FAQ:15% FLAT TAX RATE - Frequently Asked Questions

Please select a topic:

What does the optional 15% Flat Tax Rate mean?
The 15% Flat Tax Rate is 'optional' as an REP applicant can choose to apply this incentive to their tax returns, or not. Once opted for, this 15% Flat Tax Rate will be for a continuous period of 5 years. If an applicant chooses not to utilise this incentive within 2 years (the year of return or the year after), the applicant will not be able to claim this incentive in the future.
Where can I find the current tax rates for Malaysia?
Kindly refer here for Lembaga Hasil Dalam Negeri’s (LHDN) individual tax brackets.

How do I estimate my income tax amount to be paid?

Keep in mind that the following is an estimate based on an example, and the actual amount will vary due to personal tax reliefs taken, additional income, and other factors.

EXAMPLE of a married applicant:
Applicant earns RM 15,000 monthly income
Annual income = RM180,000 (RM15,000 x 12)
Tax reliefs taken = RM13,000 (RM9,000 for Individual + RM4,000 for Spouse)
Chargeable Income = RM167,000 (RM180,000 – RM13,000)

A) Regular tax rate calculation (at 2021 rate, non-REP):

		On the First 100,000		10,700
G	100,001 - 250,000	Next 150,000	24	36,000

*Income tax bracket taken from LHDN’s website

In this example, chargeable income is RM167,000 and qualifies for this tax bracket above.
Annual tax = RM10,700 + (24% x (167,000 – 100000)) = RM26,780

B) REP 15% flat tax calculation:
Chargeable Income x 15%
RM167,000 x 15% = RM25,050

In the example above, the 15% flat tax rate is lower than the regular tax rate. For more information, please contact LHDN.

How long can I wait before making my choice on my tax options?
Assuming you are approved for the REP, you will receive a 2-year validity period during which time you can make your choice and claim this incentive. Within this period, it is assumed that you obtain employment and return to Malaysia. Your validity period will lapse after 2 years; this means after 2 years you will not be eligible to claim the tax incentive, should you decide to do so.
How do I utilise the 15% flat tax rate incentive?
There are two (2) steps to utilise the 15% flat tax rate incentive:

Firstly, the employer can deduct Potongan Cukai Bulanan (PCB) at the rate of 15% from the applicant’s monthly salary once employment has started.

Secondly, the applicant must file their tax individually using the e-BT form for the next five (5) years. They are given the option to start using the 15% flat tax rate on their first year of employment or in the next consecutive year, as stated in the Surat Akuan Tarikh Kembali (SATK).
I am planning to operate my own business. Can I still opt for the 15% flat tax rate?
Approved REP applicants are allowed to establish their own business but will not be eligible for the 15% flat tax rate if they are drawing a business income. The exception here is if they are drawing a fixed employment income from the business. Kindly refer to the REP Helpdesk for more information.