Malaysian Tax Guide for Expats and Non-Residents
Who is liable to pay tax in Malaysia ?
Residents and non-residents are subject to tax on Malaysian-source income only. Effective from 1 January 2004, remittances of foreign-source income into Malaysia by tax residents of Malaysia are no longer subject to Malaysian income tax.
For Malaysian income tax purpose, an individual is treated as a RESIDENT if he satisfies one of the following conditions:-
- They are physically present in Malaysia for 182 days or more during the calendar year
- He is in Malaysia in the calendar year for a period of less than 182 days; this period is linked by or to another 182 or more consecutive days (throughout which he is in Malaysia) as follows:-
i. in the calendar year immediately preceding that particular year; or
ii. in the calendar year immediately following that particular year;
A temporary absence from Malaysia shall be taken to form part of the 182 days or that period, as the case may be, if he is in Malaysia immediately prior to or after that temporary absence and the temporary absence is for the following purposes:-
- connected with his service in Malaysia and owing to service matters or attending conferences or seminars or study abroad;
- owing to ill-health involving himself or a member of his immediate family; and
- in respect of social visits not exceeding fourteen days in the aggregate;
Income subject to tax – Employment Income
Under the Malaysian Income Tax Act, employment income is deemed to be derived from Malaysia:-
- For any period during which the employment is exercised in Malaysia;
- For any period of leave attributable to the exercise of the employment in Malaysia; or
- For any period during which the employee performs outside Malaysia duties incidental to the exercise of the employment in Malaysia.
In view of the foregoing, an employee exercising an employment in Malaysia is taxable on his full income from the exercise of the employment, notwithstanding that part of his income may be paid to him outside Malaysia or that his employer does not have any
offices in Malaysia.
Employment income includes the following:-
- Any wages, salary, remuneration, leave pay, fees, commission, bonus, gratuities, perquisites or allowance, payment of household expenses, club subscriptions, subsidized interest on loan, school fees for children (whether in money or otherwise);
- Payment of income tax borne by the employer;
- The value of the use of or enjoyment of any benefits or amenities (e.g. use of company’s motor vehicle, provision of food, clothing, household furniture, driver’s services, club membership);
- The value of living accommodation provided by the employer;
- Payment of the employee’s personal expenses, e.g. utility bills, insurance premium;
- Provision of overseas leave passages exceeding RM 3,000 per annum.
Rates and Personal Reliefs
For residents, the rate of tax is on a graduated scale on the chargeable income after deduction of reliefs. The reliefs available and rates of tax are are progressive.
You will not be taxable if
- Employed in Malaysia for less than 60 days
- Employed on board a Malaysian ship
- Age 55 years old and receiving pension from Malaysian employment
- Receiving interest from banks
- Receiving tax exempt dividends
Certificate Of Residence
A Certificate of Residence (COR) is issued to confirm the residence status of the taxpayer for the purpose of taxation. The certificate will enable a taxpayer to claim the benefits under a Double Taxation Agreement (DTA) between Malaysia and its Treaty Partner.
WHAT EXPATRIATE SHALL DO ?
Upon Arrival to register at LHDN
The expat who having source of income in Malaysia for the first time is required to notify LHDN within two months of arrival in Malaysia.
Submission of Income Tax Return
In Malaysia the tax year runs in accordance with the calendar year, beginning on 1 January and ending on 31 December.An expatriate employee is required to complete the Income Tax Return and submit it to the LHDN before 30th April of each year.
If you have not received an Income Tax Return by 31st March in each calendar year, you must immediately write to the LHDN (i.e. the branch which issued you with the last Income Tax Return) for a Income Tax Return for the relevant year before 14th April. You can now fill out the forms online at www.hasil.gov.my.
Penalties at various rates apply for failure to comply.
Before leaving Malaysia
An expatriate employee is required to obtain tax clearance before leaving Malaysia upon expiry of his employment contract or cessation of employment.
Non-resident Tax rate
For a non-resident, the rate of tax is 26% on the gross income. No reliefs are available to a non-resident.
Types Of Income
|Business, trade or profession
|Payments for services in connection with the use of property or installation, operation of any plant or machinery purchased from a non-resident
|Payments for technical advice, assistance or services rendered in connection with technical management or administration of any scientific, industrial or commercial undertaking, venture, project or scheme
|Rent or other payments for the use of any movable property
Source : www.hasil.gov.my , www.rsmi.com.my
Malaysia has entered into double tax treaties with 76 countries. Under the treaties, a foreign tax credit is available for the lesser of Malaysian tax payable on the foreign income or the amount of foreign taxes paid. For non-treaty countries, the foreign tax credit
available is limited to one-half of the foreign tax paid. Agreements with some countries provide for reduced withholding taxes under certain conditions.
General Malaysia Tax information
Tax Authority : Malaysian Inland Revenue Board (MIRB) (LHDN)
Website : www.hasil.org.my
Tax Year : 1 January to 31 December
Tax Return due date : 30 April
Is joint filing possible ? : Yes
Are tax return extensions possible No
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