I’ll explain this conceptually and side-by-side, so you can clearly see how Malaysia income tax vs Indonesia progressive tax actually work, and why the outcome feels different even at the same salary.
No calculations first — just logic, structure, and impact.
1️⃣ What “Progressive Tax” Really Means (Both Countries)
Both Malaysia and Indonesia use a progressive tax system.
👉 Progressive =
Higher income → higher marginal tax rate,
but only the portion within each bracket is taxed at that rate.
❌ Not: “If you earn high, all income taxed at high rate”
✅ Correct: “Only the top slice is taxed higher”
So the difference is not the concept, but:
bracket design
reliefs/deductions
maximum rate
what income is included
2️⃣ Malaysia Income Tax – How It Works
🇲🇾 Core characteristics
a) Many reliefs & deductions
Malaysia allows many personal reliefs, such as:
Personal relief
EPF contributions
Insurance
Lifestyle
Parents, spouse, children, etc.
➡️ These reduce taxable income significantly.
b) EPF lowers tax automatically
Your EPF (KWSP):
Is compulsory
Is deductible from taxable income
Also becomes forced savings
This is very important:
Malaysia tax is lower partly because EPF shifts money from “taxed income” to “savings bucket.”
c) Progressive, but gentle slope
Malaysia brackets increase gradually.
You only hit:
25% at RM100k+
26–30% only at very high income
➡️ Effective tax rate stays moderate for professionals.
d) Territorial concept
Malaysia generally taxes:
Income earned in Malaysia
Foreign income rules are more flexible (subject to policy year)
This matters for people working abroad.
🇲🇾 Mental model
Think of Malaysia tax as:
“Tax after relief, after savings, after deductions.”
3️⃣ Indonesia Progressive Tax – How It Works
🇮🇩 Core characteristics
a) Fewer deductions
Indonesia has:
PTKP (basic non-taxable income)
Limited family allowances
❗ No equivalent of EPF deduction that meaningfully reduces taxable income.
➡️ Most of your salary remains taxable.
b) Faster jump to high brackets
Indonesia brackets climb faster:
5%
15%
25%
30%
35% (new, for high income)
You reach 30%+ much earlier than in Malaysia.
c) Worldwide income concept (for residents)
If you are a tax resident:
Indonesia taxes income earned in Indonesia
Some global income disclosure may apply
Administration is stricter for expats.
d) No forced retirement savings
There is:
No EPF-style mandatory savings
BPJS is not comparable (social insurance, not savings)
So:
More cash is taxed upfront, not diverted to savings.
🇮🇩 Mental model
Think of Indonesia tax as:
“Tax first, save later (if you choose to).”
4️⃣ Key Structural Differences (Simple Table)
| Aspect | Malaysia | Indonesia |
|---|---|---|
| Tax system | Progressive | Progressive |
| Reliefs | Many | Few |
| EPF / pension | Mandatory & deductible | Minimal / not comparable |
| Speed to high rate | Slow | Fast |
| Top marginal rate | Lower & later | Higher & earlier |
| Effective tax | Lower | Higher |
| Philosophy | Encourage savings | Maximise cash tax |
5️⃣ Why the same salary “Feels” Different in Both Countries
Even if:
Same gross salary
Same job level
In Malaysia:
Part of income → EPF (not taxed)
Many reliefs reduce taxable base
Effective tax rate stays reasonable
In Indonesia:
Almost full salary taxable
High brackets reached quickly
No automatic savings buffer
➡️ That’s why Indonesia often looks “higher tax” at professional salary level, even though both are progressive.
6️⃣ Important Practical Implication (Very Important)
🇲🇾 Malaysia
Lower tax + forced savings =
✔ Better long-term wealth protection
🇮🇩 Indonesia
Higher take-home initially, but:
❗ You must self-discipline savings
❗ Retirement planning is your responsibility
Many expats miss this and think:
“Indonesia take-home higher, so better”
But net worth growth often favors Malaysia unless employer compensates.
7️⃣ One-Line Summary
Malaysia progressive tax is savings-friendly.
Indonesia progressive tax is cash-tax-heavy.
Same concept, very different outcome.
#anekdotindonesia #anekdotkerjaya
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