Income tax

When we start working in near future, one unavoidable thing that we must pay is income tax. The term of “income tax” is common among us but how many of us actually know how income tax works??

It is abide by law that we are compulsory to pay income tax. Generally, income tax is imposed based on a territorial basis in that only income accruing in or derived from Malaysia is liable to tax. However, resident individuals and other non-corporate entities are also taxed on foreign-sourced income remitted into Malaysia. Foreign-sourced incomes received by resident companies are not subject to tax even if such income is remitted to Malaysia.

Under world income scope basis, only income derived by tax residents from businesses of banking, insurance and air/sea transport operations is assessable.

Relief from double taxation of foreign-sourced income is available by means of bilateral credit if there is a tax treaty or unilateral relief if there is no tax treaty. The relief is restricted to the lower of Malaysian tax payable on the foreign-sourced income or foreign tax paid if there is a treaty or one-half of the foreign tax paid there is no treaty.