All individuals are liable to pay tax on income accrued in, derived from or remitted to Malaysia. Sources of income which can be taxed includes gains and profits from trade, profession and business, salaries, remunerations, gains and profits from an employment, dividends, interests or discounts, rents, royalties or premiums, pensions, annuities or other periodic payments and other gains or profits of an income nature not mentioned above.

Taxable income is arrived at after adjusting for expenses incurred wholly and exclusively in the production of the income.

The rate of tax depends on the resident status of the individual which is determined by the duration of his stay in the country (as stipulated under Section 7 in the Income Tax Act 1967). A resident individual is taxed on his chargeable income at graduated rates from 2% to 30% after the deduction of tax relief.

However, an individual with chargeable income of less than RM2,500 is not taxed. The chargeable income of an individual resident is arrived at by deducting from his or her total income the personal relief. Tax liability of a resident individual is reduced by rebates. Income tax matters in Malaysia are under the jurisdiction of Inland Revenue Board of Malaysia. 

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