Submission of Individual Annual Tax Return (“Form BE and Form M”) Year of Assessment 2025

The annual income tax return for individuals, i.e. the Form BE and Form M, for the Year of Assessment (“YA”) 2025 must be completed and submitted to the Inland Revenue Board (“IRB”) by 30 April 2026. Failure to submit the Form BE or the Form M within the statutory due date will constitute an offence under the Income Tax Act 1967 (“ITA”), which upon conviction, will be liable to a fine ranging from RM200 to RM20,000 or imprisonment for a term not exceeding 6 months or both. In addition, the IRB may impose a penalty up to 3 times the amount of tax payable.

Nevertheless, submission of the tax return may not be required, if the Monthly Tax Deduction (“MTD”) is elected as Final Tax by the taxpayer. The election is applicable only for Malaysian citizens.

Expatriates are still required to file their income tax return and apply for his or her tax clearance upon leaving the country. If the expatriate’s taxes are not cleared with the IRB, the IRB has the right to claim the outstanding tax payable from the employer. As such, employers need to ensure that expatriate employees have obtained their tax clearance before departing from Malaysia.

Monthly Tax Deduction (“MTD”) (Potongan Cukai Pendapatan (“PCB”)) as Final Tax

Although the Form BE or the Form M (for taxpayers earning employment income) must be submitted on or before 30 April each year, taxpayers have the option of not submitting the Form BE or the Form M. This is by deeming the MTD as the final tax. However, taxpayers must fulfil the following conditions:-

• Having only a single source of employment income;
• Benefits-In-Kind (“BIK”) and Value of Living Accommodation (“VOLA”) have been included in the MTD calculation;
• Employed by the same employer for 12 months in that YA;
• MTD is deducted according to Income Tax Rules;
• Taxes are not borne by the employer (unless MTD has been accurately accounted for); and
• Husband and wife elect for separate assessment.

The benefit of deeming the MTD as the final tax is for taxpayers to eliminate the daunting task of remembering the due date and collating the relevant documents for completing the Form BE or the Form M. Conversely, the disadvantage of deeming MTD as final tax is that taxpayers would have to forego the tax deduction claims (relief), which may result in a tax refund unless the Form TP1 (form for claiming deductions and rebates for MTD purpose) has been submitted therefrom.

Residence Status

The determination of a taxpayer’s tax resident status in Malaysia is important as it determines the rate of tax (refer to Chapter D) and the entitlement to enjoy tax reliefs and rebates (refer to Chapter F). A taxpayer who is a non-tax resident will be taxed at a flat rate of 30% (refer to Chapter E) and will not qualify for any reliefs and rebates.

Regardless of nationality, the tax residency status of a taxpayer in Malaysia is determined based on rules as set in the ITA. A taxpayer is a tax resident in Malaysia for a particular YA if:-

1. the taxpayer is in Malaysia on that basis year for a period or periods amounting in all to one hundred and eighty-two (182) days or more;
2. the taxpayer is in Malaysia on that basis year for a period of less than one hundred and eighty-two (182) days and that period is linked by or to another period of one hundred and eighty-two (182) or more consecutive days throughout which he is in Malaysia in that basis year for the YA immediately preceding that particular YA or in that basis year for the YA immediately following that particular YA:-
   • Relaxation for temporary absence from Malaysia is provided to a taxpayer if the taxpayer was absent due to the following reasons:-
     • connected with his service in Malaysia and owing to service matters, attending conferences, seminars or study abroad;
     • owing to ill-health involving the taxpayer or a member of his immediate family. Immediate family refers to parents, spouse and children; and
     • in respect of social visits not exceeding fourteen days (14) days in the aggregate.
3. the taxpayer is in Malaysia on that basis year for a period or periods amounting in all to ninety (90) days or more, having been with respect to each of any three (3) of the basis years for the four (4) YAs immediately preceding that particular YA either:-
   • resident in Malaysia in accordance with the ITA;
   • in Malaysia for a period or periods amounting in all to ninety (90) days or more in the basis year in question; or
4. the taxpayer is resident in Malaysia in accordance with the ITA for the basis year for the YA following the particular YA, having been so, resident for each of the basis years for the 3 YAs immediately preceding that particular YA.

Individual Tax Rate for Tax Resident for the YA 2025 and YA 2026

Individual Tax Rate for Non-Tax Resident for the YA 2025 and YA 2026

Relief and Rebate

Compulsory Deduction under MTD

Optional Deduction under MTD

Tax Exempt Allowance (Part F of Form EA)

Donation to Approved Institution or Organization

A person is allowed for a deduction against its aggregate income (up to 10%) for gifts of money made to any approved institution or organization [Section 44(6) of the ITA]. For a comprehensive search of approved institutions or organizations, refer Hasil website HERE.

Additional Expenses Claimable under Employment Income

Income Tax Rebate and Special Relief

Song Liew
Licensed Tax Agent, CA(M), FCTIM(M), FCCA(UK), CPA(AUS), CA(S), CFMP, ASEAN CPA, CFP
Founder of ANC Group

This taxletter is provided gratuitously and without liability. It is intended as a general guide only. Readers should seek appropriate professional advice regarding any particular problems they encounter. Accordingly, ANC Group assumes no responsibility for any errors or omissions it may contain, whether caused by negligence or otherwise, or any losses, however caused, sustained by any person that relies on it. For further information, clarification or advice on any of the contents stated herein, please feel free to contact our team.