Review of Income Tax Rates and Income Tax Structure

Existing Legislation
Presently, the income tax for resident individual taxpayer is calculated based on scale rates ranging from 0% to 28% with the maximum rate of 28% being applicable to the chargeable income band of RM1,000,000 and above.

For non-resident individual taxpayer, the income tax rate is at 28%.

Proposed Legislation
It is proposed that chargeable income band exceeding RM 2,000,000 be introduced and the tax rate for resident individual taxpayer for chargeable income exceeding RM2,000,000 be increased by 2% as follows:

It is proposed that non-resident individual taxpayer’s income tax rate be increased by 2% from 28% to 30%.

Reference
Schedule 1 Part 1 Paragraphs 1 and 1A of the Income Tax Act 1967.

Effective Date
From year of assessment 2020.

Likely Tax Effects and Implications

1. The Monthly Tax Deduction (MTD) table applicable to tax deductions in 2020 will have to be revised by the tax authorities to take into account the increase and change in the structure in income tax rates.
2. The proposed resident tax rates are tabulated as below: