Updated on: 2025/08/07 09:56 (UTC)
Overview
Malaysia, which is a parliamentary constitutional monarchy, consists of 13 states and three federal territories within the country’s two sectors in Southeast Asia: Peninsular Malaysia (West Malaysia) and Malaysian Borneo (East Malaysia). The 13 states of Malaysia are Johor Darul Ta’zim, Kedah Darul Aman, Kelantan Darul Naim, Malacca (Melaka), Negeri Sembilan Darul Khusus, Pahang Darul Makmur, Penang (Pulau Pinang), Perak Darul Ridzuan, Perlis Indera Kayangan, Sabah, Sarawak, Selangor Darul Ehsan, and Terengganu Darul Iman. The three federal territories of Malaysia are Kuala Lumpur, Labuan, and Putrajaya.
The main part of Peninsular Malaysia, which is on the mainland of the continent of Asia, shares a land border with Thailand to the north, and Singapore is separated from the main part of Peninsular Malaysia to its south by the Johor Strait, which at its shortest width between the main part of Peninsular Malaysia and Singapore is about 2 kilometers. Peninsular Malaysia also includes a series of islands quite close to main part of Peninsular Malaysia, the two most populous of which are Penang Island, which is part of the state of Penang, and Langkawi Island, which is part of the state of Kedah.
The main part of Malaysian Borneo, which includes the states of Sabah and Sarawak located on the island of Borneo, is bordered to its south on land by the Kalimantan provinces of Indonesia. The part of Malaysia on the island of Borneo also shares a land border with the main part of the country of Brunei and shares a land border with Brunei’s exclave of Temburong District. Malaysian Borneo also includes a series of islands quite close to the much larger island of Borneo, the most populous of which is Labuan Island, which is the main island of Malaysia’s federal territory of Labuan. Malaysia shares another land border with Indonesia on Sebatik Island, the northern part of which is part of the Malaysian state of Sabah and the southern part of which is part of the Indonesian province of North Kalimantan.
Malaysia’s currency is the Malaysian ringgit.
Employers in Malaysia are responsible for withholding income taxes and social taxes from all employees, and making additional social tax contributions. Employers also must uphold all workplace compensation and benefits requirements including regulations relating to wages, leave, hours of work, and termination pay.
Foreign workers in Malaysia are required to obtain government approval, visas, and employment passes in order to work legally in Malaysia. Foreign workers are not covered by Malaysia’s social security system and nonresidents of Malaysia are charged income taxes at a flat rate. However, they generally are covered by all other labor provisions.
Malaysian residents working in the United States are covered by U.S. tax law with possible work status exclusions applying. Work within the U.S. states and territories is covered by various labor laws.
CURRENCY DETAILS
The currency of Malaysia is the Malaysian ringgit (RM). The internationally recognized three-letter currency code for the Malaysian ringgit is MYR. The standard plural form of Malaysian ringgit is the same as its singular form, although the plural form ringgits sometimes is used.
When an amount of Malaysian ringgit is written using the currency symbol RM, the variant RM., or the variant RM:, the symbol precedes the numerical value, generally with a space between the numerical value and symbol, although some government entities prefer that there be no space between the numerical value and symbol. The currency symbol RM is an abbreviation of the equivalent term for Malaysian ringgit in the Malay language, which is ringgit Malaysia.
The Malaysian ringgit currency symbol M$ includes the general dollar currency symbol $ although the ringgit itself is not a dollar currency. When an amount of Malaysian ringgit is written using the currency symbol M$, its variant M $, or its variant $M, the symbol precedes the numerical value with no space between the numerical value and symbol.
One hundredth ( 1 ⁄ 100 ) of one Malaysian ringgit is referred to as a sen, which has the same plural form as its singular form, or as a cent, with the plural form of cents.
TAXES
The federal government generally enacts laws relating to income tax. All employers are required to withhold income taxes from all employees and make monthly remittances.
In addition, employers must withhold social taxes from all employees, make monthly remittances, and pay additional social tax contributions for all employees. Social taxes include Social Security, which generally is levied upon Malaysians with lower incomes and their employers, and the Employee’s Provident Fund, which is levied upon all employees and their employers.
The Malaysian tax year is the calendar year (Jan. 1 through Dec. 31).
Coronavirus (Covid-19) Guidance: The deadline for filing Form E for 2019 was extended to May 31, 2020, from March 31.
Employees temporarily working at home in Malaysia who normally work in Singapore are not considered to be working in Malaysia during the period of temporary work at home. Employees temporarily working in another country who normally work in Malaysia are considered to be working in Malaysia during the period of temporary work, and the associated income is considered taxable in Malaysia.
Nonresidents may temporarily work in Malaysia for up to 60 days because of coronavirus-related travel restrictions without being considered to have worked in Malaysia, as long as the work would have been performed outside Malaysia without the travel restrictions. Employees’ temporary presence in Malaysia does not create a presence for their employer in Malaysia.
Time spent outside Malaysia by residents or inside Malaysia by nonresidents because of coronavirus-related travel restrictions does not affect an individual’s status as a resident or nonresident.
Employers in Malaysia can take advantage of extended monthly deposit deadlines for retirement savings fund contributions, from the 15th to the 30th of each month, from April 2020 through December 2020.
The Employees Provident Fund (EPF) initially offered the postponement from April 2020 through August 2020; its most recent decision on Sept. 7, 2020, extends that postponement through Dec. 31, 2020.
Effective for September 2021 through December 2021, employers may remit, without incurring late penalties, contribution payments to the EPF by the end of the following month instead of the normal deadline of the 15th of the following month. Employers may also apply, from Sept. 13 to Dec. 31, 2021, for the Employer Pay for Reduction initiative (e-PaR) to reduce their outstanding late payment penalties prior to August 2021 by up to 70%. Employers must pay in full all of their contribution payments and dividends for their employees for periods before August 2021 by Dec. 31, 2021, to be eligible for e-PaR.
All employers were exempted from the Human Resources Development Levy for June 2021. The tourism and retail sectors were exempted from the levy from January to June 2021.
Income Taxes
The income tax laws in Malaysia are administered and regulated by the Inland Revenue Board of Malaysia (Lembaga Hasil Dalam Negeri Malaysia). The acronym IRBM often is used to refer to the board.
Coverage: All employers with at least one employee must withhold and remit income taxes from all resident and nonresident employees.
A resident is considered anyone who resided in Malaysia for 182 days in a year, resided 90 days in Malaysia during a year and has been considered a resident three out of the last four years, or someone who was considered a resident for all of the previous three years.
Employees: Employees generally are defined as those gaining income relating to the exercising of employment duties on behalf of an employer.
Rates and Thresholds: Income tax rates are levied on a progressive scale for residents, with rates ranging from zero to 30%. In the country’s progressive income tax system, portions of an individual’s income are allocated to the country’s personal income tax brackets, and each portion of income allocated to a tax bracket is taxed at the tax rate applicable to that tax bracket.
Effective starting with 2021, Malaysia’s personal income tax rates for residents and minimum and maximum amounts of annual income for each tax bracket are as follows:| Range of Annual Income (Malaysian Ringgit) | Income Tax Rate |
|---|---|
| Up to RM 5,000 | zero |
| More than RM 5,000 and up to RM 20,000 | 1% |
| More than RM 20,000 and up to RM 35,000 | 3% |
| More than RM 35,000 and up to RM 50,000 | 8% |
| More than RM 50,000 and up to RM 70,000 | 13% |
| More than RM 70,000 and up to RM 100,000 | 21% |
| More than RM 100,000 and up to RM 250,000 | 24% |
| More than RM 250,000 and up to RM 400,000 | 24.5% |
| More than RM 400,000 and up to RM 600,000 | 25% |
| More than RM 600,000 and up to RM 1 million | 26% |
| More than RM 1 million and up to RM 2 million | 28% |
| More than RM 2 million | 30% |
Effective until Dec. 31, 2020, Malaysia’s progressive income tax rates were those in effect for 2021, except the income tax rate of 13% was instead 14%.
Nonresidents are taxed at a flat income tax rate of 30%.
Tax deduction tables for wages paid to resident employees on a monthly basis are available from the Malaysia Inland Revenue Board. Tax deduction tables also are known as schedules of monthly tax deduction (MTD) in Malaysia.
The 2020 document and the 2019 document for determining monthly tax deductions using computerized calculations are available from the Inland Revenue Board.
The amount of tax to be deducted from an employee’s wages using Malaysia’s schedules of monthly tax deduction is based in part on the employee’s deduction category. An employee’s deduction category is derived from marital status and other factors, as follows:
- Category 1: single (unmarried);
- Category 2: married and spouse is not employed or otherwise working; and
- Category 3: married and spouse is working, employee is divorced or widowed, or employee is single (unmarried) and has an adopted child.
Employees must submit to their employer Form PCB/TP1 (Borang PCB/TP1), Form of Claims and Individual Revision Form for the Purpose of Monthly Tax Deductions, to identify to their employer any deductible amounts or rebates they want applied as part of their monthly tax withholding within the context of Malaysia’s Income Tax Act. Employers must allow each of their employees to file a new Form PCB/TP1 at least twice a year to modify withholding aspects.
The acronym PCB often is used in Malaysia’s forms related to payroll because it stands for the Malay phrase “potongan cukai bulanan,” which translates to monthly tax deductions.
Tax Incentive for Expert Return Program: Malaysian employees who are covered by Malaysia’s Expert Return Program (Program Kepulangan Pakar, abbreviated as PKP) are eligible for a flat income tax rate of 15%. Employees covered by the program are experts in fields specified by TalentCorp Malaysia and the Ministry of Finance who had left Malaysia to work in another country but returned to Malaysia to work there for an extended period. The flat income tax rate of 15% is applicable for the first five years of work in Malaysia by applicable Malaysian employees that had worked in another country for at least 36 months and returned to Malaysia to work there.
Employees must submit to the Ministry of Finance an application to be covered by the Expert Return Program and have that application approved to be eligible for the flat income tax rate of 15%. Applications for coverage by the program may be submitted until Dec. 31, 2020. Applicable fields for the program include oil, gas, and energy; business services; financial services; health care; communications and infrastructure; electronics and electrical; education; wholesale and retailing; tourism; agriculture; and palm oil and rubber.
Registration: All employers must register with IRBM and receive an income tax reference number. This can be done at any IRBM branch or online via the e-Daftar program.
Additionally, employers must register new employees at the nearest IRBM branch within 30 days of the new employees’ hire dates. This is done by filing Form CP22.
Taxable Amounts: Taxable income is generally defined as all remuneration minus allowable deductions. Remuneration includes wages, leave pay, commissions, bonuses, gratuities, and all types of allowances, among other types of income.
Employer must make deductions based on their employees’ marital status and number of children.
Withholding Methods: Employers must withhold income taxes from each paycheck and make monthly remittances.
Returns and Remittance: For each month, employers must file a monthly return, Form CP39, and remit income tax withheld from payments during that month by the 15th day of the following month. Effective starting Sept. 1, 2019, employers must file Forms CP39 or CP39A electronically and make payments electronically through a financial institution or online via the e-CP39 program.
Additionally, employers must file two annual returns, Form CP8D and Form E, which summarize the yearly income tax withholding for all employees from the previous year, with IRBM by March 31 of every year. Form E can only be filed electronically. Employers also must annually present each employee with Form EA, also known as Form CP8A, a statement of the employee’s wages earned and tax withheld in the previous year, by the last day of February.
Employee Share Plans: According to two public rulings published by the Internal Revenue Board of Malaysia, shares from employee share schemes are taxable on the market value upon exercise if they are exercised within a relevant time period. The exercise is taxable as income tax under sections 25 and 32 of the Income Tax Law in relation to gross income.
Recordkeeping: Tax documents generally should be kept for at least seven years.
Penalties: Employers that fail to remit income taxes on time, fail to withhold income taxes, fail to make correct filings, fail to register new employees or fail to present the proper forms to employees on an annual basis may be assessed fines between RM 200 and RM 2,000, may face prison terms of up to six months, or both.
Late remittances of withholding taxes on nonresidents may be assessed a fine of 10% of taxes outstanding.
Social Taxes
Social taxes in Malaysia include contributions to the Employees Provident Fund (EPF), also known in Malay as Kumpulan Wang Simpanan Pekerja (KWSP), and contributions for Social Security and the Employment Insurance System (EIS), both of which are administered by the Social Security Organisation (SOCSO), also known in Malay as Pertubuhan Keselamatan Sosial (PERKESO). SOCSO workers’ compensation contributions also sometimes are generally referred to as Social Security contributions.
The EPF provides all employees with a retirement savings fund.
The SOCSO Social Security program consists of an Employment Injury Scheme and an Invalidity Pension Scheme. The Employment Injury Scheme, which is distinct and separate from the Employment Insurance System, provides social insurance coverage against workplace accidents, occupational diseases, and commuting accidents to and from place of work. The Invalidity Pension Scheme provides coverage to individuals against invalidity arising from any cause and not necessarily one arising from their employment, if their ailment has caused them to be no longer capable of earning at least one-third ( 1 ⁄ 3 ) of the earnings they customarily could have earned based on the physical capabilities they had before their ailment began. These schemes entitle workers to medical benefits, temporary and permanent disablement benefits, constant attendance allowance, dependent’s benefit or survivors pension, funeral benefits, rehabilitation benefits, educational benefits, and invalidity pension.
The EIS provides employees with unemployment benefits and re-employment placement programs in the event of loss of employment.
Coverage: All employers must withhold EPF payments and make additional contributions for each employee. However, employees who are more than 75 years of age and their employers are exempt from EPF contributions. Additionally, expatriates outside of Malaysia are exempt from contributing, as are domestic workers.
All employers must withhold Social Security contributions and make additional contributions for each employee. The types of workers excluded from Social Security contributions are government employees, domestic workers, self-employed individuals, migrant workers and their spouses, and the owners of businesses.
All employers must withhold EIS payments and make additional contributions for each employee. However, employees who are younger than 18 years of age or more than 60 years of age, and employees who are at least 57 years of age and who before they became 57 years of age never were required to make EIS contributions, are exempt from EIS contributions, and employers of such employees do not need to pay EIS contributions on wages paid to such employees. Additionally, members of the public service and prison inmates are exempt from contributing to the EIS, as are domestic and casual workers.
Rates and Thresholds: Employers and employees are assessed contributions to fund the EPF, Social Security, and the EIS.
Employees Provident Fund (EPF): Employee and employer EPF contribution rates vary based on the amount of employment income paid to employees, the age of employees, and citizenship or residency status. There generally is no limit on the amount of employment income subject to EPF contributions, but employees who are 60 to 75 years of age and who are not foreign nationals who started contributing on or after Aug. 1, 1998, are not assessed EPF contributions.
Effective since Jan. 1, 2019, employee EPF contributions range from zero to 11%, employer EPF contributions based on employment income paid to employees who are not foreign nationals who started contributing on or after Aug. 1, 1998, range from 4% to 13%, and employers are assessed an EPF contribution of RM 5 per employee per month based on employment income paid to employees who are foreign nationals who started contributing on or after Aug. 1, 1998. Effective until Dec. 31, 2018, employee EPF contributions ranged from 5.5% to 11%, employer EPF contributions based on employment income paid to employees who were not foreign nationals who started contributing on or after Aug. 1, 1998, ranged from 6% to 13%, and employers were assessed an EPF contribution of RM 5 per employee per month based on employment income paid to employees who were foreign nationals who started contributing on or after Aug. 1, 1998.
Effective since Jan. 1, 2019, the EPF contribution rates are as follows:| Employee Citizenship or Residency Status | Monthly Income (Malaysian Ringgit) | Contribution Rates (Under 60 Years of Age) | Contribution Rates (60 to 75 Years of Age) |
|---|---|---|---|
| All Citizens, All Permanent Residents of Malaysia Who Are Not Citizens, Foreign Nationals Who Started Contributing Before Aug. 1, 1998 | Up to RM 5,000 | Employers:13%Employees:11% | Employers:4% on employment income paid to Malaysian citizens, 6.5% on employment income paid to permanent residents and foreign nationalsEmployees:zero for Malaysian citizens, 5.5% for permanent residents and foreign nationals |
| All Citizens, All Permanent Residents of Malaysia Who Are Not Citizens, Foreign Nationals Who Started Contributing Before Aug. 1, 1998 | More than RM 5,000 | Employers:12%Employees:11% | Employers:4% on employment income paid to Malaysian citizens, 6% on employment income paid to permanent residents and foreign nationalsEmployees:zero for Malaysian citizens, 5.5% for permanent residents and foreign nationals |
| Foreign Nationals Who Started Contributing On or After Aug. 1, 1998 | Unlimited wages | Employers:RM 5 per employee per monthEmployees:11% | Employers:RM 5 per employee per monthEmployees:5.5% |
| Employee Citizenship or Residency Status | Monthly Income (Malaysian Ringgit) | Contribution Rates (Under 60 Years of Age) | Contribution Rates (60 to 75 Years of Age) |
|---|---|---|---|
| Citizens, Permanent Residents, Foreign Nationals (who started contributing before Aug. 1, 1998) | Up to RM 5,000 | Employer:13%Employee:11% | Employer:6.5%Employee:5.5% |
| Citizens, Permanent Residents, Foreign Nationals (who started contributing before Aug. 1, 1998) | More than RM 5,000 | Employer:12%Employee:11% | Employer:6%Employee:5.5% |
| Foreign Nationals (who started contributing on or after Aug. 1, 1998) | Unlimited wages | Employer:RM 5 per employee per monthEmployee:11% | Employer:RM 5 per employee per monthEmployee:5.5% |
The generally applicable EPF rates are incorporated into the Employees Provident Fund monthly contributions schedule that is applicable to monthly EPF assessments on employers and employees based on monthly payments of employment income to employees. EPF contributions are assessed as flat values assigned to ranges of monthly income in the schedule.
The EPF monthly contributions schedule effective since Jan. 1, 2019, was released by the Employees Provident Fund.
In addition to the EPF statutory contributions, employers and or employees may make voluntary EPF contributions by completing Forms KWSP 17 and KWSP 17A respectively.
Social Security: Social Security contributions are subject to a maximum monthly computable wage, which is the maximum amount of wages paid to an employee during a month upon which the contribution rates may be assessed.
The maximum monthly computable wage for Social Security contributions is RM 4,000.
There are two categories of Social Security contributions, with contribution rates on employers and employees differing between the two categories.
First-Category contributions are contributions to the Employment Injury Scheme and Invalidity Pension Scheme, consisting of both employer and employee contributions. Contribution rates of the First Category apply to wages paid to employees who are younger than 60 years of age, except employees who are at least 55 years of age but younger than 60 years of age with no prior Social Security contributions. The First-Category contribution rates are as follows:
- Employers: 1.75% of an employee’s monthly wages; and
- Employees: 0.5% of an employee’s monthly wages.
Second-Category contributions are employer-only contributions to the Employment Injury Scheme but not the Invalidity Pension Scheme. Contribution rates of the Second Category apply to wages paid to employees who are at least 60 years of age or who are at least 55 years of age with no prior Social Security contributions. The Second-Category contribution rates are as follows:
- Employers: 1.25% of an employee’s monthly wages; and
- Employees: Zero.
The generally applicable Social Security rates are incorporated into the Social Security monthly contributions schedule that is applicable to monthly Social Security assessments on employers and employees based on monthly payments of employment income to employees. Social Security contributions are assessed as flat values assigned to ranges of monthly income in the schedule, subject to the maximum monthly computable wage for Social Security contributions of RM 4,000.
The Social Security monthly contributions schedule is as follows:| Range of Monthly Income (Malaysian Ringgit) | Employer’s First-Category Contribution | Employee’s First-Category Contribution | Employer’s Second-Category Contribution |
|---|---|---|---|
| Up to RM 30 | 40 cents | 10 cents | 30 cents |
| More than RM 30 and up to RM 50 | 70 cents | 30 cents | 50 cents |
| More than RM 50 and up to RM 70 | RM 1.10 | 30 cents | 80 cents |
| More than RM 70 and up to RM 100 | RM 1.50 | 40 cents | RM 1.10 |
| More than RM 100 and up to RM 140 | RM 2.10 | 60 cents | RM 1.50 |
| More than RM 140 and up to RM 200 | RM 2.95 | 85 cents | RM 2.10 |
| More than RM 200 and up to RM 300 | RM 4.35 | RM 1.25 | RM 3.10 |
| More than RM 300 and up to RM 400 | RM 6.15 | RM 1.75 | RM 4.40 |
| More than RM 400 and up to RM 500 | RM 7.85 | RM 2.25 | RM 5.60 |
| More than RM 500 and up to RM 600 | RM 9.65 | RM 2.75 | RM 6.90 |
| More than RM 600 and up to RM 700 | RM 11.35 | RM 3.25 | RM 8.10 |
| More than RM 700 and up to RM 800 | RM 13.15 | RM 3.75 | RM 9.40 |
| More than RM 800 and up to RM 900 | RM 14.85 | RM 4.25 | RM 10.60 |
| More than RM 900 and up to RM 1,000 | RM 16.65 | RM 4.75 | RM 11.90 |
| More than RM 1,000 and up to RM 1,100 | RM 18.35 | RM 5.25 | RM 13.10 |
| More than RM 1,100 and up to RM 1,200 | RM 20.15 | RM 5.75 | RM 14.40 |
| More than RM 1,200 and up to RM 1,300 | RM 21.85 | RM 6.25 | RM 15.60 |
| More than RM 1,300 and up to RM 1,400 | RM 23.65 | RM 6.75 | RM 16.90 |
| More than RM 1,400 and up to RM 1,500 | RM 25.35 | RM 7.25 | RM 18.10 |
| More than RM 1,500 and up to RM 1,600 | RM 27.15 | RM 7.75 | RM 19.40 |
| More than RM 1,600 and up to RM 1,700 | RM 28.85 | RM 8.25 | RM 20.60 |
| More than RM 1,700 and up to RM 1,800 | RM 30.65 | RM 8.75 | RM 21.90 |
| More than RM 1,800 and up to RM 1,900 | RM 32.35 | RM 9.25 | RM 23.10 |
| More than RM 1,900 and up to RM 2,000 | RM 34.15 | RM 9.75 | RM 24.40 |
| More than RM 2,000 and up to RM 2,100 | RM 35.85 | RM 10.25 | RM 25.60 |
| More than RM 2,100 and up to RM 2,200 | RM 37.65 | RM 10.75 | RM 26.90 |
| More than RM 2,200 and up to RM 2,300 | RM 39.35 | RM 11.25 | RM 28.10 |
| More than RM 2,300 and up to RM 2,400 | RM 41.15 | RM 11.75 | RM 29.40 |
| More than RM 2,400 and up to RM 2,500 | RM 42.85 | RM 12.25 | RM 30.60 |
| More than RM 2,500 and up to RM 2,600 | RM 44.65 | RM 12.75 | RM 31.90 |
| More than RM 2,600 and up to RM 2,700 | RM 46.35 | RM 13.25 | RM 33.10 |
| More than RM 2,700 and up to RM 2,800 | RM 48.15 | RM 13.75 | RM 34.40 |
| More than RM 2,800 and up to RM 2,900 | RM 49.85 | RM 14.25 | RM 35.60 |
| More than RM 2,900 and up to RM 3,000 | RM 51.65 | RM 14.75 | RM 36.90 |
| More than RM 3,000 and up to RM 3,100 | RM 53.35 | RM 15.25 | RM 38.10 |
| More than RM 3,100 and up to RM 3,200 | RM 55.15 | RM 15.75 | RM 39.40 |
| More than RM 3,200 and up to RM 3,300 | RM 56.85 | RM 16.25 | RM 40.60 |
| More than RM 3,300 and up to RM 3,400 | RM 58.65 | RM 16.75 | RM 41.90 |
| More than RM 3,400 and up to RM 3,500 | RM 60.35 | RM 17.25 | RM 43.10 |
| More than RM 3,500 and up to RM 3,600 | RM 62.15 | RM 17.75 | RM 44.40 |
| More than RM 3,600 and up to RM 3,700 | RM 63.85 | RM 18.25 | RM 45.60 |
| More than RM 3,700 and up to RM 3,800 | RM 65.65 | RM 18.75 | RM 46.90 |
| More than RM 3,800 and up to RM 3,900 | RM 67.35 | RM 19.25 | RM 48.10 |
| More than RM 3,900 and up to RM 4,000 | RM 69.05 | RM 19.75 | RM 49.40 |
A separate contribution schedule to fund the Employment Injury Scheme is in effect for employers based on wages paid to nonresident employees. This contribution schedule is detailed in the Foreign Workers section of this primer.
Employment Insurance System (EIS): EIS contributions are subject to a maximum monthly computable wage, which is the maximum amount of wages paid to an employee during a month upon which the contribution rates may be assessed.
The maximum monthly computable wage for EIS contributions is RM 4,000.
The EIS contribution rate for employees is 0.2% of wages and the EIS contribution rate for employers is 0.2% of payroll.
The generally applicable EIS rates are incorporated into the EIS monthly contributions schedule that is applicable to monthly EIS assessments on employers and employees based on monthly payments of employment income to employees. EIS contributions are assessed as flat values assigned to ranges of monthly income in the schedule, subject to the maximum monthly computable wage for Social Security contributions of RM 4,000.
The EIS monthly contributions schedule is as follows:| Range of Monthly Income (Malaysian Ringgit) | Employer’s EIS Contribution | Employee’s EIS Contribution | Sum of Employer and Employee Contributions |
|---|---|---|---|
| Up to RM 30 | 5 cents | 5 cents | 10 cents |
| More than RM 30 and up to RM 50 | 10 cents | 10 cents | 20 cents |
| More than RM 50 and up to RM 70 | 15 cents | 15 cents | 30 cents |
| More than RM 70 and up to RM 100 | 20 cents | 20 cents | 40 cents |
| More than RM 100 and up to RM 140 | 25 cents | 25 cents | 50 cents |
| More than RM 140 and up to RM 200 | 35 cents | 35 cents | 70 cents |
| More than RM 200 and up to RM 300 | 50 cents | 50 cents | RM 1 |
| More than RM 300 and up to RM 400 | 70 cents | 70 cents | RM 1.40 |
| More than RM 400 and up to RM 500 | 90 cents | 90 cents | RM 1.80 |
| More than RM 500 and up to RM 600 | RM 1.10 | RM 1.10 | RM 2.20 |
| More than RM 600 and up to RM 700 | RM 1.30 | RM 1.30 | RM 2.60 |
| More than RM 700 and up to RM 800 | RM 1.50 | RM 1.50 | RM 3 |
| More than RM 800 and up to RM 900 | RM 1.70 | RM 1.70 | RM 3.40 |
| More than RM 900 and up to RM 1,000 | RM 1.90 | RM 1.90 | RM 3.80 |
| More than RM 1,000 and up to RM 1,100 | RM 2.10 | RM 2.10 | RM 4.20 |
| More than RM 1,100 and up to RM 1,200 | RM 2.30 | RM 2.30 | RM 4.60 |
| More than RM 1,200 and up to RM 1,300 | RM 2.50 | RM 2.50 | RM 5 |
| More than RM 1,300 and up to RM 1,400 | RM 2.70 | RM 2.70 | RM 5.40 |
| More than RM 1,400 and up to RM 1,500 | RM 2.90 | RM 2.90 | RM 5.80 |
| More than RM 1,500 and up to RM 1,600 | RM 3.10 | RM 3.10 | RM 6.20 |
| More than RM 1,600 and up to RM 1,700 | RM 3.30 | RM 3.30 | RM 6.60 |
| More than RM 1,700 and up to RM 1,800 | RM 3.50 | RM 3.50 | RM 7 |
| More than RM 1,800 and up to RM 1,900 | RM 3.70 | RM 3.70 | RM 7.40 |
| More than RM 1,900 and up to RM 2,000 | RM 3.90 | RM 3.90 | RM 7.80 |
| More than RM 2,000 and up to RM 2,100 | RM 4.10 | RM 4.10 | RM 8.20 |
| More than RM 2,100 and up to RM 2,200 | RM 4.30 | RM 4.30 | RM 8.60 |
| More than RM 2,200 and up to RM 2,300 | RM 4.50 | RM 4.50 | RM 9 |
| More than RM 2,300 and up to RM 2,400 | RM 4.70 | RM 4.70 | RM 9.40 |
| More than RM 2,400 and up to RM 2,500 | RM 4.90 | RM 4.90 | RM 9.80 |
| More than RM 2,500 and up to RM 2,600 | RM 5.10 | RM 5.10 | RM 10.20 |
| More than RM 2,600 and up to RM 2,700 | RM 5.30 | RM 5.30 | RM 10.60 |
| More than RM 2,700 and up to RM 2,800 | RM 5.50 | RM 5.50 | RM 11 |
| More than RM 2,800 and up to RM 2,900 | RM 5.70 | RM 5.70 | RM 11.40 |
| More than RM 2,900 and up to RM 3,000 | RM 5.90 | RM 5.90 | RM 11.80 |
| More than RM 3,000 and up to RM 3,100 | RM 6.10 | RM 6.10 | RM 12.20 |
| More than RM 3,100 and up to RM 3,200 | RM 6.30 | RM 6.30 | RM 12.60 |
| More than RM 3,200 and up to RM 3,300 | RM 6.50 | RM 6.50 | RM 13 |
| More than RM 3,300 and up to RM 3,400 | RM 6.70 | RM 6.70 | RM 13.40 |
| More than RM 3,400 and up to RM 3,500 | RM 6.90 | RM 6.90 | RM 13.80 |
| More than RM 3,500 and up to RM 3,600 | RM 7.10 | RM 7.10 | RM 14.20 |
| More than RM 3,600 and up to RM 3,700 | RM 7.30 | RM 7.30 | RM 14.60 |
| More than RM 3,700 and up to RM 3,800 | RM 7.50 | RM 7.50 | RM 15 |
| More than RM 3,800 and up to RM 3,900 | RM 7.70 | RM 7.70 | RM 15.40 |
| More than RM 3,900 and up to RM 4,000 | RM 7.90 | RM 7.90 | RM 15.80 |
Registration: Employers must register themselves and all employees with SOCSO and the EPF. To register with SOCSO, employers must file an Employer Registration Form within 30 days of beginning operations. To register employees, employers must file a Workers Registration Form with SOCSO.
To register with EPF, employers must file EPF Form 1 (KWSP 1) within seven days from the date an employer first hires an employee. Upon registering, employers will receive an Employer’s Reference Number, the forms needed to make monthly contributions, the forms necessary to register employees, nomination forms, an Employer’s Registration Certificate (which must be displayed at the employer’s premises), an employer’s guide and contributions tables.
To register with the EPF, employees must file form EPF Form 3 (KWSP 3) before the due date of their initial contributions to EPF.
EPF registrations can be submitted through an i-Akaun account. The i-Akaun portal for employers and the i-Akaun portal for employees are available from the EPF.
To register foreign workers for the workers’ compensation Employment Injury Scheme, employers must use the Social Security Organisation’s ASSIST portal. ASSIST is an acronym for Automated SOCSO Integrated System.
Taxable Amounts: For SOCSO contributions, taxable amounts include: salary; overtime payments; commission; payments for annual leave, sick and maternity leave; payments on a rest days and public holidays; allowances such as incentive, good behavior, cost of living (COLA); and service charges. Amounts not taxable for SOCSO contributions include: payments by an employer to pension or provident funds for employees, mileage claims, gratuity payments for dismissals or retrenchments and the annual bonus.
For EPF contributions, taxable amounts include: salary, payments for annual or medical leave that was not utilized, bonuses, allowances, commission, incentives, wages for maternity leave, wages for study leave, wages for half day leave and other payments under the service contract.
Returns and Remittance: Employers must make monthly remittances and payments, and file monthly returns.
SOCSO and EIS payments should be made at approved commercial banks, post offices, or SOCSO offices and returns should be filed using Form 8A. SOCSO and EIS payments and returns are due by the last day of month following the month in which salary was paid. If no taxes are due in a particular month, employers generally should file returns nonetheless.
EPF contribution payments are due by the 15th day of the month following the month when the employment income was paid upon which the EPF contributions were assessed. Payment can be made by cash, postal order, money order, check, banker’s check or internet banking and must be sent to any EPF branch. Employers should file form KWSP 6 along with their payments.
Employers that must use the i-Akaun online account to file EPF contribution data also can use the online account for paying EPF contributions.
Employer contributions based on wages paid to nonresident employees to fund the workers’ compensation Employment Injury Scheme must be submitted through the Social Security Organisation’s ASSIST portal.
Recordkeeping: Employers must keep a registry of all contributions to SOCSO and EPF for at least seven years.
Penalties: Late SOCSO and EIS payments are assessed an annual late fees of six% of taxes outstanding rounded up to the nearest multiple of RM 5. Late SOCSO and EIS payments must be paid to the RHB Bank or the Public Bank. Failure to register with SOCSO or make payments to SOCSO can result in fines of up to RM 10,000, jail sentences of up to two years, or both.
Employers that commit acts of fraud or forgery in connection with EIS payments may be subject to prison terms of up to two years, a fine of up to RM 10,000, or both.
Late EPF payments are assessed interest fees and dividends. Employers that fail to register with EPF on time or make contributions to EPF for every employee may be subject to prison terms of up to three years, a fine of up to RM 10,000, or both.
Employers that fail to deliver wage statements to their employees may be subject to prison terms of up to six months, fines of up to RM 2,000, or both. Employers who fail to pay taxes on behalf of employees may be subject to prison terms of up to three years, fines of up to RM 10,000, or both. Employers that withhold taxes from employees but fail to remit those taxes may be subject to prison terms of up to six years, fines of up to RM 20,000, or both.
Other Taxes
Contribution to the Human Resource Development Corporation (HRD Corp): Employers are required to contribute to the Human Resource Development Corporation (Pembangunan Sumber Manusia Berhad) for the purpose of training employees.
The employer levy is assessed as follows:
- Employers with at least 10 employees: 1% of employee monthly wages
- Employers with five to nine employees: 0.5% of employee monthly wages
Employers employing at least 10 employees are required to register with the fund, while employers employing between five to nine employees may register with the fund.
Employers that fail to register with the fund may be subject to a fine of up to RM 10,000, imprisonment of up to one year, or both.
Zakat: Muslim employees in Malaysia are required to contribute zakat, also known as zakah, which is a form of Islamic charitable donation to socioeconomically disadvantaged individuals. While contributions of zakat are voluntary in some Muslim-majority countries, contributions of zakat are mandatory in Malaysia. Income from employment, including wages, allowances, bonuses, and other payments, is subject to zakat, although income from employment is one of several forms of income or wealth subject to zakat. Income and assets subject to zakat are referred to by the government of Malaysia as zakatable. While individuals may decide how much to contribute, the traditional contribution is 2.5% of the individual’s wealth, and in Malaysia this is the general percentage of an individual’s annual income that the individual is expected to give. Muslim employees in Malaysia must meet an income threshold known as the nisab, which is traditionally 85 grams (three ounces) of gold, before they are required to contribute zakat. In Malaysia, the nisab is expressed as the price of 85 grams of gold in Malaysian ringgit.
Each state has its own zakat agency, as do Malaysia’s federal territories together, which is responsible for collecting and distributing zakat and determining the nisab. While the nisab varies among states and depends on the changing price of gold, and effective periods for a determined nisab vary among states, the nisab in effect for a state generally ranges from RM 14,000 to RM 17,000. Employees may for convenience arrange through most of the state zakat agencies to have zakat withheld from their pay, but are not required to do so and may make payments through other methods. Employees who have zakat withheld from their pay must specify how much is to be withheld or have the state zakat agency specify the amount to be withheld.
Muslim employees in Malaysia are entitled to credit zakat contributions against assessed income tax. When they have zakat withheld from their pay, the zakat for the month is subtracted from the income tax withheld for the month. Zakat that is withheld from employees’ pay should appear on employees’ pay stubs, but zakat that is paid through other methods should not.
Employees may report zakat paid through methods other than withholding to their employer using the Inland Revenue Board’s Form PCB/TP1, Individual Deduction and Rebate Claim Form, to claim the tax deduction. The amount of zakat reported on the form is treated for withholding purposes as the zakat for the month reported on the form.
State/Jurisdiction Taxes
Taxes on employment income are not assessed by any of Malaysia’s states or local jurisdictions.
COMPENSATION AND BENEFITS
Employment laws in Malaysia are enforced by the Director General of Human Resources. The Director General is charged with investigating and adjudicating complaints and violations of Malaysia’s labor laws.
Employers must meet minimum wage and hours of work requirements, and provide mandated holidays, amounts of leave to employees. In addition, employers must uphold wage payment and termination payment rules.
Employees are entitled to the Employee Provident Fund as covered under social taxes.
The Employment Act of 1955 is Malaysia’s comprehensive labor legislation. It includes provisions on wage requirements, hours of work, leave policy, wage payments, and recordkeeping requirements.
Coronavirus (Covid-19) Guidance: The Malaysian government is offering a Wage Subsidy Program through Oct. 31, 2021, to help employers pay the wages of workers who are residents of Malaysia. Employers can apply for the program through prihatin.perkeso.gov.my and may apply until Oct. 31, 2021.
The fourth phase of the program, known as Wage Subsidy Program 4.0, started Aug. 1, 2021. Eligible employers can receive RM 600 per worker per month for two months, and employers in sectors considered to be high-risk for Covid-19 infection or involving crowds can receive the subsidy for an additional two months.
To be eligible for the fourth phase, employers must have lost at least 30% of total sales or income in a month of 2021 compared to any month in 2019 or later before the outbreak of Covid-19. The fourth phase removes the requirement that only employees who earn up to RM 4,000 per month are eligible, but still provides the subsidy for only up to 500 employees per employer.
Employers must also have been registered with SOCSO or have been contributing social security taxes and employment insurance before June 1, 2021, and registered with the Companies Commission of Malaysia or relevant local authorities before June 1, 2021.
Third phase: In the third phase of the program, known as Wage Subsidy Program 3.0 and which ran from Jan. 1 to July 31, 2021, for the tourism and retail sectors, and from Jan. 19 to July 31, 2021, for other sectors, employers:
- in the tourism and retail sectors could receive RM 600 per worker per month for three months if they applied in the previous phases;
- in the tourism and retail sectors could receive RM 600 per worker per month for six months if they applied for the first time; or
- in all other sectors affected by movement restrictions could receive RM 600 per worker per month for one month.
In all cases, the subsidy can only be claimed for up to 500 employees.
To be eligible for the third phase of the program, employers must have lost 30% or more total sales or revenue in a month compared to the same month of the previous year.
Employers must also have been registered with SOCSO or have been contributing social security taxes and employment insurance before Jan. 1, 2021, and registered with the Companies Commission of Malaysia or relevant local authorities before Jan. 1, 2021.
Minimum Wage
Effective since Jan. 1, 2019, Malaysia has a uniform minimum wage throughout the country. Effective until Dec. 31, 2018, the minimum wage in Malaysia was differentiated by whether employees worked in Peninsular Malaysia, which is the western part of the country attached to the main part of the Asian continent, or whether they worked in the eastern part of Malaysia on and around the island of Borneo.
Effective since Feb. 1, 2020, the minimum wage for all employees in Malaysia is RM 1,200 per month. Effective from Jan. 1, 2019, to Jan. 31, 2020, the minimum wage for all employees in Malaysia was RM 1,100 per month.
The equivalent Malay term for minimum wage is gaji minimum.
Overtime
Overtime must be paid for work performed in excess of eight hours in a day or 48 hours in a week. Overtime must also be paid for work on rest days and holidays. Overtime must be paid at 1.5 times normal wages on normal working days, two times normal wages on rest days and three times normal wages on holidays.
Hours of Work
The normal work day is eight hours per day and 48 hours in a week.
Holidays
Malaysian law specifies 11 public paid holidays. Additional paid holidays are mandated by individual states. Holidays which fall on a rest day or on another public holiday must be granted on the following business day.
The 11 public holidays are:
- Lunar New Year, dates vary based on the lunar calendar but generally occur in January or February;
- Birthday of the Prophet Muhammad, date changes year to year;
- Wesak Day, date changes year to year;
- Hari Raya Puasa Day, two days which change year to year;
- Hari Raya Haji, 2 days whose date varies year to year in Kedah, Kelantan, Perlis and Terengganu states, one day in all other states;
- Deepavali, date changes year to year;
- May 1: Labor Day;
- June 6: Birthday of Yang di-pertuan Agong;
- Aug. 31: National Day;
- Sept. 16: Malaysia Day;
and
- Dec. 25: Christmas Day.
Leave
Employers must provide employees with paid annual leave as follows
- employees with less than two years of service; 8 days paid leave;
- employees with more than two and less than five years of service; 12 days paid leave;
- employees with more than five years of service; 16 days paid leave.
Sick leave: Employers must provide paid sick leave as follows;
- employees with less than two years of service; 14 days sick leave;
- employees with between two and five years of service; 18 days sick leave;
- employees with over five years of service; 22 days sick leave
- if employees need hospitalization; up to 60 days (which includes the aforementioned sick leave provisions).
Maternity Leave: Employers must give women 60 consecutive days of paid maternity leave for each child, starting as early as 22 weeks’ gestation and no later than the day after the birth. If a doctor certifies that an employee is unable to work during pregnancy, an employer may require that she begin maternity leave up to 14 days before the due date. These leave provisions also apply to a still birth if the pregnancy lasts at least 28 weeks.
To be eligible for maternity leave, the pregnant employee must have worked for the employer at some time during the four months preceding her due date and at least 90 days out of the nine months before her due date. However, employees are only eligible for maternity leave for their first five children.
Employers must be notified 60 days before maternity leave begins. If maternity leave is started without giving notice, the maternity allowance is suspended until the employee gives notice.
An employer is prohibited from dismissing an employee during maternity leave.
If a female employee cannot return to work immediately after the end of maternity leave due to certified medical reasons connected with the pregnancy, the employer is also prohibited from dismissing her unless she remains unfit to work for more than 90 days.
If an employee was entitled to maternity leave but not paid leave, she may return to work early, provided that she obtains medical certification that she is fit to do so.
Wage Payment
Wages must be paid on a monthly or more frequent basis. Employers must provide employees with a statement of wages, detailing salary and deductions for each employee, every pay period.
Bonuses and Special Benefits
Malaysia does not mandate employers to provide bonus payments to employees but it is customary to provide employees with a 13th month bonus in December.
Termination Pay
Employers provide notice or pay in lieu of notice, and severance pay when terminating an employee. Both employers and employees must give notice when terminating an employment relationship based on the employees’ length of service as follows;
- employed less than two years; four weeks’ of notice;
- employed more than two years but less than five years; six weeks’ notice
- employed more than five years; eight weeks’ notice.
Both employers and employees may substitute the notice period with the payment of an indemnity equal to the amount of wages which the given employee would have accrued during the term of notice.
Employers must inform the Director General upon the termination of a foreign domestic servant.
Employers must award severance pay to all terminated employees based on length of service as follows:
- 10 days’ wages for each year of service for workers with less than two years of service;
- 15 days’ wages for each year of service for workers with between two and five years of service;
- 20 days’ wages for each year of service for workers with more than five years of service.
Effective starting Jan. 1, 2021, employers must submit notification to the IRBM using Form CP22A within 30 days before the employee’s last day. Until Dec. 31, 2020, the deadline was one month. Also, upon the death of an employee, an employer must submit notification to the IRBM using Form CP22A within 30 days of learning of the death.
Workers’ Compensation
All employers must be insured against work related accidents and work related diseases. Employers must be insured under an insurance scheme underwritten by an insurance provider registered under the Insurance Act of 1963 and established in a manner approved by the Minister of Health.
Recordkeeping
Employers must keep registers with the details of every employee by them for a period of six years.
FOREIGN WORKERS
Foreign workers are entitled to the same rights as Malaysian citizens and are generally covered by the same tax and workplace laws.
Visas: Foreign workers must obtain a visitor’s pass or employment pass in addition to a Visa with Reference (VDR) in order to work legally in Malaysia. However, before foreign nationals can apply for an employment pass or visitor’s pass, employers must gain approval from one of six government agencies involved in the approval of foreign workers (either The Malaysian industrial Development Authority, The Multimedia Development Corporation, The Public Service Department, The Central Bank of Malaysia, The Security Commission, or the Expatriate Committee) to employ foreign nationals. After receiving the proper authorization, foreign nationals may begin the application process for VDRs.
To apply for a VDR, foreign nationals should file an application at the nearest Malaysian Representative Office abroad. After receiving a VDR, employers and foreign nationals may file applications for an employment pass or visitor’s pass.
There are two major categories of Visitor’s passes (professional and temporary employment) and several minor categories specific to the foreign workers’ professional industry. Visitor’s Passes for Temporary Employment are granted for workers in manufacturing, plantations, agriculture, construction and other services. Employers must almost gain a letter of approval from the Ministry of Home Affairs. After receiving the Visitor’s Pass, foreign workers may work in Malaysia for up to five years for a given employer. However, employers may apply for an extension at the Foreign Workers Division of the Headquarters of Immigration Affairs three months prior to the expiration of the Visitor’s Passes.
Visitor’s Passes for Professionals are granted to those with professional qualifications or specialist skills and are valid for periods of up to 12 months. Foreign workers generally must submit their application at their local consular mission, but must obtain a letter of sponsorship from their employer.
There are three categories of employment pass that may be granted to employees that would permit them to work as expatriates in Malaysia. Foreign nationals should send applications for an employment pass to the secretariat of the Expatriate Committee, which must include a job offer and acceptance letter or employment contract, as well as a Letter of Authority from the employer. The three categories of employment passes for employees seeking to work in Malaysia as expatriates are as follows:
- Category 1 – grants the ability to work in Malaysia for up to five years, and employees must have a monthly salary of at least RM 10,000 to be eligible for this category;
- Category 2 – grants the ability to work in Malaysia for up to two years, and employees must have a monthly salary of at least RM 5,000 but less than RM 10,000 to be eligible for this category; and
- Category 3 – grants the ability to work in Malaysia for up to one year, and employees must have a monthly salary of at least RM 3,000 but less than RM 5,000 to be eligible for this category.
After obtaining the proper authorizations, visas and passes, employers must inform the director general of the hire of foreign workers within 14 days of the commencement of the employment relationship.
Upon the termination of foreign domestic employees, employers must inform the director general within 30 days.
Taxes: Nonresidents are subject to a flat income tax rate of 28% instead of being subject to the progressive income tax brackets in effect for residents.
Foreign employees working in Malaysia can be taxed on benefits arising from employee share plans as income depending on the specific double taxation agreement, or lack of double taxation agreement that exists. If the share scheme is derived from working in more than one country, an employee will be taxed on the gains for the days spent residing in Malaysia.
Social Security assessments based on wages paid to nonresident employees utilize a contribution schedule that differs from the standard Social Security contribution schedule, and these assessments fund the Employment Injury Scheme but not the Invalidity Pension Scheme. The Social Security contribution rate assessed on employers based on wages paid to nonresident employees is 1.25%, with a maximum monthly computable wage of RM 4,000. As with the standard Social Security brackets that incorporate the standard Social Security rates, the brackets for Employment Injury Scheme contributions assessed on employers based on wages paid to nonresident employees consist of flat values assigned to ranges of monthly income, with these flat values derived from the applicable rate of 1.25%. The flat values assigned to each range of monthly income are the same as the employer Second-Category contribution flat values in the standard Social Security contribution schedule.
The applicable brackets for Employment Injury Scheme contributions assessed on employers based on wages paid to nonresident employees are as follows:| Range of Monthly Income (Malaysian Ringgit) | Employer’s Contribution |
|---|---|
| Up to RM 30 | 30 cents |
| More than RM 30 and up to RM 50 | 50 cents |
| More than RM 50 and up to RM 70 | 80 cents |
| More than RM 70 and up to RM 100 | RM 1.10 |
| More than RM 100 and up to RM 140 | RM 1.50 |
| More than RM 140 and up to RM 200 | RM 2.10 |
| More than RM 200 and up to RM 300 | RM 3.10 |
| More than RM 300 and up to RM 400 | RM 4.40 |
| More than RM 400 and up to RM 500 | RM 5.60 |
| More than RM 500 and up to RM 600 | RM 6.90 |
| More than RM 600 and up to RM 700 | RM 8.10 |
| More than RM 700 and up to RM 800 | RM 9.40 |
| More than RM 800 and up to RM 900 | RM 10.60 |
| More than RM 900 and up to RM 1,000 | RM 11.90 |
| More than RM 1,000 and up to RM 1,100 | RM 13.10 |
| More than RM 1,100 and up to RM 1,200 | RM 14.40 |
| More than RM 1,200 and up to RM 1,300 | RM 15.60 |
| More than RM 1,300 and up to RM 1,400 | RM 16.90 |
| More than RM 1,400 and up to RM 1,500 | RM 18.10 |
| More than RM 1,500 and up to RM 1,600 | RM 19.40 |
| More than RM 1,600 and up to RM 1,700 | RM 20.60 |
| More than RM 1,700 and up to RM 1,800 | RM 21.90 |
| More than RM 1,800 and up to RM 1,900 | RM 23.10 |
| More than RM 1,900 and up to RM 2,000 | RM 24.40 |
| More than RM 2,000 and up to RM 2,100 | RM 25.60 |
| More than RM 2,100 and up to RM 2,200 | RM 26.90 |
| More than RM 2,200 and up to RM 2,300 | RM 28.10 |
| More than RM 2,300 and up to RM 2,400 | RM 29.40 |
| More than RM 2,400 and up to RM 2,500 | RM 30.60 |
| More than RM 2,500 and up to RM 2,600 | RM 31.90 |
| More than RM 2,600 and up to RM 2,700 | RM 33.10 |
| More than RM 2,700 and up to RM 2,800 | RM 34.40 |
| More than RM 2,800 and up to RM 2,900 | RM 35.60 |
| More than RM 2,900 and up to RM 3,000 | RM 36.90 |
| More than RM 3,000 and up to RM 3,100 | RM 38.10 |
| More than RM 3,100 and up to RM 3,200 | RM 39.40 |
| More than RM 3,200 and up to RM 3,300 | RM 40.60 |
| More than RM 3,300 and up to RM 3,400 | RM 41.90 |
| More than RM 3,400 and up to RM 3,500 | RM 43.10 |
| More than RM 3,500 and up to RM 3,600 | RM 44.40 |
| More than RM 3,600 and up to RM 3,700 | RM 45.60 |
| More than RM 3,700 and up to RM 3,800 | RM 46.90 |
| More than RM 3,800 and up to RM 3,900 | RM 48.10 |
| More than RM 3,900 and up to RM 4,000 | RM 49.40 |
Wages/Payments: Employers may pay foreign workers in any accepted legal currency.
WORKING IN THE UNITED STATES
Foreign workers from Malaysia must meet general visa requirements and be certified to be employed in the U.S. General visa requirements for the U.S. are included in the separate
U.S. employers also must check the names of all new-hires and employees against the Specially Designated Nationals and Blocked Persons List, administered by the Treasury Department’s Office of Foreign Assets Control (OFAC). Because OFAC prohibits financial transactions with individuals on the list, employers cannot employ them and may face fines for failing to comply.
For tax purposes, Malaysian citizens are subject to U.S. employment-based taxation on income earned in the U.S. unless they work under specific visa types that exempt earnings from taxes.
State and local taxation of Malaysian workers also can apply.
The U.S. labor laws apply to all workers employed and providing services in the country.
Work eligibility as an employee is contingent upon Department of Homeland Security and Labor Department approval and the employee receiving a U.S. Social Security number from the Social Security Administration.
Tax Residency: In general, employees working in the U.S. on a temporary basis are considered nonresidents for tax purposes unless they qualify for resident status. Employees can be granted permanent resident status through the so-called green card test or if they meet the substantial presence test under the U.S. tax code. More information on these requirements is in the
Permanent residents are subject to U.S. tax requirements the same as U.S. citizens and are taxed under the U.S. system on their worldwide earnings.
Income Taxes: Generally, nonresidents in the U.S. who are from Malaysia and are working in the U.S. are subject to U.S. taxes based on their U.S.-sourced income. Income is taxed differently based on whether it is categorized as wage income or nonwage income, which includes interest and dividends.
A Form W-4, Employee’s Withholding Certificate, must be filed by each employee with their employer.
All nonresidents in the U.S. who are from Malaysia and are working in the U.S. must claim “single” in Step 1c, regardless of marital status; write “Nonresident Alien” or “NRA” in the space under Step 4c of the form; and may not claim “exempt” in the space under Step 4c. Nonresident alien employees may adjust withholding using Step 2b or 2c of the Form W-4; certain employees also may be able to use Steps 3, 4a, or 4b. More information about Form W-4 requirements for nonresident alien employees is available in the
Although the versions of Form W-4 issued in 2020 or later significantly differ from the versions issued in 2019 or earlier, nonresident employees that filed a valid version of Form W-4 from 2019 or earlier with their employer do not need to file another Form W-4 with the employer unless they need to implement a change for their withholding. On Forms W-4 issued in 2019 or earlier, nonresident alien employees were required to check the “single” box on line 3, regardless of marital status; write “Nonresident Alien” or “NRA” above the dotted line on line 6; and were not permitted to claim “exempt” on line 7 of the form.
An additional amount is added to a nonresident alien employee’s wages for calculating federal income tax withholding, with the amount based on pay period frequency and the date of the employee’s most recently filed Form W-4. The table of additional amounts applicable to Forms W-4 from 2020 or later and the table applicable to Forms W-4 issued before 2020 are available in the
Nonwage income and self-employed foreign workers can be subject to income tax withholding at a flat rate of 30%.
Additionally, foreign workers may be taxed differently based on the specific type of visa they hold.
Tax treaties: Malaysia and the U.S. do not have a tax treaty.
Social Taxes: Most foreign workers are subject to paying into the U.S. Social Security system. Foreign nationals who are exempt from paying income tax and who do not have the eligibility to receive a social security number may not be required to pay social taxes. Foreign workers contributing to Social Security for a certain time period may be eligible to receive benefits.
Generally, foreign workers in the U.S. that have specific visas as exchange visitors or students or who are temporarily in the U.S. for agricultural work are not subject to social taxes on income that is obtained from the purpose in which they originally entered the U.S.
Totalization Agreements: Malaysia and the U.S. have not entered into a totalization agreement.
Wage Payment: Under certain visas for certain types of employment, employers are required to pay foreign workers the higher of either the prevailing wage or the actual wage that is paid to U.S. workers that have similar skills and qualifications.
There are no particular requirements that employees be paid in U.S. dollars.
TREATY ARRANGEMENTS
Malaysia has entered into more than 70 income tax treaties. Malaysia does not have an income tax treaty or totalization agreement with the United States.
The countries with which Malaysia has a bilateral income tax treaty in effect are Albania, Australia, Austria, Bahrain, Bangladesh, Belgium, Bosnia and Herzegovina, Brunei, Cambodia, Canada, Chile, China, Croatia, Czech Republic, Denmark, Egypt, Fiji, Finland, France, Germany, Hungary, India, Indonesia, Iran, Ireland, Italy, Japan, Jordan, Kazakhstan, Kuwait, Kyrgyzstan, Laos, Lebanon, Luxembourg, Malta, Mauritius, Mongolia, Montenegro, Morocco, Myanmar, Namibia, Netherlands, New Zealand, Norway, Pakistan, Papua New Guinea, Philippines, Poland, Qatar, Romania, Russia, San Marino, Saudi Arabia, Seychelles, Singapore, Slovakia, South Africa, South Korea, Spain, Sri Lanka, Sudan, Sweden, Switzerland, Syria, Taiwan, Thailand, Turkey, Turkmenistan, Ukraine, United Arab Emirates, United Kingdom, Uzbekistan, Venezuela, Vietnam, and Zimbabwe.
Malaysia additionally has an income tax treaty in effect with Taiwan (the Republic of China). It also has an income tax treaty in effect with the special administrative region of Hong Kong.
Malaysia does not have any totalization agreements for social tax purposes in force.
RESOURCES
All resources in English unless otherwise noted.
General
U.S. State Department: U.S. Relations With Malaysia
CIA World Factbook: Malaysia
Malaysian Investment Development Authority (MIDA)
Currency Details
International Organization for Standardization: Currency Codes - ISO 4217
Unicode Consortium: Currency Symbols
United Nations: United Nations Terminology Database: Malaysia
Taxes
The Employee Provident Fund (Malay)
Malaysia Income Tax Act
Inland Revenue Board of Malaysia (Malay)
The Social Security Organisation (Malay)
Employee Share Scheme Benefit, Public Ruling 11/2012
Share Schemes Benefit For Cross Border Employees, Public Ruling 12/2012
Social Security Contribution Rates
Human Resource Development Corporation:
- Employers’ Circular No. 4/2021
- Employers’ Circular No. 5/2021
Tax Incentive for Expert Return Program (Insentif Cukai Bagi Program Kepulangan Pakar) (Malay)
Sabah Zakat and Fitrah Division (Malay)
Selangor Zakat Board (Malay)
Compensation and Benefits
Employment Act of 1955
Workmen’s Compensation Act of 1952
Ministry of Human Resources (Malay)
FAQ Regarding Wage Subsidy Program 3.0 (Malay)
FAQ Regarding Wage Subsidy Program 4.0 (Malay)
Foreign Workers
Immigration Department of Malaysia
Working in the United States
U.S. Department of Labor:
- Foreign Labor Certification
- Hiring Foreign Workers
U.S. Internal Revenue Service:
- IRS Notice 1392, Supplemental Form W-4 Instructions for Nonresident Aliens
- IRS Publication 15, Circular E, Employer’s Tax Guide
- IRS Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities
- IRS Publication 519, U.S. Tax Guide for Aliens
- IRS Publication 901, U.S. Tax Treaties
Treaty Arrangements