Charge of income tax
Subject to and in accordance with this Act, a tax to be known as income tax shall be 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.
(Deleted by Act 451).
Non-chargeability to tax in respect of offshore business activity
Notwithstanding section 3, tax shall not be charged under this Act on income in respect of an offshore business activity carried on by an offshore company.
(Deleted by Act 578).
Classes of income on which tax is chargeable
Subject to this Act, the income upon which tax is chargeable under this Act is income in respect of— (a) gains or profits from a business, for whatever period of time carried on; (b) gains or profits from an employment; (c) dividends, interest or discounts; (d) rents, royalties or premiums; (e) pensions, annuities or other periodical payments not falling under any of the foregoing paragraphs; (f) gains or profits not falling under any of the foregoing paragraphs.
Special classes of income on which tax is chargeable
Notwithstanding section 4 and subject to this Act, the income of a person not resident in Malaysia for the basis year for a year of assessment in respect of— (i) amounts paid in consideration of services rendered by the person or his employee in connection with the use of property or rights belonging to, or the installation or operation of any plant, machinery or other apparatus purchased from, such persons; (ii) amounts paid in consideration of technical advice, assistance or services rendered in connection with technical management or administration of any scientific, industrial or commercial undertaking, venture, project or scheme; or (iii) rent or other payments made under any agreement or arrangement for the use of any moveable property, which is derived from Malaysia is chargeable to tax under this Act.
Manner in which chargeable income is to be ascertained
(1) Subject to this Act, the chargeable income of a person upon which tax is chargeable for a year of assessment shall be ascertained in the following manner: (a) first, the basis period for each of his sources for that year shall be ascertained in accordance with Chapter 2 of Part III; (b) next, his gross income from each source for the basis period for that year shall be ascertained in accordance with Chapter 3 of that Part; (c) next, his adjusted income from each source (or, in the case of a source consisting of a business, his adjusted income or adjusted loss from that source) for the basis period for that year shall be ascertained in accordance with Chapter 4 of that Part; (d) next, his statutory income from each source for that year shall be ascertained in accordance with Chapter 5 of that Part; (e) next, his aggregate income for that year and his total income for that year shall be ascertained in accordance with Chapter 6 of that Part; and (f) next, his chargeable income for that year shall be ascertained in accordance with Chapter 7 of that Part: Provided that in ascertaining the chargeable income of an individual resident in Malaysia there shall be excluded the income consisting of interest accruing in or derived from Malaysia and received from a person referred to in subsection 109C (4) in respect of interest paid or credited to that individual. (2) For the purposes of this Act, any income of a person from any source or sources, and any adjusted loss of a person from any source or sources consisting of a business, may be ascertained for any period (including a year of assessment) notwithstanding that— (a) the person in question may have ceased to possess that source or any of those sources prior to that period; or (b) in that period that source or any of those sources may have ceased to produce gross income or may not have produced any gross income. (3)–(4) (Deleted by Act 337).
Rates of tax
(1) (a) Except where this subsection provides otherwise and subject to section 6A , income tax shall be charged for each year of assessment upon the chargeable income of every person for that year at the appropriate rate as specified in Part I of Schedule l; (b) subject to section 109 but notwithstanding any other provisions of this Act, where— (i) the income of a person not resident in Malaysia for the basis year for a year of assessment consists of interest (other than interest on an approved loan or interest of the kind referred to in paragraph 33 of Part 1, Schedule 6) or royalty derived from Malaysia; or (ii) the income of a person (other than a company) not resident in Malaysia for the basis year for a year of assessment consists of remuneration or other income in respect of se rvices performed or rendered in Malaysia by a public entertainer, income tax thereon shall be charged at the appropriate rate as specified in Part II of Schedule 1; (c) (Deleted by Act 451); (d) income tax shall be charged for each year of assessment upon the chargeable income of every co-operative society for that year at the appropriate rate as specified in Part IV of Schedule 1; (e) subject to section 109B but notwithstanding any other provisions of this Act, income tax shall be charged for each year of assessment upon the income of a person charged under section 4A at the appropriate rate as specified under Part V of Schedule 1; (f) subject to section 109C but notwithstanding any other provisions of this Act, income tax shall be charged for each year of assessment upon the income of an individual resident in Malaysia which consists of interest (other than interest exempt from tax under this Act or any order made thereto) accruing in or derived from Malaysia and received from a person referred to in subsection 109C (4) at the appropriate rate as specified under Part VI of Schedule 1; (g) (Deleted by Act 624); (h) income tax shall be charged for each year of assessment upon the chargeable income of a foreign fund management company in relation to the source consisting of the provision of fund management services to foreign investors for that year at the appropriate rate as specified in Part IX of Schedule 1; (i) subject to section 109D but notwithstanding any other provisions of this Act, income tax shall be charged for each year of assessment upon the income of a non-resident unit holder which consists of income distributed by the unit trust referred to in section 61A at the appropriate rate as specified under Part X of Schedule 1. (2) The Minister, where he is satisfied that it is the intention of the Government to promote the introduction into the Dewan Rakyat of a Bill to vary in any particular way the rates of tax, may by statutory order declare those rates to be varied in that way; and, where he does so, then, subject to subsections (3) and (4), this Act shall have effect as if those rates as so varied had come into force at the beginning of the first year of assessment for which the Bill seeks to vary those rates. (3) Every order made under subsection (2) shall be laid before the Dewan Rakyat as soon as may be after it has been made and shall cease to have effect— (a) at the expiration of a period of three months (or such longer period as may be specified by resolution of the Dewan Rakyat) beginning on the date when the order was made; or (b) on the coming into force (after the date when the order was made) of an Act varying the rates of tax, whichever first occurs. (4) Where an order made under subsection (2) ceases to have effect pursuant to subsection (3)— (a) the amount of any tax which— (i) has been charged by any assessment by reference to the order; and (ii) is payable (whether or not it is due or due and payable) but not paid at the date when the order ceases to have effect, shall be taken to be amended to the amount which would have been payable if the order had not been made; and (b) so much of any tax paid by any person in consequence of the order as exceeds the tax payable under the law in force immediately after the date when the order ceases to have effect shall be repaid by the Director General if that person— (i) makes a claim therefor in the prescribed form within one year after that date; and (ii) furnishes to the Director General such further particulars of the claim as the Director General may require. (5) In subsections (2) and (3) any reference to rates of tax includes a reference to the rate of any abatement specified under Schedule 1.
Tax rebate
(1) Subject to this section, income tax charged for each year of assessment upon the chargeable income of every individual resident for the basis year for that year shall be rebated for that year of assessment in accordance with subsections (2), (3) and (3A ) before any set off is made under section 110 and any credit is allowed under section 132 or 133. (2) A rebate shall be granted for a year of assessment in the following amounts: (a) three hundred and fifty ringgit in the case of an individual who has been allowed a deduction under paragraph 46(1)(a) for that year of assessment where his chargeable income for that year of assessment does not exceed thirty-five thousand ringgit; (b) three hundred and fifty ringgit in the case of an individual who has been allowed a deduction under subsection 47(1) or (2) for that year of assessment where his chargeable income for that year of assessment does not exceed thirty-five thousand ringgit; (c) three hundred and fifty ringgit in the case of a wife who has been allowed a deduction under section 45A for that year of assessment where her chargeable income for that year of assessment does not exceed thirty-five thousand ringgit. (3) A rebate shall be granted for a year of assessment for any zakat, fitrah or any other Islamic religious dues payment of which is obligatory and which are paid in the basis year for that year of assessment to, and evidenced by a receipt issued by, an appropriate religious authority established under any written law. (3A ) A rebate of five hundred ringgit shall be granted to an individual for a year of assessment in respect of the purchase, evidenced by a receipt, of a personal computer in the basis year for that year of assessment: Provided that no rebate under this subsection shall be granted to that individual— (a) for the four following years of assessment; (b) where the personal computer was used for the purposes of his business; or (c) where such rebate has been granted to the spouse. (4) Where the total amount of the rebate under subsections (2), (3) and (3A ) exceeds the income tax charged (before any such rebate) for any year of assessment, the excess shall not be paid to the individual or available as a credit to set off his tax liability for that year of assessment or any subsequent year.
Tax rebate on loan to a small business
(1) Subject to this section, income tax charged for each year of assessment upon the chargeable income of a person who gives any loan to a small business shall be rebated by an amount equivalent to two per cent prorated per annum, or such other rate as may be prescribed from time to time by the Minister, on the outstanding balance of the loan before any set off is made under section 110 and any credit is allowed under section 132 or 133: Provided that where the rebate exceeds the income tax charged (before any such rebate) for any year of assessment, the excess shall not be paid to that person and shall not be available as a credit to set off any tax liability for that year of assessment but it shall be available as a credit to set off any income tax chargeable for any subsequent year of assessment. (2) “Loan to a small business” means a loan that conforms to the guidelines laid down by an appropriate authority designated by the Minister from time to time.
Tax rebate on fees
Income tax charged for each year of assessment upon the chargeable income of an individual shall be rebated in respect of any fee paid to the Government in the basis year for that year of assessment pursuant to any order made under section 3 of the Fees Act 1951 [Act 209], for the issue of an Employment Pass, Visit Pass (Temporary Employment) or Work Pass before any set off is made under section 110 and any credit is allowed under section 132 or 133: Provided that where the rebate exceeds the income tax charged (before any such rebate) for any year of assessment, the excess shall not be paid to that individual, and shall not be available as a credit to set off his tax liability for any subsequent year of assessment.
Residence: individuals
(1) For the purposes of this Act, an individual is resident in Malaysia for the basis year for a particular year of assessment if— (a) he is in Malaysia in that basis year for a period or periods amounting in all to one hundred and eightytwo days or more; (b) he is in Malaysia in that basis year for a period of less than one hundred and eighty-two days and that period is linked by or to another period of one hundred and eighty-two or more consecutive days (hereinafter referred to in this paragraph as such period) throughout which he is in Malaysia in the basis year for the year of assessment immediately preceding that particular year of assessment or in that basis year for the year of assessment immediately following that particular year of assessment: Provided that any temporary absence from Malaysia— (i) connected with his service in Malaysia and owing to service matters or attending conferences or seminars or study abroad; (ii) owing to ill-health involving himself or a member of his immediate family; and (iii) in respect of social visits not exceeding fourteen days in the aggregate, shall be taken to form part of such period or that period, as the case may be, if he is in Malaysia immediately prior to and after that temporary absence; (c) he is in Malaysia in that basis year for a period or periods amounting in all to ninety days or more, having been with respect to each of any three of the basis years for the four years of assessment immediately preceding that particular year of assessment either— (i) resident in Malaysia within the meaning of this Act for the basis year in question; or (ii) in Malaysia for a period or periods amounting in all to ninety days or more in the basis year in question; or (d) he is resident in Malaysia within the meaning of this Act for the basis year for the year of assessment following that particular year of assessment, having been so resident for each of the basis years for the three years of assessment immediately preceding that particular year of assessment. (1A ) For the purposes of subsection (1), an individual shall be deemed to be in Malaysia for a day if he is present in Malaysia for part of that day and in ascertaining the period for which he is in Malaysia during any year, any day (within paragraphs 1(a) and (c)) for which he is in Malaysia shall be taken into account whether or not that day forms part of a continuous period of days during which he is in Malaysia. (2) (Deleted by Act A226).
Residence: companies and bodies of persons
(1) For the purposes of this Act— (a) a Hindu joint family is resident in Malaysia for the basis year for a year of assessment if its manager or karta is resident for that basis year; (b) a company or a body of persons (not being a Hindu joint family) carrying on a business is resident in Malaysia for the basis year for a year of assessment if at any time during that basis year the management and control of its business or of any one of its businesses, as the case may be, are exercised in Malaysia; and (c) any other company or body of persons (not being a Hindu joint family) is resident in Malaysia for the basis year for a year of assessment if at any time during that basis year the management and control of its affairs are exercised in Malaysia by its directors or other controlling authority. (2) If it is shown that it has been established as between the Director General and a company or body of persons for any tax purpose that the company or body was resident in Malaysia for the basis year for any year of assessment, it shall be presumed until the contrary is proved that the company or body was resident in Malaysia for the purposes of this Act for the basis year for every subsequent year of assessment. 9–10. (Deleted by Act A226).
(Deleted by Act 624).
Derivation of business income in certain cases
(1) Where for the purposes of this Act it is necessary to ascertain any gross income of a person derived from Malaysia from a business of his, then— (a) subject to subsection (2), so much of the gross income from the business as is not attributable to operations of the business carried on outside Malaysia shall be deemed to be derived from Malaysia; (b) notwithstanding paragraph (a), if the business consists wholly or partly of the manufacturing, growing, mining, producing or harvesting in Malaysia of any article, product, produce or other thing— (i) the gross income from any sale of the article, product, produce or other thing taking place outside Malaysia in the course of carrying on the business; or (ii) where the article, product, produce or other thing is exported in the course of carrying on the business and subparagraph (i) does not apply, an amount equal to the market value of the article, produce, product or other thing at the time of its export, shall be deemed to be gross income of that person derived from Malaysia from the business. (2) Where in the case of a business to which paragraph (1)(a) applies— (a) the business or a part thereof is carried on in Malaysia; (b) any of the gross income of the business (from wherever derived) consists of a dividend or interest to which subsection 24(4) or (5) applies; and (c) the dividend or interest relates either— (i) to a share, debenture, mortgage or other source which forms or has formed part of the stock in trade of the business or, where only part of the business is carried on in Malaysia, of that part of the business; or (ii) to a loan of the kind mentioned in subsection 24(5) granted in the course of carrying on business or that part of the business, as the case may be, so much of that gross income as consists of that dividend or interest shall be deemed to be derived from Malaysia.
General provisions as to employment income
(1) Gross income of an employee in respect of gains or profits from an employment includes— (a) any wages, salary, remuneration, leave pay, fee, commission, bonus, gratuity, perquisite or allowance (whether in money or otherwise) in respect of having or exercising the employment; (b) an amount equal to the value of the use or enjoyment by the employee of any benefit or amenity (not being a benefit or amenity convertible into money) provided for the employee by or on behalf of his employer, excluding— (i) a benefit or amenity consisting of medical or dental treatment or a benefit for child care; (ii) a benefit or amenity consisting of— (A) leave passages for travel within Malaysia not exceeding three times in any calendar year; or (B) one leave passage for travel between Malaysia and any place outside Malaysia in any calendar year, limited to a maximum of three thousand ringgit: Provided that the benefit or amenity enjoyed under this subparagraph is confined only to the employee and members of his immediate family; (iii) a benefit or amenity used by the employee solely in connection with the performance of his duties; and (iv) a benefit or amenity falling under paragraph (c); (c) an amount in respect of the use or enjoyment by the employee of living accommodation in Malaysia (including living accommodation in premises occupied by his employer) provided for the employee by or on behalf of the employer rent free or otherwise; (d) so much of any amount (other than a pension, annuity or periodical payment falling under paragraph 4(e)) received by the employee, whether before or after his employment ceases, from a pension or provident fund, scheme or society not approved for the purpose of this Act as would not have been so received if his employer had not made contributions in respect of the employee to the fund, scheme or society or its trustees; and (e) any amount received by the employee, whether before or after his employment ceases, by way of compensation for loss of the employment, including any amount in respect of— (i) a covenant entered into by the employee restricting his right after leaving the employment to engage in employment of a similar kind; or (ii) any agreement or arrangement having the like effect. (2) Gross income in respect of gains or profits from an employment— (a) for any period during which the employment is exercised in Malaysia; (b) for any period of leave attributable to the exercise of the employment in Malaysia; (c) for any period during which the employee performs outside Malaysia duties incidental to the exercise of the employment in Malaysia; (d) for any period during which a person is a director of a company and that company is resident in Malaysia for the basis year for a year of assessment and within that basis year that period or part of that period falls; or (e) for any period during which the employment is exercised aboard a ship or aircraft used in a business operated by a person who is resident in Malaysia for the basis year for a year of assessment and within that basis year that period or part of that period falls, shall be deemed to be derived from Malaysia. (3) Gross income in respect of gains or profits from an employment in the public services or the service of a statutory authority— (a) for any period during which the employment is exercised outside Malaysia; or (b) for any period of leave attributable to the exercise of the employment outside Malaysia, shall be deemed to be derived from Malaysia if the employee is a citizen. (4) For the purposes of subsection (1) a benefit, amenity or living accommodation provided for an employee as therein mentioned shall be deemed to be used or enjoyed by the employee if it is used or enjoyed by his spouse, family, servants, dependants or guests. (5) Any question whether any gross income is gross income for a period mentioned in subsection (2) shall be decided by applying the appropriate provisions of Chapter 3 of Part III as if that period were the basis period for a year of assessment.
(Deleted by Act 293).
General provisions as to dividend income
(1) Subject to this section, where a company resident for the basis year for a year of assessment pays, credits or distributes a dividend in the basis period for that year of assessment, the dividend shall be deemed to be derived from Malaysia. (2) Where a company resident for the basis year for a year of assessment was not resident for the basis year for the year of assessment immediately preceding that year of assessment, only dividends paid, credited, or distributed by the company on or after the day on which the management and control of any business of the company (or, in the case of a company which does not carry on a business, the management and control of its affairs by its directors or other controlling authority) were first exercised in Malaysia in that first-mentioned basis year shall be deemed to be derived from Malaysia. (3) Where— (a) the management and control of the business of a company (or, if it has more than one business, of all its businesses); or (b) in the case of a company which does not carry on a business, the management and control of its affairs by its directors or other controlling authority, cease to be exercised in Malaysia in the basis year for a year of assessment and the company is not resident for the basis year for the year of assessment following that first-mentioned year of assessment, dividends paid, credited or distributed in that firstmentioned basis year after the cessation shall not be deemed to be derived from Malaysia. (4) Where a dividend consists of property other than money, that dividend shall be taken to consist of an amount equal to the market value of the property at the time of the distribution of the dividend.
Derivation of interest and royalty income in certain cases
Gross income in respect of interest or royalty shall be deemed to be derived from Malaysia— (a) if responsibility for payment of the interest or royalty lies with the Government or a State Government; or (b) (i) if responsibility for payment of the interest or royalty in the basis year for a year of assessment (the responsibility of any guarantor being disregarded in the case of interest) lies with a person who is resident for that basis year; and (ii) in the case of interest it is payable in respect of money borrowed by that person and employed in or laid out on assets used in or held for the production of any gross income of that person derived from Malaysia or the debt in respect of which the interest is paid is secured by any property or asset situated in Malaysia; or (c) if the interest or royalty is charged as an outgoing or expense against any income accruing in or derived from Malaysia.
Derivation of special classes of income in certain cases
Gross income in respect of— (a) amounts paid in consideration of services rendered by a person or his employee in connection with the use of property or rights belonging to, or the installation or operation of any plant, machinery or other apparatus purchased from, such person; (b) amounts paid in consideration of technical advice, assistance or services rendered in connection with technical management or administration of any scientific, industrial or commercial undertaking, venture, project or scheme; (c) rent or other payments made under any agreement or arrangement for the use of any moveable property, shall be deemed to be derived from Malaysia— (i) if responsibility for payment of the above or other payments lies with the Government or a State Government; (ii) if responsibility for the payment of the above or other payments lies with a person who is a resident for that basis year; or (iii) if the payment of the above or other payments is charged as an outgoing or expense in the accounts of a business carried on in Malaysia: Provided that in respect of paragraphs (a) and (b), this section shall apply to the amount attributable to services which are performed in Malaysia.
Voluntary pensions, etc.
Where any pension or other periodical payment is paid voluntarily to any person who has permanently ceased to exercise an employment (or to his widow, child, relative or dependant) by his former employer or the successor of his former employer, there shall be deemed to be a source of that person or of his widow, child, relative or dependant, as the case may be, in respect of that pension or payment and that pension or payment shall be deemed to be gross income from that source chargeable to tax.
Derivation of pensions, etc.
(1) Gross income in respect of a pension from the Government or a State Government shall be deemed to be derived from Malaysia. (2) Where— (a) a person has a right to a pension or other like payment— (i) from a pension fund or a fund of a similar kind; (ii) under a pension scheme or a scheme of a similar kind; or (iii) by virtue of his membership of a pension society or a society of a similar kind; and (b) the forum of the administration of the fund, scheme or society is in Malaysia at any time in the basis year for a year of assessment, the gross income for the basis period for that year of assessment in respect of the pension or other like payment shall be deemed to be derived from Malaysia. (3) The gross income for the basis period for a year of assessment from any source of the kind mentioned in section 16 or in respect of a pension or other periodical payment to which paragraph 4(e) applies shall be deemed to be derived from Malaysia if the person paying that income was resident for the basis year for that year of assessment: Provided that this subsection shall not apply to a pension or other payment to which subsection (1) or (2) applies.
Provisions on this page are reproduced verbatim from official open data. See the attribution line.
Text as at 1 January 2006 (LOM reprint); amendments made after that date may not be incorporated. Read the official text ↗
Source: Laws of Malaysia, Attorney General's Chambers of Malaysia (lom.agc.gov.my). Not a copy of the Gazette printed by the Government Printer (Interpretation Acts 1948 and 1967, s 61).