Have questions? Ask us!

Payroll & Tax in Malaysia

Malaysia payroll & taxation

There are specific rules for payroll and taxation in Malaysia, depending upon whether your company employs foreign nationals or local Malaysian employees.  The primary concerns for a foreign company that needs to comply with tax laws in China are: individual income tax for employees in Malaysia, social security costs, payroll tax, goods and services tax (GST), withholding tax, business tax and permanent establishment concerns.

Your Payroll Options in Malaysia

Remote Payroll

A remote payroll in Malaysia is where a foreign company, i.e. a non-resident company, payrolls a resident employee in Malaysia.  One option for a non-resident company to payroll its employees (local and foreign) in Malaysia is to use a fully outsourced service like a GEO which will employ and payroll the staff on their behalf.

Local Payroll Administration

In some cases, a company will register their business in Malaysia under one of the forms available, but prefer to have another company administer its payroll.  This can be accomplished through a payroll provider. It is important to note that the company, as the Employer of Record, is still fully responsible for compliance with employment, immigration, tax and payroll regulations. But the payroll calculations, payments and filings can all be outsourced to the payroll provider.

Internal Payroll

Larger companies with a commitment to Malaysia may wish to run their own local payroll for all employees, foreign and local.  In order to accomplish this, they will have to complete incorporation, register the business and then hire the necessary staff.  There will be a need for in country human resources personnel who have the background needed to manage a Malaysian payroll, and can fulfill all tax, withholding, and payroll requirements.

This approach carries significant cost and requires some knowledge of local employment and payroll regulations.  The company will need a local accounting firm and potentially legal counsel to ensure full compliance with Malaysian employment laws.

Fully Outsourced Payroll & Employment

Companies can outsource the employment and payroll of their staff in Malaysia to a GEO, like Shield GEO. This is possible for both foreign workers and Malaysian nationals. This is the easiest, fastest and safest way to payroll staff in Malaysia.

Shield GEO manages all aspects of payroll for workers in Malaysia, including taxes, withholding, social security payments and other statutory requirements. Shield GEO becomes the Employer of Record and employs the staff on behalf of the client.

Staff are paid monthly with tax and social security deducted at source and paid to local authorities. Shield GEO will invoice the client monthly in advance of the payroll date. The invoice consists of the Total Cost of Employment (Base salary + Employers Statutory Contributions + Additional statutory contributions) and a Management Fee. Shield GEO provides the employees with payslips.

Read more about outsourced payroll and employment through Shield GEO.

Jump to...

Setting up payroll in Malaysia

Information Explanation
Currency ?

Malaysian Ringgit (MYR)

Documentation Required for New Employees ?

Malaysians may work at will. Expatriates and foreign workers and are required to possess valid visas, work passes as well as employment passes prior to commencing work.

 

The Employment Act 1955 is the main legislation on labour matters in Malaysia. A Malaysia’s business environment is usually strike-free.

Tax Figures

Information Explanation
Corporate Income Tax ?

The standard corporate tax rate is 25%.

 

For companies capitalized at less than MYR 2.5 million the corporate tax rate is 20% on the first MYR 500,000, then subsequently 25%.

 

For petroleum, oil products, banking and insurance industries, different rates apply.

Income Tax Rate ?
Grossed income Tax Rate (%)
RM 0 – 2,500 0
RM 2,501 – 5,000 1
RM 5,001 – 10,000 3
RM 10,001 – 20,000 3
RM 20,001 – 35,000 7
RM 35,001 – 50,000 12
RM 50,001 – 70,000 19
RM 70,001 – 100,000 24
RM 100,001 – 150,000 26
RM 150,001 – 250,000 26
RM 250,000+ 26
Sales Tax ?

The Goods and Services Tax is 6%.

 

As of 1 April 2015, the Sales and Services Tax was replaced by a Goods and Services Tax. There are products that are exempt from the GST, including agricultural products, livestock, exported goods and certain services.

Withholding Tax ?

Dividends: No withholding tax applies to dividends paid to non-residents.

 

Interest: A withholding tax of 15% applies to interest paid to non-residents, which may be reduced under a tax treaty.

 

Royalties: A withholding tax of 10% applies to royalties and technical service fees, which may be reduced under a tax treaty.

 

Rental or installation fee tax: A 10% withholding tax applies to income received by non-residents from rental of movable property or installation fees from services rendered in Malaysia. These may be reduced under a tax treaty.

Employee Social Security (EE SS)

Total social security rate for employees: 11.51%

 

The employee contributes 0.51% and an additional 11% payable to the EPF.

Employer Social Security (ER SS)

Total social security rate for companies: 13.78%.

 

The employer contributes 1.78% of an employee’s remuneration to social security. In addition, the employer must contribute 12% to the national social security organization through an employee’s provident fund (EPF) scheme. The EPF provides retirement benefits to Malaysian employees.

Payments

Information Explanation
Frequency of Salary Payment ?

Monthly payroll.

Invoice / Payslips required ?

Available monthly on web-site, pdf or paper

Employee Entitlements

Information Explanation
Time Off Work ?

An employee is entitled to paid annual leave of

  • Eight days for every twelve months of continuous service with the same employer if employee has been employed by that employer for a period of less than two years
  • Twelve days for every twelve months of continuous service with the same employer if employee has been employed by that employer for a period of two years or more but less than five years
  • Sixteen days for every twelve months of continuous service with the same employer if employee has been employed by that employer for a period of five years or more
Medical Leave ?

An employee is entitled to paid sick leave, where no hospitalization is necessary,

  • Fourteen days in the aggregate in each calendar year if the employee has been employed for less than two years
  • Eighteen days in the aggregate in each calendar year if the employee has been employed for two years or more but less than five years
  • Twenty-two days in the aggregate in each calendar year if the employee has been employed for five years or more
  • Sixty days in the aggregate in each calendar year if hospitalization is necessary, as may be certified by such registered medical practitioner or medical officer

Employment Termination

Information Explanation
Resignation / End of Service Payment ?

Monthly as event occurs.

+1 877 457 7691
Chat Now
  • Twitter
  • Linkedin

Subscribe

to our monthly Global Mobility newsletter