Property News

2020 Review of Income Tax Rates and Income Tax Structure

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:

Chargeable Income (RM) Existing Rates (%) Proposed Rates (%) Increase (%)
0 – 5,000 0 0
5,001 – 20,000 1 1
20,001 – 35,000 3 3
35,001 – 50,000 8 8
50,001 – 70,000 14 14
70,001 – 100,000 21 21
100,001 – 250,000 24 24
250,001 – 400,000 24.5 24.5
400,001 – 600,000 25 25
600,001 – 1,000,000 26 26
1,000,001 – 2,000,000 28 28
Above 2,000,000 28 30 2

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:
Chargeable income brackets Present tax rate

(%)

Proposed tax rate

(%)

Present tax payable

(RM)

Proposed tax payable

(RM)

(RM)
On the first

On the next

5,000

5,000

0

1

0

1

0

50

0

50

On the first

On the next

10,000

10,000

1 1 50

100

50

100

On the first

On the next

20,000

15,000

3 3 150

450

150

450

On the first

On the next

35,000

15,000

8 8 600

1,200

600

1,200

On the first

On the next

50,000

20,000

14 14 1,800

2,800

1,800

2,800

On the first

On the next

70,000

30,000

21 21 4,600

6,300

4,600

6,300

On the first

On the next

100,000

150,000

24 24 10,900

36,000

10,900

36,000

On the first

On the next

250,000

150,000

24.5 24.5 46,900

36,750

46,900

36,750

On the first

Exceeding

400,000

200,000

25 25 83,650

50,000

83,650

50,000

On the first

Exceeding

600,000

400,000

26 26 133,650

104,000

133,650

104,000

On the first

Exceeding

1,000,000

1,000,000

28 28 237,650

280,000

237,650

280,000

On the first

Exceeding

2,000,000

2,000,000

28 30 517,650 517,650