Tax Return Software in Malaysia: A Simple Guide

Imagine transforming the daunting task of tax filing in Malaysia into a smooth sail across its serene waters—this is the magic of modern tax return software.

In this guide, we’re shining a spotlight on the digital wizards that can turn tax season from a perplexing puzzle into a straightforward checklist, all with a click of a button.

Whether you’re a seasoned taxpayer or new to the game, let’s embark on this digital journey together, ensuring your voyage through tax obligations is as pleasant as a leisurely stroll through the lush gardens of KL.

Let’s dive in!

What Is A Tax Return?

A tax return is a form or form filed with a tax authority that reports income, expenses, and other pertinent tax information.

Tax returns allow taxpayers to calculate their tax liability, schedule tax payments, or request refunds for the overpayment of taxes.

In most countries, tax returns must be filed annually for an individual or business with reportable income, including wages, interest, dividends, capital gains, or other profits.

All personal tax returns have a central section that contains common types of income, such as bank interest or dividends received, and expected tax reliefs, such as donations to charities.

Other types of income, such as profits from self-employment or salary from a job, are reported in separate sections.

Not all income has to go on a personal tax return; for example, if you have money in an ISA, you do not need to include interest earned because ISA interest is tax-free.

Understanding Tax Refunds

It can be exciting to get a large tax refund. You can expect a refund if you overpaid your taxes during the year.

This generally happens when taxes are deducted from your paycheck every time you get paid by your employer.

Here are some reasons why a taxpayer might get a refund:

  1. The taxpayer should have filled out Form W-4, which estimates the correct withholding amount from the employee’s paycheck.
  2. The taxpayer intentionally fills out their W-4 for a higher withholding and larger tax refund at tax time.
  3. The taxpayer should have updated their W-4 to reflect a change of circumstances, such as the birth of a child and an additional child tax credit (CTC).
  4. A freelancer or self-employed person who files quarterly estimated taxes may overpay to avoid a surprise tax bill or underpayment penalties at tax time.
  5. The taxpayer is eligible for refundable tax credits, which can reduce the taxes owed below $0. In other words, if the credit exceeds your tax bill, you will receive a refund for the difference.

Tax refunds are the opposite of a tax bill, which refers to taxes owed by a taxpayer.

 In the case of a tax bill, you owe more taxes to the government than you paid during the year. You usually have a tax bill if your employer doesn’t withhold enough taxes from your paycheck.

What Are Refundable Tax Credits?

Most tax credits are nonrefundable, meaning that the tax credit can only reduce a taxpayer’s liability to $0.

The taxpayer automatically forfeits any remaining amount from a nonrefundable tax credit. For this reason, this type of tax credit is sometimes called a waste tax credit.

In contrast, a refundable tax credit pays out in full, meaning that a taxpayer is entitled to the entire amount of the credit regardless of their income or tax liability.

If the tax credit reduces the tax liability to below $0, the taxpayer gets a refund.

Refundable tax credits include:

Child Tax Credit (CTC)

The child tax credit is $2,000 maximum for eligible taxpayers. The fully refundable portion is $1,600 for 2023 and $1,700 for 2024.

Earned Income Tax Credit (EITC)

The Earned Income Tax Credit (EITC) gives low- and moderate-income workers and families a tax break.

The credit is $7,430 in 2023 and $7,830 in 2024. The amount of credit a taxpayer receives depends on their income, filing status, and the number of children.

For example, eligible taxpayers without children will receive $600 for tax year 2023. That figure increases to $632 for tax year 2024.

Premium Tax Credit (PTC)

Low- and moderate-income households may qualify for the premium tax credit (PTC), which lowers the monthly premiums for health plans offered through the federal and state health benefit exchanges.

Taxpayers can use all, some, or none of their PTC in advance (i.e., upfront). If taxpayers use less PTC than they qualify for, they will get the difference as a taxable credit.

How Are Taxes In Malaysia?

For Residents

Tax rates for residents run on a sliding scale up to 30%, depending on the income level.

If you have workers rotating in and out of Malaysia, they may still qualify for a residency tax rate, providing they fit into one of the following criteria:

  • If they have been in Malaysia for 182 days per calendar year
  • If they have been in Malaysia for fewer than 182 days in a calendar year but have still been in the country for 182 consecutive days, linked to days from the year immediately preceding that calendar year
  • If they have been in Malaysia for at least 90 days in a calendar year for three of the four preceding years

There are also a few tax exemptions. 

If you fall into any of the below categories, then you will not pay any income tax:

  • Residents who work fewer than 60 days a year
  • Retired people older than 55 years of age
  • Those receiving a pension
  • Those living off bank interest

For Non-Residents

Expats in Malaysia will become tax residents if they spend 182 or more days in the country. 

If they spend fewer than 182 days of the year in Malaysia, they will be subject to a flat % tax rate of 30%.   

The tax year in Malaysia runs from 1 January to 31 December, at which point you will be required to file a tax return.

Some businesses will pay the tax on behalf of their staff, whereas others ask their workers to submit the payment themselves. 

A fixed monthly SOCSO (social security organization) fee for non-residents is 49.4 ringgit (RM) per month, like a national insurance fee.

You will automatically be classified as a non-resident for your first six months in Malaysia and be liable to pay a 30% tax from your first day of work.

What Are The Best Tax Return Softwares In Malaysia?

Deskera

Founded in 2008, Deskera has rapidly evolved into one of the leading SaaS providers globally, focusing on advancing businesses. 

Recognizing small and medium businesses’ critical role as the backbone of every economy, Deskera is steadfastly committed to enhancing its narrative through growth and exceeding expectations.

At its core, Deskera’s vision is to invoke a transformative shift in how businesses operate globally. 

Our technology-driven tools are crafted to empower these businesses to achieve their full potential.

Get started with Deskara 🔥

Eztax

Eztax is the Easiest Online Accounting Software for SMEs in Malaysia. 

From Sales and Service Tax(SST) Invoicing, Billing, Printing, Inventory, Reports, auto invoice delivery, maintaining books to Customer, Product, Supplier 360 view, Analytics, and more at 3X lower pricing, 30% higher productivity.

It is offered at a 30-day FREE Trial with unlimited invoicing for SMEs.

Easier, Faster, highly customized invoicing, experienced at scale, and proven on the ground to be the most practical cloud accounting application with the highest data protection standards in the industry with 256-bit encryption.

Along with the low cost to own among the leading software available in Malaysia with flexible monthly, quarterly, and yearly, there is no doubt that the EZTax.Books would be the best choice for SMEs, entrepreneurs, and professionals.

Get started with Eztax.in 🔥

Thomson Reuters

In times of constant change, the world looks to professionals to lead. But as complexity grows, even professionals risk being overwhelmed.

Thomson Reuters clarifies today’s complex landscape with AI and technology, deep subject-matter expertise, and content the world has trusted for over 150 years.

It gives professionals the confidence to know today, navigate tomorrow, and lead a fast-evolving world.

They empower professionals to reduce inefficiencies to do more of the work that matters, act decisively to add more excellent value for critical stakeholders, and anticipate future challenges to face the unexpected.

Get started with Thomson Reuters 🔥

ClearTax

ClearTax’s e-Invoicing software seamlessly aligns with LHDN’s guidelines, and as Malaysia’s most sought-after solution, they are determined to make your E-invoicing implementation a breeze.

They are a tax & technology company that builds trusted, valuable, and insightful platforms for their clients to run their finances, stay compliant with the latest norms, connect with other businesses, and improve their relationship with money. 

Get started with ClearTax 🔥

What Are Tax Return Forms In Malaysia?

All workers in Malaysia are also required to file an income tax return each year reporting the income they have received. 

Tax returns must be filed before 30 April of the following year. The government agency responsible for taxes in Malaysia is the Inland Revenue Board of Malaysia (IRBM).

The Malaysian government may issue a fine if the employer or worker does not complete this form.

This tax return form can be completed online or by appointing a payroll partner. 

To do this, you will need the following:

  • Income Tax Number of worker
  • Copy of worker’s latest salary statement (EA/EC) or latest salary slip
  • PIN for online system (if this is your first time paying taxes in Malaysia, you will need to register with the IRB and obtain a PIN

Tax Clearance, Tax Filing

All staff employees must complete tax clearance and tax filing at year-end. 

The financial year is from 1 January – 31 December. Tax filing must be completed by April.

Conclusion

Crossing the tax season finish line in Malaysia can now be a breeze, thanks to the trusty sidekick that is tax return software.

With the insights from this simple guide, you’re wellequipped to choose the right digital tool that makes tax filing as satisfying as enjoying a perfectly brewed teh tarik.

Remember, in the realm of taxes, being well-prepared is half the victory.

Happy filing!

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