Labuan: Personal Taxation
Gross income from employment includes wages, salary, remuneration, leave pay, fees, commissions, bonuses, gratuities, perquisites or allowances (in money or otherwise) arising from employment; directors' fees.
Employee benefits and amenities not convertible into money are included in employment income. The cost of leave passages for an employee and the employee's immediate family are also taxable, although the following items are exempt:
- Leave passage within Malaysia, up to three times in a calendar year; or
- One leave passage in a calendar year from Malaysia to any place outside Malaysia, up to a maximum amount designated by the authorities.
Income tax is payable on taxable income by residents at progressive rates up to 26%
There are a number of permissible deductions in calculating
- Interest on borrowings used to finance the purchase of income-producing property or investments;
- Donations of cash to the government, a local authority or an institution or organization approved by the tax authorities;
- A rebate is allowed to individuals once every five years for the purchase of a personal computer, which may not be used for business purposes;
- Foreign employees may claim a rebate for amounts spent to obtain employment passes, visit passes and work permits;
- Personal allowances for self and spouse;
- Medical expenses for parents, capped at an amount designated by the authorities;
- Expenses for disabled family members;
- Life insurance premiums/provident fund contributions, capped;
- Medical expenses for self, wife or child with serious disease, capped;
- Medical and educational insurance premiums, capped..
For non-residents, local source income is subject to withholding taxes at the following rates, at the time of writing:
- Use of movable property (ie rental income) 10%
- Technical advice, assistance or services 10%
- Installation services for the supply of plant, machinery and similar assets 10%
- Personal services associated with the use of intangible property 10%
- Royalties for the use or conveyance of intangible property 10%
- Services of a public entertainer 15%
- Interest 15%
- Contract payments to nonresident contractors 10%
- Other income 30%
Short-term visitors to Malaysia are exempt from income tax if their employment does not exceed:
- A period totaling 60 days in a calendar year;
- A continuous period or periods totaling 60 days spanning two calendar years; or
- A continuous period spanning two calendar years, plus other periods in either of the calendar years, totaling 60 days.
Under most of Malaysia's tax treaties, a business visitor to Malaysia for varying periods of up to 183 days is exempt from Malaysian income tax if the services performed are for, or on behalf of, a nonresident person and if the remuneration paid for the services is not directly deductible from the income of a permanent establishment in Malaysia.