(TAX UPDATE) This Hire Is Tax Free for Working Women and Tax Deductible Twice for Employer

(TAX UPDATE) This Hire Is Tax Free for Working Women and Tax Deductible 50% More for Employer

Introduction

She left work when the second baby came. Three years later the youngest starts school, the household budget is tighter than she remembered, and she is ready to return. The only problem is confidence. She has been out of the workforce long enough to wonder whether anyone still wants her, and whether the salary is even worth it after tax.

Here is something she may not know. For up to 12 months, her employment income can be fully exempt from tax. And the employer who hires her gets an extra deduction on her pay.

Two separate rules, recently refreshed, sit behind this. If you run an SME and you are short on good people, this is one of the cleaner win-win incentives Malaysia offers right now. Let us walk through both sides.

Tax Relief : the woman pays no tax on her income for up to 12 months

The employee-side incentive comes from the Income Tax (Income of Approved Individual) (Women Returning to Work After Ceasing from Employment Temporarily) (Exemption) Order 2026, gazetted on 9 June 2026. In plain terms, it extends the earlier Income Tax (Exemption) (No. 9) Order 2019, so the incentive now runs through to YA 2028.

What she gets : an income tax exemption on her gross employment income for a period of up to 12 consecutive months.

There is a small planning point built in. She can choose to have the exemption period start in the year of assessment she applies, or in the following YA. That choice matters when she returns partway through a year, because it lets her line up the full 12 months of exemption where it does the most good.

To qualify as an "approved individual", she must:

  • Be a Malaysian citizen and a tax resident.

  • Have ceased employment and not derived any employment income for a continuous period of at least 24 months, on or after 28 October 2017.

  • Have at least three years of full-time employment experience before she stopped.

  • Be not more than 58 years of age on the date she applies.

  • Sign a full-time employment contract with a qualifying employer for at least 24 months, entered into between 1 January 2023 and 31 December 2028, and actually work at least 12 consecutive months under it, earning gross income of at least RM5,000 a month.

The application goes to Talent Corporation Malaysia Berhad (TalentCorp), and applications are open from 1 January 2024 to 31 December 2027. Approval comes as a Letter of Approval, after which she decides which year to apply the exemption to and files as usual.

One trap to note. If she already enjoyed this exemption under the older 2019 Order, she cannot claim it again under the 2026 Order. It is a one-time benefit, not a renewable one.

Tax Deduction : the employer gets a further 50% deduction on her pay

This is the part many bosses miss, because it lives in a different piece of legislation. The Income Tax (Deduction for Employment of Approved Individual) Rules 2026 give the employer a further deduction, on top of the normal section 33 deduction for salaries, equal to 50% of the remuneration that is deductible under section 33.

Read that again slowly. You already deduct her salary as a business expense. This gives you an extra half on top. Pay her RM60,000 over the year and, subject to the conditions, you may deduct RM90,000.

The employer-side deduction:

  • Is limited to a period not exceeding 12 consecutive months.

  • Applies to remuneration paid to an "approved individual", meaning a woman returning to work as defined under the 2026 Exemption Order above.

  • Must be verified by TalentCorp.

Not every employer counts. You are excluded if you are a company controlled, directly or indirectly, by the approved individual herself, a sole proprietorship, or a relative of the approved individual (parent or parent-in-law, child, stepchild or adopted child, sibling, grandparent or grandchild, or spouse). The incentive is meant to reward genuine third-party hiring, not an arrangement inside the family.

The two windows do not line up, so watch the dates

Here is the detail that separates careful planning from a missed claim. The two incentives run on different timelines.

The woman's income tax exemption is effective from YA 2024 to YA 2028. The employer's further deduction is effective from YA 2025 to YA 2027. The employer window is shorter at both ends.

So it is possible for a returning employee to enjoy her exemption in a year where the employer's deduction has already lapsed. If you are hiring with this incentive in mind, treat the employer deduction as the tighter constraint and get the TalentCorp verification sorted early. A benefit you qualify for but do not document is a benefit you do not get.

Why this should matter to a Johor SME

Female labour force participation is exactly the talent pool most SMEs overlook. These are experienced people, often with a decade of prior work behind them, who stepped out for family reasons and are now ready to come back. The government is effectively co-funding your decision to hire them, from both directions at once.

For the returning employee, the message is simpler still. The first year back is the hardest, and for that first year the tax system steps aside.

KTP's View

Most incentives in the Malaysian tax system reward capital. This one rewards people, and it rewards them twice, once in the employee's pocket and once in the employer's tax computation. That is rare, and it is worth acting on.

If you are an employer, our advice is practical. Do not wait until year-end to think about this. The employer-side deduction requires TalentCorp verification and it closes at YA 2027, so the runway is short. Identify the hire, confirm she meets the "approved individual" tests, and start the TalentCorp process before the offer letter, not after.

If you are the returning employee, apply to TalentCorp, mind the RM5,000 monthly and 12-month working conditions, and think carefully about which YA to anchor your exemption to. That single choice can be worth real money.

Either way, check your specific facts against the gazetted Order and Rules, and against your Letter of Approval, before you file. The conditions are precise, and precision is where these claims are won or lost.

This article is general information, not advice on any person's specific tax position. It was prepared and reviewed by a licensed tax professional at KTP before publication. Statutory references are to the Income Tax Act 1967 and the gazetted 2026 Order and Rules cited above. Figures and deadlines should be confirmed against the primary sources and your TalentCorp Letter of Approval.

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