Labuan Company Tax – Employer’s Return and Personal Income Tax

Every Labuan company is obliged to comply with IRB’s regulations to lodge its Employer Return (Form E) to declare the number of staffs (local or expatriates) employed in the Company. Form E lodgement is required for all staffs or directors who receive any amount of income from Labuan company regard it they have personal tax number (SG No). The filing of Employer Return is due on 30th March each year through e-filing at www.hasil.gov.my.

As an employer, you are required to do Monthly Tax Deduction (MTD) for all your staffs who earns more than RM 2581 per month and it is payable to Inland Revenue Department. The Employer Return (Form E) will summarize all salaries, and bonuses including MTD paid to all your staffs for the year. You are required to issue the EA Form to them as a proof of summary payment for their annual income derived from the Company. [Read: Guide on Monthly Tax Deduction for Labuan Expatriates]

Guide On Personal Income Tax Filing For Expatriates and Local Staffs Employed by Labuan Company

Every expatriates and employees of Labuan Company has the duty to file their Personal Income Tax (Form BE or Form M) on a yearly basis for their income earned from Labuan Company and all other income derived from Malaysia. The personal income tax filing is only applicable for those earning more than RM30,000 per year. Form BE is for Malaysians and expatriates who is regarded as residents (stayed in Malaysia for more than 182 days in a calendar year) while Form M is for non-resident status employees. Personal Income Tax (Form BE or M) e-filing submission due date is by 30th April each year. Personal Income Tax (Form BE or M) e-filing submission due date  is by 30th April each year.

Labuan Personal Tax InfoSource: www.hasil.gov.my

Expatriates receiving income (Director’s fees, salaries, allowances) from a Labuan Company is required to lodge their annual tax return with Malaysia Inland Revenue Board (IRB). Malaysia personal tax calendar is for the period of 12 months from 1st January to 31st December each year. IRB has the right to access your tax records and under the Income Tax’s law, all personal tax records are to be kept for a period of 7 years. Expatriates can apply for their Personal Tax Residence Certificate as proof of residence in Malaysia.

To simplify your Personal Tax filing, kindly register the E-Filing Account with IRB, please click here! To register E-Filing, your passport details and personal tax file number (SG no) are required.

The annual due date for filling to Inland Revenue Board is as follows:

  • Employer Return (Form E) filing by 31 March for manual submission, while e-filing submission is by 30th April
  • Personal Income Tax (Form BE or M) filing by 30th April for manual submission, while e-filing submission is by 30th April

Here is the latest Personal Tax Rate for Resident (Malaysian/Expatriates):

StagesChargeable
Income RM
Tax Rate
%
Tax Payable
RM
On the first
On the next
5,000
15,000
1
0
150
On the first
On the next
20,000
15,000
5150
750
On the first
On the next
35,000
15,000
10900
1,500
On the first
On the next
50,000
20,000
162,400
3,200
On the first
On the next
70,000
30,000
215,600
6,300
On the first
On the next
100,000
150,000
2411,900
36,000
On the first
On the next
250,000
150,000
24.547,900
36,750
On the first
On the next
400,000
200,000
2584,650
50,000
On the first
On the next
600,000
400,000
26134,650
104,000
On the first
Above
1,000,000
1,000,000
28238,650

Here is the latest Personal Tax Relief for Resident (Malaysian/Expatriates):

Tax Relief for Resident Status CategoryYA 2016
RM
Self9,000
Disabled individual – additional relief for self6,000
Spouse4,000
Disabled spouse – additional spouse relief3,500
Child2,000
• per child (below 18 years old)
• per child (over 18 years old) :-
receiving full-time instruction of higher education in respect of:
- diploma level and above in Malaysia; or
- degree level and above outside Malaysia
OR serving under article of indentures in a trade or profession in Malaysia
8,000
• per physically / mentally disabled child6,000
• physically / mentally disabled child (over 18 years of age)
receiving full-time instruction of higher education in respect of:
- diploma level and above in Malaysia; or
- degree level and above outside Malaysia
OR serving under article of indentures in a trade or profession in Malaysia
14,000
Life insurance premiums and EPF contributions6,000
Private Retirement Scheme contributions and Deferred annuity scheme premium (YA 2012 to YA 2021)3,000
Insurance premiums for education or medical benefits3,000
Expenses on medical treatment, special needs or carer expenses for parents (evidenced by medical certification)5,000
Parental care relief:
-father
-mother
(until YA2020)
1,500
1,500
Employee’s contribution to Social Security Organization (SOCSO)250
Medical expenses for self, spouse or child suffering from a serious disease (including fees of up to RM500 incurred by self, spouse or child for complete medical examination)6,000
Purchase of sports equipment300
Free expended for any course of study up to tertiary level other than a degree at Masters or Doctorate level, undertaken for the purpose of acquiring law, accounting, Islamic financing, technical, vocational, industrial, scientific or technological skills or qualifications or any course of study for a degree at Masters or Doctorate level undertaken for the purpose of acquiring any skill or qualification7,000
Purchase of supporting equipment for self (if a disabled person) or for disabled spouse, child or parent6,000
Cost incurred for the purchase of books, journals, magazines and other similar publications for the purpose of enhancing knowledge1,000
Relief for purchase of personal computer ( once every 3 years)3,000
Deposit for child into the Skim Simpanan Pendidikan Nasional account established under Perbadanan Tabung Pendidikan Tinggi Nasional Act 1997 (until YA 2017)6,000
Relief on housing loan interest for the purchase of one unit residential property where the Sale and Purchase Agreement us executed between 10 March 2009 and 31 December 2010 (given for 3 consecutive years)10,000
Additional Tax Rebate for Resident CategoryRebate (RM)
Individual’s chargeable income does not exceed RM35,000400
If husband and wife are separately assessed and each chargeable income does not exceed RM35,000400
(each)
If husband and wife are jointly assessed and the joint chargeable income does not exceed RM35,000800
Rebate for Zakat, Fitrah or other Islamic religious dues paidActual amount paid
Tax Payer StatusTax Rate
Resident individuals with chargeable income (after deduction of personal reliefs) of more than RM5,000 (US$1,166) and not more than RM1,000,000 (US$233,100)1% – 26%
Resident individuals with chargeable income (after deduction of personal reliefs) of more than RM1,000,000 (US$233,100)28%
Non-resident individuals (not entitled to any personal reliefs28%

All are encouraged to do e-filing submission. Often the e-filing portal through Inland Revenue Board (IRB) website will be accessible starting from March 1st each year. For more information, please visit Malaysia Inland Revenue website.

Personal Income Tax Exemption – For Expatriates and Malaysians under Labuan Company employment

There are 4 main tax exempt incentives, applicable up to year 2020 for Expatriates and Malaysians working in a Labuan Company:

1. Expatriates are exempted from the payment of income tax in respect of fees received by that individual in his/her capacity as a director of a Labuan entity.

2. Any person (expatriates or Malaysians) is exempted from payment of income tax on 65% of the statutory income derived from a source consisting of the provision of qualifying professional services (legal, accounting, financial and secretarial services) rendered in Labuan by that person to a Labuan entity.

3. Expatriates are exempted from the payment of income tax on 50% of gross income received by that individual from exercising an employment in a managerial capacity with a Labuan entity in Labuan, co-located office or marketing office.

4. Malaysian citizens are exempted from the payment of income tax on 50% of gross housing allowance and gross allowance received by that individual from exercising an employment with a Labuan entity in Labuan.

Email us at contact@labuanbusiness.com to understand more about your personal tax compliance. We reserve the personal tax service exclusively to our clients only.

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