Payroll and tax calculation in Malaysia

Every country has its own payroll and tax structure. Based on this structure, every individual and company has to calculate payroll and tax. There are specific rules for payroll and tax in Malaysia, based on whether the company employs foreign nationals or local Malaysian employees.

Companies in Malaysia are required to register as an employer for tax, EPF, Social security funds and human resources development fund; if applicable. It is mandatory for the employers to register with SOCSO when the first employee begins at the company. The immediate employer or principal; who employs one or more employees is required to register and contribute to monthly SOCSO within 30 days from the date of new employee was employed. 

Companies with payroll function in the country are required to rely on internal or external company policies for ensuring protection of data principles are upheld. The processing of payroll takes place on monthly basis and the administration for payroll needs to take following things to account:

1. Mandatory benefits: This in Malaysia includes paid annual leave, statutory holidays, maternity or medical leave, benefits derived for unemployment and termination.
   
2. Optional benefits:  The benefits which is optional includes payment for long service, allowances for housing and transport, medical insurance schemes, bonuses, commission and any schemes pertaining to retirement and pension.
3. Statutory contributions: Both employer and employee make statutory social contributions to EPF retirement and SOCSO scheme. They have to make payment for students funding scheme and Zakat donations.
4. Scheduler tax deduction: Tax deductions on monthly basis is governed by STD mechanism- which does away the need for employees to pay tax in one go.
5. Payslip: All employees should be issued with a payslip; when payment is made. It should contain information such wages earned and deductions made.
6. Records: All employers must maintain an employee register with all the payroll information of every member of the staff.

All the employers in Malaysia are required to withhold monthly tax contributions of the employees at the rates ranging from 0% to 28% based on the salary amount.

Tax system of Malaysia is territorial. It means only income that are earned in the country are taxable. The tax category one falls in is based in the duration of the stay and the type of work which one does.

In Malaysia every income accrued in, derived from or remitted to the country is liable for tax. Income of the person derived outside the country and received in Malaysia is exempted from tax.

Corporations are subject to corporate income tax, real property gains tax and GST.  All the residents and NRI organizations carrying out
 
The business and generating taxable income will be taxed on income accrued in or derived from country. Individual income tax is imposed on earned income or received in Malaysia. So every individual is subject to tax on income accruing or derived from country. 

Both structure of payroll and tax in Malaysia is complicated and complex to understand, it is therefore advisable to hire professional service provider; who will provide comprehensive advice and guidance in the matter so that the entire process can be transpired seamlessly without any hassle.