Malaysia Payroll & Tax Overview - A GUIDE TO DOING BUSINESS IN MALAYSIA 2020 - Shopify
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Malaysia Payroll & Tax Overview A GUIDE TO DOING BUSINESS IN MALAYSIA 2020 © 2020 The Global Payroll Association, Inc.; All Right Reserved 1
Contents 1.0 Key Country Facts and Public Holidays 3 2.0 Business and Culture in Malaysia 4 3.0 Visas and Work Permits 5 4.0 Tax and Social Security 6 5.0 Compliance 8 6.0 Statutory Absence/Payments 9 7.0 In-country Payroll Providers 10 8.0 About This Payroll and Tax Overview 11 © 2020 The Global Payroll Association, Inc.; All Right Reserved 2
1.0 Key Country Facts and Public Holidays
1.1 Official Language
The official Language is Standard Malay (official), English, Chinese dialects, Tamil, Telugu, Malayalam
1.2 Currency
Malaysian ringgit
1.3 Country Dial code
The country dial code is +49
1.4 Country abbreviation
The country abbreviation is MY
1.5 Statutory Filing Payment Methods
Online payments
1.6 National Minimum wage
The minimum wage for employees in Peninsular Malaysia will be raised to RM1,200 per month for city and municipal
council employees and RM1,100 for employees outside cities and council effective from February 1, 2020. Those
employees classed as ‘domestic servants’ under the Employment Act 1955 are excluded from all rates.
1.7 Filing Deadlines
Return of Remuneration from Employment, Return of Remuneration by an Employment, Statement of Tax Deduction
and Tax remittance for individual employee. Process additional earnings for year-end tax declaration (for payroll-related
items and benefits in kind as advised by the Customer). Prepare and file the Form E (Annual Remuneration and
Deductions Statement), and CP8D to the Internal Revenue Board of Malaysia (IRBD) before 31 of March of the following
year. Monthly filing deadline is 10th of following month.
1.8 Fiscal year
January – 31 December
1.9 Time Zone
Malaysia Time Zone (UTC+08:00)
Holidays in Malaysia 2019/20
2020 Holiday Holiday Type
1 January New Year’s Day National Holiday
26-27 January Chinese New Year National Holiday
1 May Labour Day National Holiday
7 May Wesak Day National Holiday
11 May Nuzul Al-Quran National Holiday
24-26 May Hari Raya Aidilfitri National Holiday
8 June The Yang di-Pertuan National Holiday
Agong's Birthday
31 July Hari Raya Haji National Holiday
20 August Awal Muharram National Holiday
31 August National Day National Holiday
16 September Malaysia Day National Holiday
29 October Prophet Muhammads National Holiday
birthday
25 December Christmas Day National Holiday
© 2020 The Global Payroll Association, Inc.; All Right Reserved 3
2.0 Business and Culture in Malaysia
2.1 Establishing as an Employer
The Malaysia Investment Development Board encourages inward investment from foreign multi national companies
and provide incentives to invest particularly in Technology, Automotive and machinery & Equipment businesses.
A company must register with the Employment Provident Fund (EPF) and Social Security Organisation (SOCSO)
within 7 days (EPF) and 30 days (SOCSO) from the date the first employee joins the company.
Payments to employees and third parties may currently be made from any country, ie an in country bank account is not
mandatory
2.2 Employment
In Malaysia employment law is outlined in the Employment Act 1955 and the Industrial Relations Act 1967, which deal
with relations between employers, employees and trade unions. The Employment Act gives minimum terms and
conditions for manual workers and non-manual workers who earn less than a defined amount. It covers full-time, part-
time, temporary and contract employment.
Part-time work is classed as being employed for less than 70 percent of the time of a full-time employee in a similar job.
Casual workers, who are hired only when needed, are not covered by the Employment Act.
Working hours are limited by:-
1. 5 consecutive hours with a period of rest for at least 30 minutes (any break of less than 30 minutes in the five
consecutive hours shall not break the continuity of that five consecutive hours) or 8 hours must include a period of
rest (including meal) of at least 45 minutes;
2. 8 hours in one day;
3. a spread-over period of not exceeding 10 hours in one day/48 hours in one week.
© 2020 The Global Payroll Association, Inc.; All Right Reserved 4
3.0 Visas and Work Permits
3.1 Visas
Foreign nationals can obtain Permanent Residence status from the authorities, however the usual category for
foreign/corporate transfers is a standard Employment Pass.
• Professional Visit Pass (PVP) – for assignments of less than 12 months remaining on home payroll.
• Employment Pass (EP) – For assignments over a 2-year, duration period and salary must be paid by the
local sponsoring entity in Malaysia.
• Visit (Temporary) Employment Pass – for assignment between 6 months to a maximum of 1- year duration
and salary must be paid by the local sponsoring entity in Malaysia
Other work visas or passes include:
• Visitor's Pass (Professional)
• Malaysia Automated Clearance System (MACS)
• Short Term and Long Term Social Visit Pass
Getting an employment pass can be a long process, but harsh penalties apply for those who are caught without a
valid pass. A work pass is usually valid for six months to five years.
In general, applicants must be over 23 years old (for the IT sector) and 27 years old for all other sectors.
In addition to these work visas, foreigners can apply for the Malaysia My Second Home (MM2H) Programme.
Applicants accepted on the scheme are granted a multiple-entry Social Visit Pass which is valid for ten years in the
first instance and is renewable. It is open to everyone regardless of age and foreigners with a pass can bring their
partners, and children up to the age of 21, with them.
Those granted a pass via the MM2H scheme can set up a business in the country and work part-time. Full details of
the scheme, the entitlements it brings, how to apply and information on living in the country can be found on the
MM2H website. All the necessary forms to make an application can also be downloaded.
© 2020 The Global Payroll Association, Inc.; All Right Reserved 5
4.0 Tax and Social Security
4.1 Tax
Employers in Malaysia are required to deduct tax withholding tax when making payments for salaries. Monthly
deductions are calculated based on any personal tax relief (eg spouse, children etc )
Employers should submit their monthly withholding tax return and make payments to the Inland Revenue Board of
Malaysia by the 15th of the month following payroll. Penalties are in place for any employer not following filing
deadlines.
Tax is progressive from 0% to 28% however, effective January 2020, any residents earning more than 2 million pa
will be taxed at 30%. This does not currently include non residents, however this is expected to change in future
years.
The website http://www.hasil.gov.my provides further information on taxes.
2020 Income Tax rates
Taxable income (MYR*) Tax on column 1
Tax on excess (%)
(MYR)
Over Not over
5,000 20,000 0 1
20,000 35,000 150 3
35,000 50,000 600 8
50,000 70,000 1,800 14
70,000 100,000 4,600 21
100,000 250,000 10,900 24
250,000 400,000 46,900 24.5
400,000 600,000 83,650 25
600,000 1,000,000 133,650 26
1,000,000 2,000,000 237,650 28
2,000,000 517,650 30
© 2020 The Global Payroll Association, Inc.; All Right Reserved 64.2 Social Security
The Malaysian Social Security system is called SOCSO, or PERKESO (Pertubuhan Keselamatan Sosial). It provides
financial assistance to employees and their families in the event of an accident which results in death, disability or
illness, or an occupational disease. SOCSO provides two kinds of insurance:
1. Employment injury insurance
2. Invalidity pension scheme
For more information, please refer to website http://www.perkeso.gov.my
Only Malaysian citizens and permanent residents are eligible to contribute to SOCSO and to benefit from its services.
The following individuals are exempt from paying SOCSO:
• Business owners and their spouses
• Domestic servants
• Foreign workers
• Government employees
• Self-employed people
SOCSO is funded by contributions from both the employer and the employee. The amount paid into the scheme
depends on an employee's earnings.
4.3 Employees Provident Fund
Employees Provident Fund relates to the compulsory savings and retirement plan. This is a mandatory scheme for
Malaysian citizens and voluntary for non-Malaysian citizens.
The amount is calculated based on the monthly wages received.
RMB5,000 and below 11% employee 13% employer
Over RMB5,000 11% employee 12% employer
For more information, please refer to website http://www.perkeso.gov.my
4.4 Employment Insurance Scheme
EIS provides certain benefits and re-employment placement for individuals who have lost their employment and
provides support in finding a job in addition to financial support.
Employees and employers contribute 0.2% of salary up to a maximum of RMB4,000
© 2020 The Global Payroll Association, Inc.; All Right Reserved 75.0 Compliance 5.1 Starters/Registration Employers are required to submit SOCSO Form 2, EIS 2A and CP22 to inform official authorities of a new joiner. Employees should provide their personal details, copy of identity card and TP3 if previously worked in Malaysia. 5.2 Leavers/De-registration Employers withhold final payment until tax clearance is received where an employee is leaving the country © 2020 The Global Payroll Association, Inc.; All Right Reserved 8
6.0 Statutory Absence/Payments
6.1 Annual leave
Annual Leave is accrued by workers who continue to work for the same employer as follows:
• 8 days for every 12 months of continuous service with the same employer if they have been
employed by that employer for a period of less than 2 years
• 12 days for every 12 months of continuous service with the same employer if they have been
employed by that employer for a period of 2 years or more but less than 5 years
• 16 days for every 12 months of continuous service with the same employer if they have been
employed by that employer for a period of 5 years or more;
6.2 Maternity leave
Pregnant employees may take up to 60 days off with full pay after the birth (note rates are higher in the public
sector until 2021). Leave can commence any time within 30 days of due dateunless confirmed by a doctor,
when it may be within 14 days.
6.3 Paternity leave
There is no statutory paternity leave
6.4 Sickness
Employees may receive sick pay with full pay as follows where there is no hospitalisation:
Less than 2 years service 14 days paid sick leave pa
2 – 5 years service 18 days paid sick leave pa
5+ years service 22 days paid sick leave pa
Where hospitalisation has been necessary, 60 days sick days pa
6.5 National Service
There are no National Service obligations in Malaysia
© 2020 The Global Payroll Association, Inc.; All Right Reserved 97.0 In-country Payroll Providers
8.0 About This Payroll and Tax Overview
8.1 Copyright
All rights reserved. No part of this publication may be reproduced, distributed, or transmitted in any form or by any
means, including photocopying, recording, or other electronic or mechanical methods, without the prior written
permission of the publisher.
8.2 Disclaimer
Every effort has been made to ensure that all information in this booklet is correct at the time of publication. This
information should be used as reference only and not as a sole source of decision making.
8.3 The Global Payroll Association
Global Payroll Association is the first international payroll association of its kind. We are a central hub for ‘all-things
payroll’. A one-stop-shop supplying comprehensive directories, interactive training and in-depth country resources.
We are here to help you with your global payroll needs, no matter how complex, connecting you with the world’s
leading experts and offering a forum to network with other like-minded global professionals.
Global Payroll Association welcomes international payroll, HR and financial professionals of all levels.
© 2020 The Global Payroll Association, Inc.; All Right Reserved 11The United Kingdom GPA Education Ltd/Global Payroll Association 49 Greek Street London W1D 4EG 0203 871 8870 info@globalpayrollassociation.com © 2020 The Global Payroll Association, Inc.; All Right Reserved 12
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