Malaysia has become one of Asia’s most attractive destinations for professionals, entrepreneurs, and retirees. With its tropical climate, low cost of living, and modern infrastructure, it’s easy to see why so many expats choose to call Malaysia home.

If you’re planning to live or work here in 2026, understanding how the Malaysian tax system works will help you stay compliant and make informed financial decisions.

This guide explains everything you need to know about taxes in Malaysia for 2026, including who needs to pay, how much, and how to file your return.

The Basics of the Malaysian Tax System

Malaysia’s tax system is straightforward compared to many Western countries. It’s based on territorial taxation, which means you are generally taxed only on income earned in Malaysia. Income from abroad is usually exempt (except for certain cases of foreign income remitted by residents, which are subject to specific rules).

The tax year runs from January 1 to December 31, and the filing deadline for individual tax returns is April 30, 2027, for manual submissions, or May 15, 2027, if filed electronically.

Taxes are managed by the Inland Revenue Board of Malaysia (Lembaga Hasil Dalam Negeri Malaysia, LHDN).

Who Has to Pay Taxes in Malaysia

Your tax obligations depend on your residency status.

You are considered a tax resident in Malaysia if you:

• Stay in the country for 182 days or more in a calendar year, or

• Meet specific conditions linking multiple years of stay (known as the “linked period” rule).

Residents are taxed at progressive rates on income earned in Malaysia.
Non-residents pay a flat tax rate of 30% on Malaysian-sourced income and cannot claim personal reliefs or deductions.

Example:
If you move to Kuala Lumpur in January 2026 for a job and stay until the end of the year, you’ll qualify as a tax resident and pay progressive rates. If you only work there for four months, you’ll be taxed as a non-resident at 30%.

Income Tax Rates in Malaysia for 2026

The Malaysian income tax system uses progressive rates for residents, ranging from 0% to 30%.

Non-residents pay a flat rate of 30% on all taxable income.

Taxable Income in Malaysia

Taxable income includes:

• Salaries, bonuses, and benefits from employment.

• Business or freelance income earned in Malaysia.

• Rental income from property in Malaysia.

• Dividends, interest, and royalties from Malaysian sources.

• Pensions or annuities received from Malaysian employers.

Foreign income (from outside Malaysia) is generally exempt from Malaysian tax for both residents and non-residents, except for income remitted by residents that falls under specific categories determined by LHDN.

Deductions and Personal Reliefs

Malaysia provides various tax reliefs and deductions that can reduce your overall taxable income. These apply only to tax residents.

Common personal reliefs for 2026 include:

• Self and dependent relief: RM 9,000

• Spouse relief (if applicable): RM 4,000

• Child relief: RM 2,000 per child (higher for children in tertiary education)

• EPF (pension) and life insurance contributions: Up to RM 7,000

• Medical expenses for parents: Up to RM 8,000

• Education fees (self): Up to RM 7,000

• Lifestyle expenses (books, internet, sports equipment): Up to RM 2,500

• SOCSO (social security) contribution: Up to RM 350

Example:
If you earn RM 120,000 and claim RM 20,000 in eligible reliefs, you’ll only be taxed on RM 100,000, which lowers your total payable tax.

Double Taxation Agreements

Malaysia has signed double taxation agreements (DTAs) with more than 70 countries, including the United Kingdom, Australia, Germany, Japan, and Singapore.

These agreements ensure that you do not pay tax twice on the same income. If you pay income tax abroad on income also taxable in Malaysia, you can claim a foreign tax credit under the relevant treaty.

If you are an expat working in Malaysia, check whether your home country has a DTA with Malaysia and how it affects your salary or business income.

How to File Taxes in Malaysia

Filing taxes in Malaysia is straightforward, and most individuals now use the e-Filing system provided by LHDN.

Step 1: Register for a tax file
Once you start working, register with the Inland Revenue Board (LHDN) to obtain a Tax Identification Number (TIN). Your employer usually helps with this process.

Step 2: Gather your documents
Collect your EA form (annual income statement from your employer), receipts for deductions, and any additional income records.

Step 3: File online
Log in to https://ez.hasil.gov.my and complete your tax return form (Form BE for residents, Form M for non-residents).

Step 4: Submit and pay
Submit your return by April 30, 2027, for manual filing, or May 15, 2027, for e-Filing. If you owe tax, payment is due by the same date. Refunds are usually processed within a few weeks.

Tax Tips for Expats in Malaysia

• Keep all receipts and supporting documents for deductions, LHDN may request verification.

• Check your tax residency status carefully if you arrive or leave mid-year.

• If your employer provides housing, transportation, or other allowances, these may be taxable benefits.

• Register for e-Filing early to avoid system congestion near the deadline.

• Use a licensed Malaysian tax consultant for your first year and they can help with reliefs and ensure full compliance.

Malaysia’s tax system is simple once you understand its residency rules and progressive structure. With online filing and clear relief options, managing your taxes here is efficient and accessible.