First-Time Tax Payer? Here's How to Register E-Filing Income Tax

April is rolling around, which means it’s time for one thing: it’s the season to file your taxes.

Like in many countries, Malaysia requires its workers under the law to pay their taxes, with your income tax dependent on your total taxable income for the year. If you are new to the workforce, all of this can seem more daunting than exciting. Nevertheless, paying your taxes is important as it is also considered your civic duty. This is your contribution to making your community, city, or the entire country a much better place to live in, as it pays for the basic goods and social services you enjoy.

Am I eligible to pay taxes in Malaysia?

While paying taxes is a responsibility placed upon workers and professionals in Malaysia in general, it is important to find out first whether you are eligible to pay taxes.

According to the Inland Revenue Board (IRB) of Malaysia, also known as Lembaga Hasil Dalam Negeri or LHDN, an individual in Malaysia is eligible to pay taxes when they earn an annual employment income of RM34,000. This amount is exclusive of the EPF deduction or the Employees’ Provident Fund, which Malaysian citizens employed in the private sector are required to join.

In short, if you meet the annual income requirement, then you need to register yourself as a taxpayer.

While the definition is pretty straightforward for salaried employees who meet the cutoff, what about other people who earn money from other means? In a nutshell, you are still eligible — and required — to pay taxes. After all, income tax does not just count your monthly salary. This also covers different types of income you may have: regular employment, your business, dividends, rent, royalties, premiums, interest, pensions, annuities, and other means to earn. Even employees earning monthly salaries will have to account for other things, such as bonuses, overtime pay, and commissions, as these are all forms of taxable income. And yes, even freelancers and part-time workers will have to file their taxes.

What happens if I don’t file my income tax?

Whether you are a Malaysian citizen or a foreign expat working in the country, you are required to file taxes if you make more than RM34,000 annually after the Employees Provident Fund (EPF) deduction. Foreigners who have been in Malaysia for more than 182 days, known as residents, will be subject to the same tax rates and policies, just like Malaysian nationals. Meanwhile, a foreign worker who has been in Malaysia for between 60 and 182 days (non-residents) will be subjected to a flat rate interest based on their type of income.

For example, those earning from their business, trade, profession, employment, dividends, or rent, will be taxed 30% of their taxable income. Meanwhile, those working as public entertainers will be taxed 15%.

The only ones exempted from paying taxes are foreigners who have been in Malaysia for less than 60 days, and those whose sources of income come from abroad. However, if one has multiple income streams, those based in the country will be subject to taxes.

Meanwhile, no specific filing requirement exists for those who do not make more than RM34,000.

Remember, if you don’t file your income tax, the consequences you face can be pretty heavy once caught. Section 112 (1) of the Income Tax Act 1967 says that an individual may be put behind bars for up to six months or fined up to RM2,000 if they fail to provide an income tax form.

You also face a penalty when you submit your tax form late. Those who submit their forms late within the first 60 days will be subject to a fine of 10% more than the tax payable. If the non-payment period has exceeded 60 days, you will be fined another 5%.

Ready to file your taxes in Malaysia? Here is a guide on how first-timers can get started.

How to File Income Tax for the First Time in Malaysia

1. Register as a first-time taxpayer on e-Daftar.

Is this your first time filing your taxes online? Good thing the LHDN now has an e-Daftar website where you can proceed with the taxpayer registration process online. Take note of two important things that you must have before you can start registering your taxpayer status: your income tax number and PIN for your income tax return form (ITRF).

To get your income tax number, first register as a taxpayer on e-Daftar. After registering, you can receive your PIN online or by visiting the nearest LHDN branch.

To kickstart the process of registering as a taxpayer, head on over to the LHDN’s e-Daftar website, where you can conveniently carry out the process online. You’ll need to upload a digital copy of your IC to serve as a supporting document, so it would be a good idea to prepare that beforehand.

While you can still register in person at the LHDN office, it is much easier and more convenient to sign up online. If you would like to drop by the LHDN offices, you can check their operating hours here, as well as if your preferred branch is open. Note that they may also ask you for your IC, as well as the latest salary slip or EA form for the process.

2. Log into e-Filing

Once you have registered, you can start accessing e-Filing through ezHASiL or MyTax. After logging into e-Filing for the first time, you can also start filling out your ITRF online.

Choose the right type of ITRF based on the income category that you fall under:

• e-B/e-BT: For residents earning income from business/knowledge or expert worker
• e-BE: For residents earning income without a business
• e-M/e-MT: For non-resident individuals/knowledge workers

When navigating e-Filing online, please make sure that you select the form as well as the year of assessment. You should declare your income from the previous year. For example, if you are filing your taxes today in 2023, you should be declaring your income from 2022.

3. Know which tax reliefs and rebates you are eligible for.

After filling out the needed fields for your income tax return form, here is one of the most important and valuable parts of filing taxes: knowing and applying for the relevant tax reliefs and rebate you are eligible for. Tax reliefs can reduce or lower your chargeable income, meaning you can be deducted a lower tax rate and tax amount. There is a comprehensive list of tax reliefs that can be applied to your 2022 income tax rate, but some of the most prominent reliefs and their respective relief caps include the following:

• Automatic individual relief - RM9,000
• Medical expenses for parents - RM8,000
• Husband/wife/alimony - RM4,000
• Education fees - RM7,000
• Medical expenses for serious diseases, fertility treatment, and vaccination - RM8,000
• Complete medical examinations for yourself, a spouse, or your child (including COVID-19 related expenses)  - RM1,000 sub-limit

Here’s some good news, too: you can claim tax reliefs for lifestyle expenses. These include purchases of computers, smartphones, books, Internet subscriptions, sports equipment, and gym memberships. If you have kept the receipts of computer, smartphone, and book purchases, they all fall under the 'lifestyle' tax relief.

If you have also availed of life and education as well as medical insurance plans, you can also claim the premiums for these two different categories, with a cap of RM3,000 cap in each category.

Filing your taxes is an important step to becoming a productive and responsible member of the Malaysian workforce. Ready to #SEEKBetter in your professional journey? Visit the Career Resources page for more expert insights.