Tax Declaration In Malaysia: Step-By-Step Guide

Navigating the maze of tax declarations in Malaysia can be daunting, especially for expats unfamiliar with the local system. Fret Not! We’ve got your back!

Whether you’re a newcomer or a seasoned resident, understanding the ins and outs of tax filing is crucial to avoid headaches down the line. In this guide, we break down everything you need to know about declaring taxes in Malaysia, ensuring you’re well-prepared and compliant.

Let’s dive in!

Is It Mandatory To File A Tax Declaration In Malaysia?

In Malaysia, confident individuals and entities must file a tax declaration.

Malaysian tax laws require individuals and businesses meeting specific criteria to submit an annual tax return to the Inland Revenue Board of Malaysia (Lembaga Hasil Dalam Negeri Malaysia or LHDN).

The filing requirements vary depending on income level, residency status, and type of income earned. Failure to comply with tax filing requirements may result in penalties the tax authority imposes.

Individuals and businesses must understand and fulfill their tax obligations accordingly to avoid legal consequences.

In Malaysia, several individuals and entities are required to file a tax declaration.

Here’s a breakdown:

Individual Taxpayers: Malaysian residents with taxable income exceeding the stipulated threshold. Non-residents earning income from Malaysian sources exceeding the threshold or those deriving income from Malaysia through a business carried on in Malaysia.
Employers: Companies and businesses must file returns related to employees’ income, including deductions for EPF (Employees Provident Fund) and SOCSO (Social Security Organization).
Business Entities: Sole proprietorships, partnerships, limited liability partnerships (LLPs), and companies must file tax returns if they operate a business in Malaysia.
Non-Resident Companies And Entities: Non-resident companies and entities deriving income from Malaysia must also file tax returns.
Trusts And Estates: Trusts and estates earning taxable income must file tax returns.
Withholding Tax Agents: Entities or individuals responsible for deducting withholding tax are required to file tax returns related to the withholding tax deducted.
Exceptional Cases: Individuals and entities engaged in specific transactions, such as real property gains, must file tax returns.

What Special Cases Should File Tax Declaration In Malaysia?

In Malaysia, certain exceptional cases require individuals and entities to file tax declarations based on specific transactions or circumstances.

Here are some of the critical exceptional cases:

Real Property Gains Tax (RPGT):
1. Individuals or entities who dispose of real property (land or buildings) in Malaysia are subject to Real Property Gains Tax (RPGT). They must file a tax declaration on the capital gains derived from the disposal of real property.
2. RPGT rates and exemptions may vary depending on factors such as the holding period and type of property.
Stamp Duty:
1. Stamp duty is levied on various instruments, including agreements, contracts, and documents relating to property transfers, loan agreements, and share transfers.
2. Parties involved in these transactions must file stamp duty declarations with the Stamp Office.
Transfer Pricing:
1. Multinational corporations and related entities engaged in cross-border transactions are subject to transfer pricing regulations.
2. They must submit transfer pricing documentation and disclosures to demonstrate that their intercompany transactions are priced at arm’s length.
Double Taxation Agreements (DTAs):
1. Individuals or entities deriving income from overseas sources may be subject to tax obligations in Malaysia and foreign jurisdictions.
2. In such cases, taxpayers may need to avail themselves of benefits under Double Taxation Agreements (DTAs) to avoid double taxation. This often involves filing additional documentation or disclosures to claim relief or credits for taxes paid in the foreign country.
Labuan Entities:
1. Entities registered in Labuan, a federal territory in Malaysia known for its offshore financial services center, are subject to specific tax regulations.
2. Labuan entities must comply with Labuan tax laws and may need to file tax declarations and reports as per the Labuan Financial Services Authority (Labuan FSA) requirements.
Venture Capital Companies (VCCs):
1. Venture Capital Companies (VCCs) are subject to specific tax regulations designed to promote venture capital investments in Malaysia.
2. VCCs must file tax declarations and comply with the relevant tax incentives and regulations applicable to their operations.

These exceptional cases often involve unique tax considerations and compliance requirements.

Taxpayers involved in such transactions or circumstances should ensure they understand their obligations and comply with the relevant regulations to avoid penalties or legal issues.

Consulting with tax professionals or legal advisors familiar with Malaysian tax laws can be beneficial in navigating these complexities.

Can You Claim Taxes Back In Malaysia?

Yes, individuals in Malaysia can claim certain types of taxes back, depending on their circumstances and the tax laws in Malaysia.

Here’s a comprehensive list of some common scenarios where tax refunds are applicable:

Overpayment Of Tax: If you have paid more income tax than you owe due to errors or miscalculations, you can claim a refund for the excess amount.
Tax Deductions And Reliefs: Individuals can claim tax refunds by utilizing available deductions and reliefs, including:
- Medical expenses for self, spouse, and children.
- Education expenses for self, spouse, and children.
- Lifestyle relief (e.g., purchase of books, sports equipment).
- Expenses for the maintenance of disabled individuals.
- Zakat payments.
- Premiums for life insurance and EPF contributions.
- Expenses related to medical treatment of severe diseases.
- Purchase of breastfeeding equipment.
- Disabled individuals’ education expenses.
- Child care fees.
- Essential supporting equipment for disabled individuals.
- Net deposit in the Skim Simpanan Pendidikan Nasional (SSPN).
- Net deposit in the National Education Savings Scheme (SSPN-i).
Tax Credits: Certain tax credits may result in a refund, such as:
1. Tax credits for taxes paid in another country (relief from double taxation).
2. Withholding tax credits on dividends, interest, and royalties.
Double Taxation Agreements (DTAs): Malaysia has DTAs with many countries. Taxpayers who are residents of Malaysia and have paid taxes on the same income in both Malaysia and another country may be eligible for tax refunds under these agreements.
Employment Expenses: Employees may be entitled to claim tax refunds for certain employment-related expenses, such as
- Professional subscription fees.
- Books, journals, and magazines related to employment.
- Tools and equipment used for employment.
Investment Losses: Taxpayers can claim tax refunds for capital losses incurred from investments in stocks, real estate, or other capital assets.
Excess EPF (Employees Provident Fund) Contributions: If EPF contributions exceed the statutory limit, the excess can be claimed as a tax refund.
Exemption Or Relief For Specific Professions: Certain professions or occupations may be eligible for specific tax exemptions or reliefs, leading to potential tax refunds.
Special Tax Incentives: Individuals who qualify for special tax incentives, such as those related to investment in specific industries or activities, may be entitled to tax refunds or exemptions.

Other Special Circumstances

This section includes a variety of specific situations or events in which taxpayers in Malaysia may be eligible for tax refunds, in addition to the more common scenarios previously mentioned.

These circumstances can include, but are not limited to:

Inheritance Tax Refunds
Tax Incentives for Green Initiatives
Tax Incentives for Research and Development (R&D)
Tax Incentives for Export-Oriented Businesses
Tax Incentives for Small and Medium Enterprises (SMEs)
Refunds for Taxpayers with Special Needs
Tax Treaty Benefits
Correction of Errors or Omissions

How To Get More Taxes Back From Malaysia?

To maximize your tax refunds in Malaysia, you can consider several strategies:

Strategy 1: Keep Accurate Records

Ensure you keep detailed records of all your expenses and income throughout the year. This includes receipts for business expenses, medical bills, charitable donations, education expenses, and other deductible expenses.

Strategy 2: Claim Deductions

Take advantage of all the deductions you’re eligible for. This may include deductions for education expenses, medical expenses, zakat (for Muslims), lifestyle relief, and more.

Strategy 3: Invest In Approved Investments

Consider investing in instruments that qualify for tax relief, such as approved unit trusts, private retirement schemes (PRS), or the National Education Savings Scheme (SSPN).

Contributions to these investments can reduce your taxable income, thereby increasing your tax refund.

Strategy 4: Contribute To EPF And SOCSO

Contributing to the Employees Provident Fund (EPF) and the Social Security Organization (SOCSO) can reduce your taxable income and increase your tax refund.

Strategy 5: Tax Credits

Consider tax credits for specific activities, such as purchasing eco-friendly products or participating in government-approved activities.

Strategy 6: Employment-related Benefits

If you have employment-related benefits like medical or childcare allowances, claim them as they can reduce your taxable income.

Strategy 7: File On Time

Ensure you file your tax returns on time to avoid penalties and maximize your chances of receiving tax refunds promptly.

Strategy 8: Consult With A Tax Professional

If you need clarification on which deductions or credits you qualify for, consider consulting with a tax professional or accountant who can provide personalized advice based on your financial situation.

Remember, while maximizing your tax refunds is essential, you must also accurately report your income and expenses to comply with Malaysian tax laws.

How To File A Tax Declaration In Malaysia?

Filing tax declarations in Malaysia involves several steps.

Here’s a step-by-step guide:

Step 1: Register For A Tax File Number (TFN)

If you still need to, register for a Tax File Number (TFN) with the Inland Revenue Board of Malaysia (Lembaga Hasil Dalam Negeri Malaysia, LHDN). You can do this by visiting the nearest LHDN branch or using their online portal.

Step 2: Gather Necessary Documents

Collect all relevant documents such as:

Form EA/Form E: This is provided by your employer and includes details of your income, tax deducted, and other relevant information.
Form BE (Borang E) Or Form B (Borang B): You may need to use either form to file your tax return, depending on your employment status and income sources. Form BE is for individuals with income from employment only, while Form B is for individuals with income from business, rental, or other sources besides employment income.
Supporting Documents: You may need supporting documents such as receipts, invoices, bank statements, and investment statements to substantiate your income, deductions, and reliefs claimed.
Identification Dcuments: Copies of your identification documents, such as MyKad or passport, may be required for verification.
Bank Account Details: You may need to provide your bank account details for tax refunds or direct credit of any tax rebates.
Details Of Tax Reliefs And Deductions: You’ll need documents supporting these claims. This could include receipts for medical expenses, education fees, insurance premiums, etc.
Income From Other Sources: If you have income from sources other than employment, such as rental income, dividends, interest, or capital gains, you’ll need documents to report these accurately. This could include rental agreements, dividend statements, bank statements showing interest income, etc.
Tax Assessment Notices (If Applicable): If you’ve received any tax assessment notices or letters from the Inland Revenue Board of Malaysia (LHDN), you may need to refer to them while filing your return.

Step 3: Determine Your Tax Category

Understand which tax category you fall under (e.g., resident, non-resident) based on your residency status in Malaysia. This will determine your tax obligations.

Step 4: Choose Your Filing Method

Decide whether you want to file your tax declaration manually by filling out physical forms or electronically through e-filing. Electronic filing is generally more convenient and preferred.

Step 5: Complete The Tax Form

If filing manually, obtain the necessary tax forms from LHDN or download them from their website. You can use the LHDN e-filing system to file your electronic documents.
Fill out the form accurately and completely. Provide information about your income, deductions, reliefs, and other required details.

Step 6: Calculate Your Tax Liability

Once you’ve filled out the form, calculate your tax liability based on the provided information. You can use tax calculators or consult tax professionals if needed.

Step 7: Submit Your Declaration

If filing manually, submit your completed tax form and supporting documents to the nearest LHDN branch.
If filing electronically, log in to the LHDN e-filing system, upload your completed form and supporting documents, and submit them online.

Step 8: Receive Acknowledgment And Payment Instructions

Upon successful submission, you’ll receive an acknowledgment or receipt from LHDN confirming your submission.

If you owe taxes, follow the instructions provided to make the payment. Payment methods typically include online banking, ATM transfers, or payment at designated banks.

Step 9: Review Your Assessment

After submission, LHDN will process your declaration and assess your tax liability. Review the assessment notice provided by LHDN to ensure accuracy. You may need to respond accordingly if there are any discrepancies or issues.

Step 10: Keep Records

Keep copies of all submitted documents, receipts, and correspondence with LHDN for your records. These may be required for future reference or audits.

Comply With Deadlines

File your tax declaration before the deadline specified by LHDN to avoid penalties or fines. The deadline for filing taxes in Malaysia typically falls around April or May each year, but it’s essential to check for any updates or changes.

Seek Professional Advice If Needed

If you need clarification on any aspect of the tax filing process or have complex financial situations, consider seeking advice from tax professionals or accountants to ensure compliance and optimize your tax situation.

What Is The Best Tax Return Software In Malaysia In English?

When choosing tax return software, consider user-friendliness, accuracy, support, and compatibility with your tax situation.

Ensuring the software complies with Malaysian tax laws and regulations is also essential. Additionally, always verify that your chosen software is up-to-date with the latest tax requirements and guidelines.

Now let’s look at the best options we have for you:

When Is The Malaysian Tax Return Deadline?

The deadline for filing Malaysian tax returns typically falls for individual taxpayers on April 30th of each year.

Let’s examine the details of the different types of Malaysian taxpayers and their deadlines.

1. Income Tax
Type of return	Form	Due date
All taxpayers Notification of change of address	CP 600B	Within three months of the change
Individuals without business income Notification of changeability of an individual who first arrives in Malaysia	No prescribed form	Within two months of the date of arrival
Submission of income tax return* – Resident / Resident (Knowledge Workers / Expert Workers) – Non-resident	BE/BT M/MT	By 30 April in the year following that YA
* Tax returns are not required to be filed for specific groups of employees where requirements are met. The Monthly Tax Deduction will be the final tax.
Individuals with business income Submission of income tax return – Resident / Resident (Knowledge Workers / Expert Workers) – Non-resident	B/BT M/MT	By 30 June in the year following that, YA
Companies Submission of estimate of tax payable	CP 204	30 days before the beginning of the basis period
Submission of the revised estimate of tax payable	CP 204A	In the 6th or / and 9th month, and / or 11th month* of the basis period (w.e.f YA 2024)
Submission of income tax return	e-C	Within seven months from the date following the close of its accounting period
Furnishing of particulars of payment made to agent, dealer, or distributor (ADD)	CP 58	By 31 March of the following year
Other entities – Submission of income tax return Deceased person’s estate / Association	TP/TF	By 30 April (without business income) or 30 June (with business income) in the year following that, YA
Partnership	P	By 30 June in the year following that, YA
Limited Liability Partnership	PT	Within seven sevenths from the date following the close of its accounting period
Co-operative society	C1
Trust body	TA
Unit trust / Property trust	TC
Business trust	TN
Real estate investment trust (REIT) / property trust fund	TR
Employers Return of remuneration by an employer(mandatory electronic submission effective from the year ending 31 December 2023)	E	By 31 March of the following year
Statement of remuneration of the employee	EA	By the last day of February of the following year
Notification of employee’s commencement of employment	CP 22*	Within 30 days of commencement of employment
Notification of employee’s cessation of employment (in certain prescribed cases, including cessation resulting from the death of the employee)	CP 22A*	Not less than 30 days before cessation. In cases of death, not less than 30 days after being informed of death
Notification of employees leaving Malaysia for more than three months* mandatory electronic submission effective from 1 January 2024	CP 21*	Not less than 30 days before the expected date of departure
Statement of tax deduction by employer under the Monthly Tax Deduction scheme	CP 39	Within 15 days after month end
2. Withholding Tax (WHT)
Interest or royalty to non-residents	CP 37	Within one month of paying or crediting the non-resident, whichever is earlier
Contract payments to non-resident contractors	CP 37A
Technical and management service fees, rental of moveable properties, etc. to non-residents	CP 37D
Technical and management service fees, rental of moveable properties, etc., to non-residents carrying out activities in the Joint Development Area	CP 37 D(1)
Interest or royalty to non-residents (WHT amount ≤RM500 per transaction)	CP 37S	Once every six months, as follows -On or before 31 December of the year: For payments made to non-residents from 1 June to 30 November of the yearOn or before 30 June of the year: For payments made to non-residents from 1 December of the previous year to 31 May of that year
Technical and management service fees, rental of moveable properties, etc. to non-residents (WHT amount ≤RM500 per transaction)	CP 37DS
REIT income exempted at the trust level distributed to unit holders (other than resident companies)	CP 37E	Within one month of distributing the income to the unit holders
Family fund, family re-Takaful fund, or general fund income distributed to participants	CP 37E(T)	Within one month of distributing or crediting the income, whichever is earlier
Payments to a non-resident person about any gains or profits falling under Section 4(f)	CP 37F	Within one month of paying or crediting the non-resident, whichever is earlier
Withdrawal of contribution from a private retirement scheme fund	CP 37G	Within one month of paying the amount
Payments to a resident ADD who has received more than RM100,000 from the company in the previous YA	CP 107D	Last day of the month following the month of paying or crediting the ADD
3. Real Property Gains Tax
Return of disposal of real property/shares in real property company	CKHT 1A/1B & CKHT 3*	Within 60 days after disposal of real property/shares in real property company* If applicable
Return of acquisition of real property/shares in real property company	CKHT 2A & CKHT 502*
4. Sales Tax And Services Tax
Taxable persons
Registration	SST-01	Last day of the month following the month in which the annual turnover exceeded or is expected to exceed the relevant registration threshold
Submission of tax return and payment of tax due	SST-02	Last day of the month following the end of the taxable period OR30 days from the end of the taxable period (where the taxable period is varied)
Non-taxable persons
Submission of Declaration and payment of service tax due [Note: Currently only applicable for declaration of imported taxable services acquired in the course of carrying on a business]	SST-02A	The last day of the month following the end of the month in which payment is made, or invoice is received, whichever is the earlier
Foreign digital service providers
Registration	DST-01	Last day of the month following the month in which the annual turnover exceeds or is expected to exceed the registration threshold
Submission of return and payment of tax due	DST-02	Last day of the month following the end of the taxable period

How Long Does It Take To Get Your Tax Refund In Malaysia?

The LHDN aims to process tax refunds within 30 to 90 days from the tax return submission date.

However, it’s essential to note that this timeframe can vary depending on various factors, including the complexity of the return, any discrepancies that need to be resolved, and the volume of returns being processed during that period.

Taxpayers can check the status of their tax refund through the LHDN’s online portal or by contacting the LHDN directly for updates.

Conclusion

Declaring taxes in Malaysia doesn’t have to be a stressful experience. By staying informed and organized, you can tackle your tax obligations with confidence. Remember, timely and accurate tax declarations not only keep you on the right side of the law but also provide peace of mind.

So, take the time to understand the requirements and leverage the resources available to make the process as smooth as possible.

Declare Confidently!

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