once approved. The salient tax-centric proposals of Budget 2021 include:

1. Review of Income tax rate for resident individual

It is proposed that the income tax rate for resident individuals be reduced by 1 percentage (%) point for the chargeable income band of RM 50,001 to RM 70,000 from 14% to 13%.

Chargeable income (RM) Existing Tax rates (%) Proposed Tax rate (%)
0 -  5,000 0 0
5,001 – 20,000 1 1
20,001 – 35,000 3 3
35,001 – 50,000 8 8
50,001 – 70,000 14 13
70,001 – 100,000 21 21
100,001 – 250,000 24 24
250,001 – 400,000 24.5 24.5
400,001 – 600,000 25 25
600,001 – 1,000,000 26 26
1,000,001- 2,000,000 28 28
2,000,001 and above 30 30
Effective Date: Assessment Year (AY) 2021
2. Change in the limit of income tax relief on expenditures of Medical Treatment, Special Needs or Carer Expenses

It is proposed to increase the Income tax relief on medical treatment, special needs or Carer Expenses, paid by resident individual to medical practitioner, registered with the Malaysian Medical Council (‘MMC’) from RM 5,000 to RM 8,000.

Effective Date: Assessment Year 2021
3. Increase in income tax relief on disabled Spouse

It is proposed to increase the tax relief on disabled husband /wife i.e. Spouse from RM 3,500 to RM 5,000.

Effective Date: Assessment Year 2021
4. Extension of resident individual income tax relief on Private Retirement Scheme (‘PRS’)

It is proposed to extend the income tax relief of RM 3,000 on Private Retirement Scheme (‘PRS’) for another 4 years.

Effective Date: Assessment Years 2022 to 2025
5. Change in tax relief of resident individual income on self /spouse /children medical expenses

It is proposed that the relief on medical expenses incurred on self/spouse /children on serious illness will be increased from RM 6,000 to RM 8,000 of which:

  • The complete medical examination expenses will be increased from RM 500 to RM 1,000; and
  • The tax relief on medical expenses incurred on self /spouse /children will be expanded to include vaccination expenses up to RM 1,000. The vaccines eligible for the tax relief are as follows:
    • a. Pneumococcal;
    • b. Human Papillomavirus (‘HPV’);
    • c. Influenza;
    • d. Rotavirus;
    • e. Varicella;
    • f. Meningococcal;
    • g. Combination of tetanus, diphtheria and acellular pertussis (‘Tdap’); and
    • h. COVID-19 (subject to availability of vaccine)

Presently, a resident individual taxpayer is eligible to claim income tax relief on medical expenses incurred on self /spouse /children on serious illness up to RM 6,000 per year of assessment. This includes expenses for a complete medical examination for the taxpayer, spouse and children not exceeding RM 500 per annum

Effective Date: Assessment Year 2021
6. Extension of resident individual income tax relief on net annual savings in the National Education Savings Scheme

Tax relief of RM 8,000 on net annual savings to the National Education Savings Scheme (Skim Simpanan Pendidikan Nasional – SSPN) by an individual taxpayer is proposed to be extended for another 2 years.

Effective Date: Assessment Year 2021 & 2022
7. Increase in income tax relief on lifestyle expenses of resident individual

It is proposed that:

  • The relief on lifestyle expenses be increased from RM 2,500 to RM 3,000, where the additional of RM 500 be allocated for the cost of purchasing sports equipment, entry /rental fees for sports facilities and participation fees in sports competitions; and
  • The scope of relief for printed daily newspapers will be expanded to include subscription of electronic newspapers.

Presently, a resident individual taxpayer is eligible to claim income tax relief up to RM 2,500 on lifestyle expenses incurred on purchase of reading materials; printed daily newspapers; sports equipment; computer, smartphone or tablet; subscription of broadband internet; and gymnasium membership fee.

Effective Date: Assessment Year 2021
8. Expansion of the scope of resident individual income tax relief for expenses on study fees

It is proposed that:

  • The scope of relief be expanded to cover fees for attending upskilling and self- enhancement courses in any field of skills recognised by the Department of Skills Development, Ministry of Human Resources; and
  • The tax relief on this additional scope is limited to RM 1,000 for each year of assessment.

Presently, an individual taxpayer who pursues any course of study in selected fields or Master or Doctorate in any field offered by institutions or professional bodies in Malaysia recognised by the Government of Malaysia or approved by the Minister of Finance are eligible to claim a maximum of RM 7,000 tax relief on study fees.

The eligible fields of study are as under:

  • Certificate/ Diploma/ Bachelor in field of Law, accounting, Islamic finance, skills or vocational, technical, industrial, scientific and technological skills
  • Masters/ Doctorate in all fields
Effective Date: Assessment Year 2021 & 2022
9. Increase in the limit of income tax exemption on compensation for loss of employment

Section 13(1)(e) of the Income Tax Act 1967 provides that compensation received for loss of employment is taxable on individuals. However, individuals with loss of employment are eligible to claim for exemptions provided under Paragraph 15(1) of Schedule 6 of the Income Tax Act 1967 under the following circumstances:

  • 100% tax exemption on the compensation for loss of employment due to ill health; or
  • RM 10,000 income tax exemption for each full year of service with the same employer or companies within the same group

To assist taxpayers who lose their jobs due to the COVID-19 pandemic, it is proposed that the exemption limit in (ii) be increased from RM 10,000 to RM 20,000 for each full year of service.

Effective Date: Assessment Year 2020 & 2021
10. Preferential tax rate

A tax rate of 15% for five (5) consecutive years is proposed for non-Malaysian citizens holding key positions / C-Suite positions in companies who relocate their operations to Malaysia under the PENJANA incentive package. This preferential tax rate is subject to following conditions:

  • (i) Holding the key position for a period of five (5) consecutive years;
  • (ii) Receiving a monthly salary of not less than RM 25,000; and
  • (iii) A Malaysian tax resident for each year of assessment throughout the flat rate tax treatment.

This tax incentive is limited to five (5) non-citizen individuals employed in each company that has been granted relocation tax incentive under PENJANA initiative.

Effective Date: Applicable for applications received by the Malaysian Investment and Development Authority from November 7, 2020 until December 31, 2021.
11. Returning Expert Programme (‘REP’)

Currently, flat rate of 15% on employment income for five consecutive years. Effective date of this incentive was till the applications received by TalentCorp up to December 31, 2020. The Government now proposes to provide a flat rate of 15% on employment income for five (5) more consecutive years. Effective period is now further increased for applications till December 31, 2023

12. Reduction of employee’s contributions to the Employees’ Provident Fund (‘EPF’)

The Government will leverage on the EPF to increase the disposable income of individuals. It is proposed that the rate of employee’s contribution to the EPF be reduced from 11% to 9% for a period of 12 months beginning January 2021.

Effective Date: January 01,  2021 to December 31, 2021
13. Introduction of Wakaf services

Permodalan Nasional Berhad (‘PNB’) through Amanah Saham Nasional Berhad (‘ASNB’) will introduce wakaf services to all ASNB unit trust holders. Under this service, unit holders can endow some of their units into ASNB wakaf fund and be eligible for an income tax deduction.

Effective Date: To be confirmed
 
A. Update

The Malaysia Government has released 2020 version of form CP22 . Please note that except for new additions such as gender, citizen, passport number, overall presentations etc, there are not much changes.

Form CP 22 is New Employee Notification Form. This form must be submitted within one month from the date of commencement of employment.

B. Statutory Compliance Release Date: July 01, 2020
C. Effective Date: January 01, 2020
 
A. Update

Further to earlier update in the last release on reduction of EPF contribution rate change, the Inland Revenue Board has now notified the revised EPF contribution rate table.

B. Statutory Compliance Release Date: March 30, 2020
C. Effective Date: FY 2020 
 
A. Update

On 26 March 2020, in order to ease the financial burden faced by employers due to the effects of Coronavirus (COVID-19), the Honorable Human Resources Minister of Malaysia announced that employers categorized within all 63 sub-sectors, stipulated under the sectors of Manufacturing, Services Sector and Mining and Quarrying Sector, affected by the Coronavirus (COVID-19) pandemic will be exempted from paying the human resources development levy for a period of 6 months effective from April 2020 to September 2020 .

Accordingly, Employers are exempted from paying levy for the months of March 2020 to August 2020

B. Statutory Compliance Release Date: March 26, 2020
C. Effective Date: March 26, 2020
 
A. Update

In light of the ongoing Covid 19 pandemic, the Malaysian Government has announced fourth economic relief package named ‘PENJANA’ to reopen the economy.

  • Employees who received benefits-in-kind in the form of mobile phones, laptop or tablet from the employer for the purpose of working from home will be entitled to an income tax exemption of up to MYR 5,000
  • Special individual income tax relief of up to RM2,500 on the purchase of handphone, notebook & tablet
  • Individuals who incur childcare expenses will be entitled to a personal relief of MYR 3,000.
  • The domestic tourism relief of MYR 1,000 will be extended to year of assessment 2021 i.e. from March 1, 2020 till Dec 31, 2021

The above amendments are still in proposal stage. We shall analyse further details once the same is passed in a Gazette.

B. Statutory Compliance Release Date: February 01, 2020
C. Effective Date: April 01, 2020
  • Tax exemptions for BIK: July 1, 2020
  • Special individual income tax relief: June 1, 2020
  • Domestic tourism: March 1, 2020
 

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