General Overview Operation of

Taxation Institution in Malaysia

Institution of Taxation in Malaysia

Inland Revenue Board

Malaysia (IRB)

Royal Malaysian Customs

(RMC)

Local Authority Council

(PBT)
Inland Revenue Board

• Inland Board Revenue handle tax administration

in Malaysia especially on direct tax.
• On the 1st of March, 1996, the Inland Revenue
Depart of Malaysia became the Inland Revenue
Board of Malaysia (IRBM) which is now what it is
formally known as today. IRBM in Malaysia is one
of the main agencies responsible for collecting
revenue for the Ministry of Finance.
 Function & Duties of IRBM
• IRBM is responsible for acting as an agent for the government and
is required to provide services which include administration,
assessing, enforcing and collecting payment of taxes. The taxes
upon which need to be collected by the agency include income tax,
petroleum income tax, stamp duties, real property gains tax, estate
duties and other taxes which may be agreed upon by the
government of the board.
• It is the duty of IRBM to take part either in or outside of Malaysia
when it comes to all matters relating to taxation.
• The IRBM is required to provide advice to the government on any
matters which are related to taxation, in addition to being required
to liaise with the corresponding ministries and statutory bodies.
• Part of IRBM’s responsibility is to perform other functions which
are conferred on the board by any other written law.
• IRBM is also required to act as a collection agent for and on behalf
of any body involved in respect to the recovery of loans due for
repayment.
 Inland Revenue Board

Direct Taxes
Real
Corporate Property Petroleum
Individual Stamp
Tax Gains Tax Tax
Tax Duty
(Income (Real (Petroleum
(Income (Stamp Act
Tax Act Property Income tax
Tax 1967) 1949)
1967) Gains Tax Act 1967)
1967)
 Direct Taxes - IRB
• Based on Petroleum (Income Tax ) Act 1967
Petroleum • Imposed at the rate of 38% on income from petroleum
operations in Malaysia. An effective tax rate of 25% applies on
income from petroleum operations in marginal fields.
Tax • No other taxes are imposed on income from petroleum
operations

• Stamp duty is a tax on legal documents, basically all transactions such as

sale, transfer, mortgage and loan are subjected to legal stamps.
• Fixed Duties – Fixed charges are RM10 per unit, including stamps, policies,
stamps for every copy.
Stamp Duty • Ad Valorem Duties – Stamp duty based on the value of the transaction on
the legal documents, including the Memorandum of Transfer / Deed of
Assignment, the equity of the listed company, lease, loan contract and
legal documents.

•RPGT according to Real Property Gains Tax 1967 is form Capital Gains Tax that is
imposed on the disposal of property in Malaysia
Real Property •A chargeable gain is the profit when the disposal price is more than the purchase
price of the property . Applies to both residents and non-residents.
• You will only be taxed on the positive net capital gains which is disposal price less
Gains Tax than the purchased price less the miscellaneous charges such as; stamp duty, legal
fees, advertisement charges
•Not charged if you sell your property same/lower than purchase price
Royal Malaysian Customs
• RMC is the government agency responsible for administrating the
nation’s indirect tax policy, border enforcement and narcotic
offences.
• RMC is responsible for administration of direct taxes in Malaysia.

• Roles:
1. Formulate and enforce legislations, policies and procedures in line
with international best practice
2. Evaluate procedures, policy and legislation related to duty/tax
exemptions
3. Collect and analyse data related to Customs Department
4. Consultation and advice to business community.
 Tax administered under RMC
Custom Duties (Tariff)
• Imposed on imports and exports of
goods
• Malaysia’s import duty rates can be
anything from 0% to 50%(ad
valorem basis), but the average
duty rate is around 6%. There are
some goods which are exempt from
duty; these include electronic
products such as laptops and
electric guitars. Others, like raw
material, machinery, essential
foodstuffs, pharmaceutical products
are generally non-dutiable or
subject to lower rates duties
Excise Duties
• Imposed on selected range of goods
manufactured and imported into
Malaysia which is levied at the
moment of manufacture (specific
goods)
• Goods that are subject to excise
duty include beer, rice wine, brandy
and any alcoholic beverages,
cigarettes containing tobacco,
motorcycles, vehicles etc.
• Rate of excise duties vary from
composite rate of RM 0.1 per liter
and 15% of the value for certain
types of beverages, to as much as
105% of the value of motorcars
(depending on engine capacity.
Sales Tax (1972) & Services Tax
(1975) – SST 1.0
• Sales Tax 1972 levied at the point of
sale, collected by the manufacturer
and passed on to the government
• Levied on services providers on
certain service transactions,
actually borne by customers.
• Differences with the SST 2.0:
• - Limited range of exemption
facilities (SST 2.0 has wider tax
exemption net to cover more
goods)
• -Registered manufacturers who
purchasing materials/components
from another registered
manufactured or via importation,
had to apply for exemption
manually and it could cause red
tape procedures (SST 2.0 could
simply applied online and some can
be automatically obtained online)
• Threshold of mandatory
registration.
SST 2.0 (Reintroduced in 1 September
2018)
• Single stage tax charged and levied on
Sales Tax taxable goods manufactured in Malaysia
by taxable person and sold by him & on
taxable goods imported into Malaysia
(2018)
• Levied on specific prescribed services
Service provided by taxable person in the course
of furtherance of a business in Malaysia

Tax (2018)
Key points of the proposed SST
implementation models:
 Local Authority Council
• The local government in Malaysia is the lowest tier of government
in Malaysia administered under the states and federal territories
which in turn are beneath the federal tier. Local governments are
generally under the exclusive purview of the state governments as
provided in the Constitution of Malaysia, except for local
governments in the federal territories.
• The federal Ministry of Housing and Local Government plays a role
in co-ordinating and standardising the practices of local
governments across the country.
• Local government has the power to collect taxes (in the form of
assessment tax), to create laws and rules (in the form of by-laws)
and to grant licenses and permits for any trade in its area of
jurisdiction, in addition to providing basic amenities, collecting and
managing waste and garbage as well as planning and developing
the area under its jurisdiction.
• Local governments are usually referred to as local authority
(Malay: pihak berkuasa tempatan, abbreviated PBT.
 Tax administered by Local Authority
Council
Assessment rates (Cukai Pintu or Cukai Taksiran)

• Taxes collected will be used to finance the maintenance cost of the city / region, such as the cost of
transporting waste, cleaning gutters, beautify the landscape, pay bills street lighting, maintenance of signal
lights and so on.

• Payable 2 times per year according to the legislation of the local or municipal authorities on properties
located in areas under their jurisdiction, as per the National Land Code 1966. The bill is blue in colour.

• Calculated based on estimated gross annual rental value of a property as determined by the market and
then multiplied by a set of rates decided by local councils

• Assessment Rates (Cukai Pintu or Cukai Taksiran) will still be imposed although the property, building or
house is empty (not occupied). However, the owner can apply for remission claims over the period of
vacancy by giving written notice to the local or municipal authorities within seven (7) days from the date the
building was vacated.
• Eg: estimated monthly rental value of a property is RM 1500, annual value would be RM18000 . RM18000 x
0.006 = RM 1080 is the assessment tax. RM1080 divided by 2 (2 times per year) = RM 540 would be paid on
beginning of year (January to June) and remaining RM 540 before August 31 (July to December)
 State Government
• State Government collects Quit Rent, also known as
Cukai Tanah and it is imposed on owners of all
alienated land (freehold or leasehold.
• Compulsory for owners of all types of properties to pay
quit rent annually to the relevant Land Office and for
majority of states, the last date for payment is on or
before May 31.
• The amount varies from state to state or even within
each state.
• Eg: Kuala Lumpur (RM0.035 per square foot per
annum). If you own 2800 square foot link house in
Kuala Lumpur, you will have to pay 2800 sq2 x RM0.035
= RM 98 quit rent every year.
 Conclusion
• Zakat & taxation system is very important for a
country especially Muslim country because it
covers the whole aspect for a fully functional
country such as civil welfare, administration,
economic growth and spiritual health of the
masses. It is important for the Muslim to fulfill
and pay zakat and tax according to their capacity
and legal accountability in order to ensure help
government of the day administrating and
carrying their duties for the citizen in the
particular Muslim country.
 References
Malaysian Tax Booklet. (2009). PricewaterhouseCoopers Taxation Services Sdn Bhd.

Taxation and Investment in Malaysia. (2018).Deloitte International Tax.

Tax Division
Retrieved from: http://www.treasury.gov.my/index.php/en/ministrysprofile/divisions-
units/tax

Royal Malaysian Customs

Retrieved from: http://www.customs.gov.my/en/ci/Pages/ci_os.aspx

Dewan Bandaraya Kuala Lumpur

Retrieved from:
http://www.dbkl.gov.my/index.php?searchword=assessment%20tax&searchphras
e=all&Itemid=158&option=com_search&lang=en