INDIVIDUAL TAXES
SIGNIFICANT DEVELOPMENTS
As from the year of assessment 2000, individuals will be taxed on the current-year, rather the preceding-year, basis of assessment, so that an individual for year of assessment 2000 will be taxed on income arising in the calendar year 2000. No tax will be levied on income arising in 1999.
An exit levy is imposed on the repatriation of capital and profits from investments in shares, bonds and other financial instruments. Dividends, rents, interests, and foreign direct investments are excluded from the levy.
TERRITORIALITY AND RESIDENCE
An individual resident in Malaysia is taxed on any income accruing in or derived from Malaysia or received in Malaysia from outside Malaysia; a nonresident is taxed only on income accruing in or derived form Malaysia.
However, foreign-source income received in Malaysia by resident
individuals during the period May 20,1998 to December 31,1998 is exempt from tax where approval for exemption has been granted by the Finance Ministry.
The status of individuals as residents or nonresidents determines whether or not they can claim personal allowances and the benefit of the graduated rates of tax. Resident status is determined by reference to the number of days an individual is present in Malaysia. Generally, an individual who is in Malaysia for a period or periods amounting to 182 days or more in a calendar year will be regarded as a tax resident.
Basis of assessment/An individual is taxed on income accruing in, derived from or received in Malaysia in the calendar year preceding the year of assessment. As from the year of assessment 2000, this preceding-year basis of assessment will be changed to the current-year basis, so that an individual for year of assessment 2000 will be taxed on income arising in
the calendar year 2000. No tax will be levied on income arising in 1999.
GROSS INCOME
Employee gross income/An employee is taxed on employment income earned for work performed in Malaysia, regardless of where payment is made.
Employment income includes salary, allowances, perquisites,
benefits-in-kind, tax reimbursements, and rent-free accommodation provided by the employer.
Medical benefits as well as child care benefits provided by the employer are not taxable. Leave passages, restricted to one overseas trip, up to a maximum amount of RM3,000 and three local trips per year, are also tax exempt in the hands of the employee. Cars or other household items provided for private use are valued at prescribed rates that are lower than the actual cost incurred by the employer. Rent-free accommodation
provided by the employer is valued at the lower of 30% of the employee's total cash remuneration or the actual rental value.
Short-term visiting nonresident employees are not subject to tax on income from employment exercised in Malaysia if the period of employment does not exceed 60 days in a calendar year. If the period of employment straddled two calendar years, they are exempt if the total period of their employment over the two years does not exceed 60 days.
Area representatives of nonresident companies using Malaysia as a base for activities extending to other countries in the Far East are taxed on the remuneration relating to the time actually spent in Malaysia.
Capital gains and investment income/Capital gains on the disposal of real property (including shares in a real property company-RPC) situated in Malaysia are subject to real property gains tax. The tax is levied at rates ranging from a maximum rate of 30% (for assets held for less than two years) to 0% (for assets held for more than five years). Capital losses on the sale of real property (other than losses on the of RPC
shares) are allowed as offset against gains arising on the sale of real property. (A real property company is a controlled company that owns real property or RPC shares with a defined value of not less than 75% of its total tangible assets.) other capital gains are not subject to tax.
An individual who is not a citizen or permanent resident in Malaysia is subject to real property gains tax on gains arising from the disposal of real property or RPC shares on or after October 17,1997 at a rate of 30% on disposals within five years and at 5% on disposals after five years.
A resident is generally subject to income tax on all investment income accruing in or derived from Malaysia or received in Malaysia from outside Malaysia. A nonresident is not taxed on income derived outside Malaysia.
Interest received by a resident individual is subject to income tax at a flat rate of 5%. Interest received on deposits for a period of 12 months or more is tax exempt. Interest received from certain types of bonds or securities is also exempt from tax.
Interest paid to a nonresident individual by commercial or merchant banks or finance companies operating in Malaysia is exempt from tax.
DEDUCTIONS
Business de
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