As the end of the year approaches, it’s time for Malaysians to get serious about maximizing their tax deductions. Tax relief is a fundamental aspect of Malaysia’s tax system that enables taxpayers to reduce their taxable income and ultimately lower their tax obligations. These government-granted deductions and exemptions are designed to ease the financial burden on individuals and families while promoting specific social and economic objectives.
Understanding and maximizing these tax relief opportunities can lead to substantial savings during tax season. Each eligible deduction, from healthcare expenses to retirement contributions, reduces your taxable income. By planning ahead and systematically tracking qualifying expenses throughout the year, taxpayers can make informed financial decisions that benefit their personal finances and align with national welfare goals.
This guide provides practical strategies for Malaysian taxpayers to optimize their tax positions before the year-end. Whether you’re a seasoned taxpayer or new to tax planning, understanding these relief options will help you make the most of your eligible deductions and create a more efficient tax strategy.
Lifestyle relief for self, spouse or child (up to RM2,500)
Under Malaysia’s tax relief framework, individuals can claim deductions for various expenses associated with improving the quality of life for themselves, their spouses, and their dependents. This relief includes any reading materials that are not banned in the country.
Taxpayers can also claim deductions when purchasing computers, smartphones, or tablets. Remember to keep all relevant receipts when making such purchases since they serve as proof of your claims when filing income taxes.
Furthermore, If you have an internet subscription under your name, these costs may fall under eligible expense categories. Remember that the lifestyle relief is capped at RM2,500 per annum; therefore, compiling an exhaustive list of claimed items to optimize deductions without going overboard would be wise.
Sports equipment relief (up to RM1000)
Previously included under lifestyle relief, sports-related expenses now form their distinct tax relief category. Malaysian taxpayers can claim deductions for sports activities listed in the government’s Sports Development schedule. These deductions encompass purchasing sports equipment, competition registration fees, entry or rental fees for sports facilities, gym memberships, and sports training fees. However, it’s important to note that sports clothing and footwear are not eligible for tax relief as they are considered personal attire.
EPF contribution relief (up to RM7,000)
EPF contributions allow taxpayers to claim up to RM7,000 annually. This tax benefit is structured in two main components.
The first component allows for tax relief of up to RM4,000 on basic EPF contributions, whether mandatory or voluntary. Any employed individual earning more than RM3,030 monthly should automatically be eligible for this component through contributions typically deducted from their monthly salary. At the same time, self-employed persons can make voluntary contributions to qualify for this tax relief.
In addition to the basic contribution relief, taxpayers can claim up to RM3,000 in tax relief for additional voluntary contributions to their EPF account. These supplementary contributions can be made at any time during the tax year. To maximize the available tax benefits, taxpayers should ensure their combined basic and voluntary contributions reach the full RM7,000 limit before the tax year ends on December 31st.
SSPN AND PRS relief (up to RM11,000)
The government has introduced two significant tax relief schemes to promote financial planning and secure futures for Malaysians. The Private Retirement Scheme (PRS) allows taxpayers to claim relief of up to RM3,000 annually for their retirement savings contributions, supplementing their mandatory EPF savings with voluntary long-term retirement investments. Additionally, parents can claim up to RM8,000 in tax relief for contributions made to the National Education Savings Scheme (SSPN), a dedicated savings platform designed to fund their children’s future education needs.
EV-related relief (up to RM2,500)
Recently, Malaysia has been pushing toward a greener future. Under this initiative, taxpayers can now claim relief for various EV-related charger expenses, including the purchase of EV charging equipment, installation costs of charging facilities, rental fees for EV charging equipment, and subscription fees for EV charging services. Originally introduced in Budget 2022 with an initial period until the Year of Assessment 2023, this tax relief has been extended under Budget 2024 to continue through the Year of Assessment 2027.
Parent related relief (up to RM8,000)
Taxpayers are allowed to claim deductions for medical expenses incurred caring for their elderly parents. To qualify for the medical expense deduction, a certification from a Malaysian Medical Council-registered practitioner stating that the parent’s medical condition requires the treatment or care services provided is required. Additionally, the parent must be a resident of Malaysia, and the medical care must be received within the country.
Beyond medical expenses, taxpayers can claim a deduction of up to RM1,000 for their parent’s annual dental expenses and medical check-ups.
Vaccination and dental tax relief (up to RM2,000)
Taxpayers can claim medical examination expenses and vaccination costs for themselves and their spouses. The maximum allowable deduction is RM1,000 for medical examinations and RM1,000 for vaccinations, resulting in a total potential relief of RM2,000. Medical examinations must be conducted at registered healthcare facilities or hospitals, including comprehensive health screenings, diagnostic tests, and preventive check-ups. Similarly, vaccination expenses cover various immunizations, including but not limited to COVID-19, influenza, pneumococcal, and other approved vaccines administered by licensed healthcare providers. Official receipts and documentation from registered medical practitioners or facilities must support these claims.
The fifth perspective
As the fiscal year draws to a close, taking a proactive approach to tax planning becomes essential. By strategically managing your expenses and understanding available tax relief options, you can reduce your tax liability effectively while avoiding last-minute complications. A thorough understanding of Malaysia’s tax relief categories, combined with careful tracking of your eligible expenses, should enable you to maximize your deductions and optimize your tax position.
For at least seven years, in case of a tax audit, please remember to maintain proper documentation of all relief-related expenses, including receipts, invoices, and supporting documents.
