Income Tax Act 1967

Malaysian income tax is based on territorial basis. As mentioned in Section 3 of Income Tax Act 1967, a tax 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. However, with effect from year 2004, foreign source income (income received in Malaysia from outside Malaysia) is exempted from tax under Paragraph 28, Schedule 6 of Income Tax Act 1967.

There are different classes of income subjected to Income Tax under Section 4 of Income Tax Act 1967, which are:

a) Profits or gains of a trade, business, profession or vocation
b) Profits or gains from personal services - employment
c) Dividends, interests and discounts
d) Rents, royalties and premiums
e) Pensions, charges or annuities or other periodical payments; and
f) Gains or profits not falling under any of the foregoing paragraph.

From Year of Assessment 2004, self-assessment for individuals was implemented. Under Self Assessment System (SAS), taxpayer himself or herself holds the responsibility to correctly compute the amount assessable, file the return and make payment of any tax due and payable within the stimulated dateline.

There are two types of forms available, which are BE Form for employment income only and B Form for business income and/or other income. The dateline for individuals without business income is 30th April while individuals with business income is 30th June.