Malaysia Budget 2014 Review – A Guide to Income Tax Policy Changes

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So far, has covered a wide range of the Malaysia Budget 2014, from Retirement to Welfare and Cash Handouts. This week we’ll discuss Income Tax Policy Changes.




Income Tax Policy Changes

In the Malaysia Budget 2014, there were several changes in income tax rates and policies for both individuals and corporates, however a note of caution, this policy only affects income tax earners in 2015 (filing in 2016) and for corporates in 2016 (filing in 2017).

Decrease in Personal Income Tax rates by 1%-3% across Bands

A decrease in income tax rates across the board from assessment year 2015 onwards, with the effect supposedly meaning that households earning around RM4,000 a month and below will pay no income tax. In truth the number is probably closer to RM3,600 / month (unless (depending on how many children a household is assumed to have, 5 kids make the RM4,000 more accurate), but at least there are savings across the board for all taxpayers:

Two more tax bands were added to the list, with 2 top earners now at RM100,001 – RM250,000 and RM250,001- RM400,000. This move brings more upper-middle class families into the fold, creating tax rate differentials between those middle/upper-middle class families and the rich (assumed by the government here to be earning more than RM400,001 per year).

No need tax filing for employees who contribute monthly via PCB/MTD system

Income tax return submission was previously compulsory for taxpayers (those currently earning RM2,500 and above / month), but under the new policy, employees in private and public sector will now not be required to submit tax forms (Borang BE) if they are paying tax through their companies PCB/MTD deduction system.

In truth however, most people who pay tax under the PCB/MTD deduction system will WANT to continue filing, as there are many tax reliefs and deductions that aren’t reflected in their companies’ PCB/MTD system (such as books, broadband and more), and many can get money back through tax refunds at the end of the tax year. However, for taxpayers who don’t foresee taking advantage of tax reliefs, this may be a welcome convenience.

Decrease in Corporate Income Tax rates by 1% across Bands

For assessment year in 2016, corporate tax rates have been reduced by 1%, that is from 25% to 24% for taxable income above RM500,000 and 20% to 19% for taxable income between RM0 and RM500,000.

If you’re interested in the changes for Property or GST, then stay tuned for next week’s instalment of’s guide!



*Hann Liew is the Founder and Editor-in-Chief of, an online consumer advice portal which aims to help Malaysians save money through smart (and most of the time painless) savings in their daily banking, technology, and lifestyle spending habits.