What’s the tax refund in Malaysia?

Are you a Malaysian resident who thinks you’ve overpaid your income tax? Or maybe you’re a tourist wondering if you can get back the sales tax on your shopping spree? This guide is for you. We’ll demystify the tax refund process in Malaysia, covering everything from eligibility to the exact steps you need to take.

What is a Tax Refund in Malaysia?

A tax refund in Malaysia is money returned to you by the government because you have paid more tax than you were legally required to. There are two primary types of tax refunds:

1. Income Tax Refund: This is for Malaysian residents whose monthly tax deductions (MTD) throughout the year were higher than their total annual tax liability. This often happens after you’ve claimed all your eligible tax reliefs and rebates when filing your yearly tax return.
2. Sales and Service Tax (SST) Refund: This is for international tourists who have purchased eligible goods from participating stores and are exporting them out of the country. This scheme is officially known as the Tourist Refund Scheme (TRS).

How Do I Get an Income Tax Refund as a Resident?

The process for getting your income tax refund is straightforward and managed by the Inland Revenue Board of Malaysia (LHDN). The key is to file your annual tax return accurately and on time.

Real-Life Example:

• User: “How do I get my income tax refund from LHDN?”
• Process:
  • Input: Sarah, an engineer in Kuala Lumpur, had a total monthly tax deduction (MTD) of RM 5,000 for the year. After filing her tax return, she claimed reliefs for her life insurance (RM 3,000), medical check-up (RM 500), and books (RM 1,000).
  • Output: These reliefs reduced her total taxable income, making her final tax payable only RM 4,200. Since she had already paid RM 5,000 via MTD, LHDN will process a refund of RM 800 to her registered bank account after her e-Filing submission is processed.

Steps to Take:

1. File your tax return: Use the MyTax e-Filing system on the LHDN website. This is the fastest and most efficient method.
2. Ensure bank details are correct: Double-check that your bank account information is accurate in your MyTax profile for a smooth electronic funds transfer (EFT).
3. Wait for processing: LHDN typically processes refunds from e-Filing within 30 working days. You can track the status directly on the MyTax portal.

How to Get an SST Refund as a Tourist

The Tourist Refund Scheme (TRS) allows tourists to get back the SST paid on their purchases. To be eligible, you must follow specific steps and meet certain criteria.

Real-Life Example:

• User: “Can I get a tax refund on my shopping in Malaysia as a tourist?”
• Process:
  • Input: David, a tourist from the UK, buys a camera for RM 3,500 from a store at Pavilion KL that has the “Tax-Free Shopping” logo. He requests a tax refund form from the cashier, who verifies his passport and completes the form.
  • Output: Before his flight from KLIA, David visits the Customs counter with his passport, boarding pass, the camera, and the refund form. After customs approval, he goes to the designated refund agent and receives his SST refund, which is typically around 5% of the purchase price.

Steps to Take:

1. Shop at approved stores: Look for retailers that display the “Tax-Free Shopping” logo.
2. Get a refund form: Ask the cashier for a tax refund form and present your original passport at the time of purchase.
3. Go to the airport early: On your departure day, head to the airport with extra time before checking in your luggage.
4. Visit the Customs counter: Present your passport, boarding pass, the tax refund forms, receipts, and the goods themselves for verification.
5. Claim your refund: After customs approval, go to the refund agent’s counter to receive your refund in cash, via credit card, or bank cheque.

Frequently Asked Questions (FAQ)

1. How long does it take to get an income tax refund from LHDN?

LHDN’s target for processing income tax refunds from e-Filing is within 30 working days. For manual submissions, it can take up to 90 working days. The process is delayed if there are incomplete details or outstanding tax arrears.

2. What is the minimum amount I need to spend for an SST refund in Malaysia?

To be eligible for an SST refund, you must spend a minimum of RM 300 (inclusive of SST) on a single receipt from a participating “Tax-Free Shopping” retailer. Purchases must also be made within three months of your departure date.

3. What items are not eligible for an SST refund?

Items that are not eligible for a refund include services (like hotel stays), goods that have been partially or wholly consumed in Malaysia, precious metals, gemstones, tobacco products, and alcoholic beverages.

4. Why was my tax refund reduced or canceled by LHDN?

LHDN may reduce or cancel your refund if you have any outstanding tax arrears from previous assessment years. The overpaid amount will be used to offset any old debts before a refund is issued.

5. Can I get an SST refund if I leave Malaysia by land or sea?

No. The Tourist Refund Scheme (TRS) is only available to tourists departing by air from a designated international airport. The goods must be exported out of Malaysia from one of these approved points.