Malaysia ties salary tax deductions to bank-paid wages for larger firms
Prime Minister Anwar Ibrahim announced that companies above the MSME level can only claim tax deductions on salaries if wages are paid through bank accounts or other approved channels.
In the Budget 2027 debate, Prime Minister Anwar Ibrahim disclosed that firms beyond the micro, small and medium enterprise category must use bank accounts or other approved payment methods to qualify for salary tax deductions. This requirement is intended to close loopholes that allow employers to hire migrant workers without proper permits. It complements the Employment Act 1955, which already mandates wage payments through financial institutions and requires Labour Department approval for hiring migrants.
Recent enforcement actions have seen a sharp rise in arrests of employers accused of employing undocumented workers. The move also responds to concerns highlighted in the US Trafficking in Persons 2026 report about Malaysia's migrant-worker recruitment system. By linking tax benefits to traceable payrolls, the government aims to make informal employment harder for larger companies.
Why it matters
The policy links tax benefits to transparent wage payments, targeting illegal migrant hiring and informal payrolls.
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