In view of the recent announcement from IRB (LHDN) the new Income Tax rates will be taking effect on 1st June 2023 after passing the Finance Act 2023 around the end of May 2023.
Revised Income Tax Rate for Year 2023
It is proposed that tax rates for tax resident individuals for the following chargeable income bands will be reduced by 2.0%:
- RM35,001 to RM50,000 (-2%)
- RM50,001 to RM70,000 (-2%)
- RM70,001 to RM100,000 (-2%)
It is proposed that tax rates for tax resident individuals for the following chargeable income bands will be increased by between 0.5 to 2.0%:
- RM100,001 to RM250,000 (+1%)
- RM250,001 to RM400,000 (+0.5%)
- RM400,001 to RM600,000 (+1%)
- RM600,001 to RM1,000,000 (+2%)
Please note that these income tax rates are only applicable to Resident tax status.
*Note: Highlight in Green = Reduced tax rate; Red = Increased tax rate
2022 vs 2023 Comparison
Although some increments of tax rate % have been implemented for income group >RM100k- RM400k per year, however, you can see that actually the calculations on the first tax on RM100,000 has been reduced from RM10,500 to RM9,400 for the Year 2023. So, the impact of the increment of tax rate % is less significant.
We have breakdown the comparison for HR/Payroll/ Business Owner to understand the differences between 2022 and 2023's tax rates:
Next Step for altHR Payroll Users
For user who is currently using altHR, you do not have to do anything - altHR will update the revised income tax rate, you DO NOT need to unprocess or adjust the Income Tax (PCB) amount that you've processed via altHR for the previous month(s) because the revised Income Tax rate will recalculate the Yearly Tax amount subjected by the employees, and recalculate the Monthly Tax Deduction (MTD) for the remaining months in 2023.
However, your employee may realize their PCB is being deducted LESSER (earning <RM100k per year) or GREATER (earning >RM100k per year) - we would strongly advise HR/ Business Owner to inform your employees about the changes in the income tax rate.
Note: Revised 2023 tax rates will update in altHR payroll on 19th June 2023. For users who have already run and confirmed June 2023 payroll before 19th June 2023, the income tax rates will follow 2022's tax rates. In this case, if the user wants the tax rate to reflect on June 2023 payroll, the user may consider to unprocess the payroll IF yet to proceed with the salary payout. Otherwise, the PCB will be adjusted from July 2023 payroll onwards.