The Malaysian payroll and tax process can complex for foreign businesses who are unfamiliar with the country’s laws and submission requirements and deadlines. When operating and employing in Malaysia, there are a number of things to be aware of to make sure your business is compliant with regulations. As a payroll provider in Malaysia, INS Global can take care of your payroll for you, simplifying the process. Below are a few things to keep in mind when processing payroll in Malaysia.
Understanding Payroll & Tax in Malaysia
In Malaysia, a monthly tax deduction (MTD) system applies whereby employers are required to deduct monthly income tax payments from their employees’ income. Employers are required to submit a monthly withholding tax return, and make MTD payments to the Malaysian Inland Revenue Board (MIRB) by the 15th day of the following calendar month. Failure to do so will result in a penalty fine of RM200 – RM20,000, imprisonment or both.
Individual Income Tax (IIT)
Income tax rates in Malaysia are progressive and range from 0% to 28%. The following rates apply:
|Taxable income (MYR)||Percentage of Income Tax|
|Up to 5,000||No Tax|
|Between 5,000 and 20,000||1%|
|Between 20,001 and 35,000||3%|
|Between 35,001 and 50,000||8%|
|Between 50,000 and 70,000||14%|
|Between 70,001 and 100,000||21%|
|Between 100,001 and 250,000||24%|
|Between 250,001 and 400,000||24.5%|
|Between 400,001 and 600,000||25%|
|Between 600,001 and 1,000,000||28%|
|Between 1,000,001 and 2,000,000||28%|
Payroll Contributions in Malaysia
There are three statutory payroll contributions that Malaysian employers must be aware of.
Social Security (SOCSO)
The Malaysia Social Security system (SOCSO), also known as PERKESO (Pertubuhan Keselamatan Sosial), is a scheme set up to protect an employee against occupational injury including diseases, invalidity and other matters relating to employment. Under SOSCO, there are two schemes: Employment Injury Scheme and Invalidity Scheme. All Malaysian citizens and foreign residents are required to contribute to SOCSO. Employers who hire foreign workers must register employees with SOCSO and contribute to the Employment Injury Scheme only.
Employee Provident Fund (EPF)
EPF is a national retirement saving scheme. Malaysian employees and permanent residents are required to be contributors to the scheme. Foreign employees are not required to contribute to EPF, but may choose to do so.
Employment Insurance System (EIS)
The Employment Insurance System (EIS) protects employees aged between 18 and 60 years old who have lost their job. Employees enrolled into SOCSO are automatically entitled to EIS and employers can make payments to EIS through the same channels as SOCSO contributions. Foreign employees do not contribute to EIS.
We handle your payroll, you focus on your business
If you opt for your own in-house payroll in Malaysia, you’ll need a dedicated team of HR professionals to make monthly contribution calculations and submissions for each employee on payroll. Outsourcing the process is a flexible, cost-effective solution for businesses of all sizes and ensures that your company remains compliant with local regulations. By letting a trusted partner like INS Global take care of your payroll, you can simplify operating in a new market. Our payroll solution ensures compliance with Malaysia unique laws relating to employment and tax contributions and frees your company from the administrative burden that usually comes with global expansion. As your payroll provider in Malaysia, we take into account:
- Latest changes to tax regulations
- Social security deductions
- Annual leave management
- Expenses and benefits
Your staff are paid monthly with tax and social security deducted at source and paid to the Malaysian authorities. At the end of every month, we send an invoice consisting of the total cost of employment and management fees. It’s that simple.
INS Global: Your payroll provider in Malaysia
Setting up your operations in Malaysia can be a challenge without the necessary professional support in place. Outsourcing back-office services like payroll management allows your company to apply its focus elsewhere in its operations in Malaysia, all while remaining compliant with tax regulations and social security contributions. Whether you have a local entity in Malaysia or not, our payroll solution is designed to simplify your expansion. Contact us today to learn more.