Malaysia income tax 2026: LHDN rates, 182 days, and three other ways to be resident

Malaysia decides tax residence year by year, from physical presence, and not from nationality. Public Ruling No. 11/2017 of the Inland Revenue Board (LHDN) is blunt about it: a Malaysian citizen is not automatically a tax resident, and the same rules apply. Section 7 of the Income Tax Act 1967 gives four sets of circumstances, and falling inside any one of them makes you resident for that basis year, which for an individual is the calendar year. The first is the simple count: 182 days or more, consecutive or not. The others look outward, at the years before and after, so that a person with 88 days in a year, or 4, can still be resident. If you fall outside all four, you are non-resident, and the difference is large: 30% on all taxable income, with no personal relief and no rebate. The stakes sit at the low and middle of the scale, where a resident pays a small fraction of that.

The LHDN scale and what a non-resident pays instead

Residents, on chargeable income after reliefs. The LHDN page stops at year of assessment 2025 when we read it. Non-residents: a flat 30%.

To read the table with real money: LHDN gives MYR 9,400 as the tax on the first MYR 100,000 of chargeable income, and MYR 528,400 on the first MYR 2,000,000. A non-resident at 30% would pay MYR 30,000 on that same first MYR 100,000. Residents can claim reliefs under sections 45A to 49, including MYR 9,000 for themselves and dependent relatives, and a MYR 400 rebate if chargeable income does not exceed MYR 35,000. Individuals file by 30 April without business income and 30 June with it, under a self-assessment system.

LHDN also lists the penalties for a late return, from 15% of the tax within 12 months, rising to 45% with time, plus a 10% increase for late payment. Records must be kept for 7 years, including your list of entries and exits and passport copies, which matters here more than in most countries because the day count is the case.

Four paragraphs of section 7, with the ruling's own people

The fact sheet only carries the first paragraph. Each of the others has a worked case in the ruling or in LHDN's 2025 slides.

Paragraph (d) has a line that readers tend to miss. The ruling says you can be resident under it even if you were never actually in Malaysia during that basis year. So a year abroad need not break the chain, if the years around it hold.

Fourteen days of holiday can undo a linked period

Paragraph (b) depends on 182 consecutive days, and temporary absences can count as part of them, on condition that you were in Malaysia immediately before and after. The ruling allows three kinds: absence connected with your service in Malaysia, such as a conference or study abroad; ill health of you or your parent, spouse or child; and social visits of no more than 14 days in the aggregate, which includes a holiday in your home country.

Compare two of its examples. Marshall's 10 days in the UK over New Year fit inside the limit, so his periods link up. Hideki, a professor from Japan, spends 20 days in Japan over the same holiday. The visit passes 14 days, his 96 days in 2016 are not linked to 2017, and he is non-resident for 2016 despite spending 362 days in Malaysia the next year. The ruling adds that if he had used up his 14 days in the earlier year, a further short trip would break the run in the later one.

A short assignment, and the sixty-day exemption

A non-resident's employment income can be exempt under paragraph 21 of Schedule 6 of the Act, if the employment in Malaysia lasts no more than 60 days in the basis year, or across two years in a continuous run. LHDN's slides set out the exclusion for public entertainers. Its case of Mr. Andrew, 46 days, is exempt. Its case of Mr. Baker is more instructive: employed from 1 September to 31 October, gone on the night of 26 October, physically present for 56 days only, but paid through 31 October, so LHDN takes his period of employment as 61 days and taxes it at 30%. The count that matters for the exemption is therefore employment, and not presence. The same slides ask you to keep passport copies, the list of entries and exits, the departure ticket, and the employer's confirmation.

Foreign income: an exemption whose end date differs by document

This is the point we cannot close for you. Since 1 January 2022, foreign income received in Malaysia by a resident is taxable in principle, under an amendment to paragraph 28 of Schedule 6. An exemption order covers resident individuals, excluding partnership income. LHDN's December 2022 guideline gives it as running until 31 December 2026, on condition that the income has been taxed in the country of origin. The Ministry of Finance's Budget 2026 tax measures give 31 December 2036 for individuals. LHDN's own introduction page states the exemption with no date. We did not read a gazetted order setting the later date, so we report the three texts as they stand. If you bring foreign income in from 2027, check which applies before relying on it. The guideline defines "received in Malaysia" widely: cash and electronic transfer, including payment cards and digital assets.

Before you leave: the tax clearance letter

If you stop working or leave, your employer applies for tax clearance, using form CP21 for leaving the country, or CP22A on retirement, resignation or termination in the private sector. The notice is due no later than 30 days before the contract ends, or the date of resignation or departure, depending on the case. LHDN says it issues the letter in 14 working days if nothing further is needed, and the employer can release what it withheld after any tax is settled. A delay can mean a fine of RM200 to RM20,000 and up to six months in prison.

One stay, several verdicts

A person at 182 days has crossed the line in Malaysia and not in Singapore or Canada. Being resident here also leaves your former country's rules untouched: the ruling's own paragraph 7 keeps Malaysian status for domestic law even where a tie-breaker in a tax treaty points elsewhere, so read both sides of a dual residency. See the country table for the rest. If you want the days kept for you across years, the Taxlag app does that from your trips, which is the record a linked period depends on.