According to the latest guidelines by the Inland Revenue Board of Malaysia (LHDN), certain categories of income are granted tax exemption. Below is a summary of the main types of exempt income:
Tax-Exempt Income in Malaysia：
Payments received due to loss of employment or for entering into restrictive agreements (e.g. non-compete clauses).
Dividends paid, credited, or distributed by co-operative societies to their members.
Financial assistance or subsidies received from the Federal or State Government.
Salaries or wages derived from employment on board a ship (subject to PR No. 1/2023 conditions).
Interest, bonuses, gains, or profits received by residents from deposits placed with licensed financial institutions.
Pensions derived from employment in Malaysia.
Profits paid, credited, or distributed to partners by a Limited Liability Partnership (LLP) after the LLP has paid its applicable tax.
If an individual partner’s annual profit distribution exceeds RM100,000, a 2% tax will be imposed.
Prize money received from recognised E-Sports tournaments.
Prize money awarded under the Government’s Sports Victory Prize Scheme.
Cash or in-kind perquisites received for long service exceeding 10 years with the same employer.
Income of Malaysian residents received from outside Malaysia (subject to prevailing regulations).
Fees received by non-Malaysian citizen directors from Labuan business activities are exempt from tax until Year of Assessment 2025.
Employment income of women returning to the workforce after a career break of at least two years is exempt from tax for up to 12 months (application through Talent Corporation required).
Income derived from qualifying sustainable finance or green projects (such as SRI sukuk) may be eligible for tax incentives or exemptions under budget measures.
Certain educational scholarships and death gratuities are classified as tax-exempt or non-taxable under LHDN guidelines.
**Data updated on 14.10.2025
(201706002678 & AF 002133)