Government imposed tax on resident as well as non-resident in Malaysia. However, government has also set general guidelines for the resident on areas that are exempted from taxation in Malaysia.
Among some of the criteria as proposed by the government is known as leave passage. One home leave passage out of Malaysia is tax-free that is limited to RM30,000 annually while three trips in a year within Malaysia still remain tax-free without any restriction or boundaries for the employee and immediate family members. Immediate members refer to spouses and children only. Therefore, parents are not subjected to the above exemption. However, it is restricted to the cost of fare and not tax deductible for employer.
Other tax-free areas include medical and dental benefits. That includes benefit for childcare offered to the employee and their immediate family. Fees or honorariums provided for the lecturers and tutors for validation or accreditation of educational programs in higher institutional learning centre are also tax-free provided the services are verified by relevant and in-charge authority and also do not bypass their official responsibilities.
Tax-exempt policy also includes a new system known as single-tier. This system refers to tax exemption for dividends received by the employee. However, government has set a 6-year transitional period beginning from 1stof January 2008 till end of 2013. The execution of the transitional plan enables the resident companies to fully utilize Section 108 whereby individuals will be taxed on the gross dividends but entitled to a credit for imposed tax on the dividends.
However, bear in mind that it does not apply to individuals who received dividends from shares in public listed companies. After the end of the transitional plan, which is beginning of 2014, all companies will practice the single-tier system.
Another tax-free area is whereby new computers received by the employees as provided by employers as well as broadband subscription fees will also be exempted from income tax from year of assessment 2008 till 2010. The proposal is still in consideration.