Tax slabs in Malaysia are a critical piece of the financial puzzle for residents and businesses alike. As we step into 2025, understanding how these tax brackets work can mean the difference between saving more or paying more out of your hard-earned income. Malaysia’s progressive tax system ensures fairness, taxing higher earners at higher rates, but with new updates rolling out in 2025, it’s time to get informed. Whether you’re an individual taxpayer, a freelancer, or a business owner, this guide will break down everything you need to know about tax slabs in Malaysia for 2025—helping you navigate the system and optimize your finances.
In 2025, the Malaysian government has introduced subtle tweaks to the tax structure, including potential changes to reliefs and a new dividend tax, which could impact your tax liability. Curious about what’s in store? From updated tax brackets to deductions that could shrink your taxable income, this comprehensive guide has you covered. Let’s dive in and explore how tax slabs in Malaysia will shape your financial planning this year!
Understanding Tax Slabs in Malaysia (How Tax Brackets Work?)
At its core, tax slabs in Malaysia operate under a progressive taxation system. This means your income is divided into brackets, or “slabs,” with each slab taxed at a different rate. The more you earn, the higher the tax rate applied to the additional income—ensuring that lower earners pay less while higher earners contribute more.
Here’s how it works:
- Income is split into predefined ranges (tax slabs).
- Each range has a specific tax rate, starting at 0% for the lowest slab and increasing as income rises.
- Only the income within each slab is taxed at that slab’s rate—not your entire income at the highest rate you reach.
This system promotes equity, but it also means understanding your tax slab is key to calculating what you owe—or what you can save. For 2025, these slabs remain the backbone of Malaysia’s tax policy, with slight adjustments reflecting economic priorities.
2025 Tax Slabs in Malaysia – What’s New?
In Malaysia, individuals who reside in the country for less than 182 days within a calendar year are classified as non-resident individuals for tax purposes. Non-resident individuals are subject to a flat tax rate of 30% on their total taxable income derived from Malaysian sources.
The tax slabs in Malaysia for 2025 largely follow the progressive structure of previous years, but there are notable updates to watch for. Based on the Budget 2025 announcement, here’s the latest breakdown for individual taxpayers (resident individuals spending 182+ days in Malaysia):
2025 Tax Slabs for Individuals
| Chargeable Income (RM) | Tax Rate (%) | Tax Payable (RM) |
|---|---|---|
| 0 – 5,000 | 0% | 0 |
| 5,001 – 20,000 | 1% | 0 – 150 |
| 20,001 – 35,000 | 3% | 150 – 600 |
| 35,001 – 50,000 | 6% | 600 – 1,500 |
| 50,001 – 70,000 | 11% | 1,500 – 3,700 |
| 70,001 – 100,000 | 19% | 3,700 – 9,400 |
| 100,001 – 250,000 | 24% | 9,400 – 45,400 |
| 250,001 – 400,000 | 25% | 45,400 – 82,900 |
| 400,001 – 600,000 | 26% | 82,900 – 134,900 |
| 600,001 – 1,000,000 | 28% | 134,900 – 246,900 |
| Over 1,000,000 | 30% | 246,900+ |
Key Changes in 2025
- Dividend Tax: A new 2% tax on dividend income exceeding RM 100,000 annually applies to individuals, marking a shift from previous exemptions.
- Rebates: The tax rebate for income up to RM 35,000 remains at RM 400 (or RM 800 for joint filers with zakat payments), offering relief to lower earners.
- No Major Rate Shifts: Core tax rates align with 2023/2024, but reliefs and incentives have expanded slightly (more on that later).
Compared to 2024, the slabs remain stable, but the dividend tax could nudge higher earners to rethink investment strategies. Stay tuned as these changes might affect how much you save—or pay—in 2025.
Tax Slabs in Malaysia for Different Income Levels
How do tax slabs in Malaysia hit your wallet? Let’s break it down with examples across income levels:
Low-Income Earner (RM 30,000/year)
- Taxable Income: RM 30,000
- Calculation:
- 0 – 5,000: 0% = RM 0
- 5,001 – 20,000: 1% = RM 150
- 20,001 – 30,000: 3% = RM 300
- Total Tax: RM 450
- After Rebate (RM 400): RM 50
Middle-Income Earner (RM 80,000/year)
- Taxable Income: RM 80,000
- Calculation:
- 0 – 5,000: 0% = RM 0
- 5,001 – 20,000: 1% = RM 150
- 20,001 – 35,000: 3% = RM 450
- 35,001 – 50,000: 6% = RM 900
- 50,001 – 70,000: 11% = RM 2,200
- 70,001 – 80,000: 19% = RM 1,900
- Total Tax: RM 5,600
High-Income Earner (RM 300,000/year)
- Taxable Income: RM 300,000
- Calculation:
- 0 – 5,000: 0% = RM 0
- 5,001 – 20,000: 1% = RM 150
- 20,001 – 35,000: 3% = RM 450
- 35,001 – 50,000: 6% = RM 900
- 50,001 – 70,000: 11% = RM 2,200
- 70,001 – 100,000: 19% = RM 5,700
- 100,001 – 250,000: 24% = RM 36,000
- 250,001 – 300,000: 25% = RM 12,500
- Total Tax: RM 57,900
Higher earners face steeper rates, but deductions can lighten the load—more on that next!
Tax Deductions and Exemptions in Malaysia (Maximize Your Savings!)
One of the best ways to save more with tax slabs in Malaysia is by leveraging deductions and reliefs. Here’s a rundown of key options for 2025:
| No | Individual Relief Types | Amount (RM) |
| 1 | Individual and dependent relatives | 9,000 |
| 2 | Expenses for parents : Medical treatment, dental treatment, special needs and carer expenses for parents (Medical condition certified by medical practitioner). Complete medical examination (Restricted to RM1,000). | 8,000 (Restricted) |
| 3 | Purchase of basic supporting equipment for disabled self, spouse, child or parent | 6,000 (Restricted) |
| 4 | Disabled individual | 6,000 |
| 5 | Education fees (Self): Other than a degree at masters or doctorate level – Course of study in law, accounting, islamic financing, tehcnical, vocational, industrial, scientific or technology Degree at masters or doctorate level – Any course of study Course of study undertaken for the purpose of upskilling or self-enhancement (Restricted to RM2,000) | 7,000 (Restricted) |
| 6 | Medical expenses on: Serious diseases for self, spouse or child Fertility treatment for self or spouse Vaccination for self, spouse and child (Restricted to RM1,000) Dental examination and treatment (Restricted RM1,000) | 10,000 (Restricted) |
| 7 | Expenses (Restricted to RM1,000) on: Complete medical examination for self, spouse or child COVID-19 detection test including purchase of self-detection test kit for self, spouse or child Mental health examination or consultation for self, spouse or child | |
| 8 | Expenses (Restricted to RM4,000) for child aged 18 and below: Assessment of intellectual disability diagnosis Early intervention programme / intellectual disability rehabilitation treatment | |
| 9 | Lifestyle – Expenses for the use / benefit of self, spouse or child in respect of: Purchase or subscription of books / journals / magazines / newspapers / other similar publications (Not banned reading materials) Purchase of personal computer, smartphone or tablet (Not for business use) Payment of monthly bill for internet subscription (Under own name) Skill improvement / personal development course fee | 2,500 (Restricted) |
| 10 | Lifestyle – Additional relief for the use / benefit of self, spouse or child in respect of: Purchase of sports equipment for any sports activity as defined under the Sports Development Act 1997 Payment of rental or entrance fee to any sports facility Payment of registration fee for any sports competition where the organizer is approved and licensed by the Commissioner of Sports under the Sports Development Act 1997 Gymnasium membership fee / sports training | 1,000 (Restricted) |
| 11 | Purchase of breastfeeding equipment for own use for a child aged 2 years and below (Deduction allowed once in every TWO (2) years of assessment) | 1,000 (Restricted) |
| 12 | Child care fees to a registered child care centre / kindergarten for a child aged 6 years and below | 3,000 (Restricted) |
| 13 | Net deposit in Skim Simpanan Pendidikan Nasional (Net deposit is the total deposit in 2023 MINUS total withdrawal in 2023) | 8,000 (Restricted) |
| 14 | Husband / wife / payment of alimony to former wife | 4,000 (Restricted) |
| 15 | Disabled husband / wife | 5,000 |
| 16a | Each unmarried child and under the age of 18 years old | 2,000 |
| 16b | Each unmarried child of 18 years and above who is receiving full-time education (“A-Level”, certificate, matriculation or preparatory courses). | 2,000 |
| Each unmarried child of 18 years and above that: receiving further education in Malaysia in respect of an award of diploma or higher (excluding matriculation/ preparatory courses). receiving further education outside Malaysia in respect of an award of degree or its equivalent (including Master or Doctorate). the instruction and educational establishment shall be approved by the relevant government authority. | 8,000 | |
| 16c | Disabled child | 6,000 |
| Additional exemption of RM8,000 disable child age 18 years old and above, not married and pursuing diplomas or above qualification in Malaysia @ bachelor degree or above outside Malaysia in program and in Higher Education Institute that is accredited by related Government authorities | 8,000 | |
| 17 | Life insurance and EPF Civil servants’ pension schemes, non-civil servants pension schemes and self-employed category: Mandatory contributions to approved schemes or voluntary contributions to EPF (excluding private retirement schemes) or contributions under any written law (Restricted to RM4,000) Life insurance premium payments or family takaful contributions or additional voluntary contributions to EPF (Restricted to RM3,000) | 7,000 (Restricted) |
| 18 | Deferred Annuity and Private Retirement Scheme (PRS) | 3,000 (Restricted) |
| 19 | Education and medical insurance | 3,000 (Restricted) |
| 20 | Contribution to the Social Security Organization (SOCSO) | 350 (Restricted) |
| 21 | Expenses on charging facilities for Electric Vehicle (Not for business use) | 2,500 (Restricted) |
Compulsory Deductions
- Personal Relief: RM 9,000 for every taxpayer.
- Spouse Relief: RM 4,000 if your spouse has no income.
- Child Relief: RM 2,000 per child under 18.
- Disabled Person: RM 7,000
- Disabled Spouse: RM 6,000
- EPF Contributions: Up to RM 4,000.
By claiming these, you can lower your taxable income, dropping you into a lower tax slab and reducing your liability. Plan wisely to maximize savings!
Corporate Tax vs. Personal Tax in Malaysia (2025 Overview)
While tax slabs in Malaysia govern income, corporate tax applies to businesses. Here’s a quick comparison:
- Personal Tax: Progressive rates (0%–30%) based on income slabs.
- Corporate Tax:
- Standard rate: 24%.
- SMEs (capital < RM 2.5 million, income < RM 50 million): 17% on first RM 600,000, 24% thereafter.
Benefits for Entrepreneurs
- Freelancers and sole proprietors fall under personal tax slabs, benefiting from individual reliefs.
- Companies enjoy incentives like e-invoicing deductions or green tech allowances, cutting taxable profits.
Understanding both systems helps business owners decide whether to operate as individuals or incorporate for tax perks.
How to File Your Taxes in Malaysia (Step-by-Step Guide)
Filing taxes under tax slabs in Malaysia is straightforward with the Inland Revenue Board (LHDN). Here’s how:
- Register with LHDN: Get a tax file number via e-Daftar.
- Gather Documents: Payslips, receipts for reliefs, investment statements.
- Access e-Filing: Log into LHDN’s MyTax portal.
- Fill the Form: Use Form BE (non-business income) or B (business income).
- Calculate Tax: Input income and reliefs; the system computes your tax based on 2025 slabs.
- Submit by Deadlines:
- Non-business: April 30, 2025.
- Business income: June 30, 2025.
- Pay Any Balance: Via online banking or LHDN counters.
Late filing incurs a penalty (5%–30% of tax due), so don’t delay!
Future of Taxation in Malaysia – What to Expect Beyond 2025?
What lies ahead for tax slabs in Malaysia? Economic growth, inflation, and sustainability goals could drive changes:
- Digital Economy Taxes: Expansion of taxes on e-commerce and gig workers.
- Green Incentives: More reliefs for eco-friendly investments.
- Rate Adjustments: Possible tweaks to balance revenue and taxpayer relief.
With Malaysia aiming for fiscal responsibility (targeting a 3% deficit by 2026), expect a focus on widening the tax base while supporting middle-income growth.
Conclusion: Save More or Pay More in 2025?
Navigating tax slabs in Malaysia in 2025 is all about preparation. From understanding progressive brackets to claiming deductions, you can tilt the scales toward saving more. Whether you’re a low earner enjoying rebates or a high earner strategizing around dividends, this guide equips you to make smart tax moves. Ready to tackle your 2025 taxes? Share your tax filing tips or questions below, or consult a tax pro to optimize your plan. Let’s make 2025 a year of savings, not surprises!
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