Tax Resident in Malaysia

From Petronas Twin Towers to lush green rain forests to golden sandy beaches, Malaysia has got it all! From extremes of luxury urban life to beautiful rural landscapes, Malaysia offers a wide experience to its residents. Malaysia is a country in the south-east Asia region. Singapore, Thailand & Brunei bordered this nation. The country is an upper-middle class country with a GNI per capita of RM42,607 (US$10,449). Currently it is listed as an upper developing country. The credit mostly goes to the strong economy and taxation policies. A great deal of national revenue is generated from tax revenue in Malaysia. Commercial stronghold as a result took attention of the World Bank. They have therefore remarked the nation with ‘developed nation’ status in 2020.

The capital of Malaysia is Kuala-Lampur & its official currency is Malaysian Ringgit (RM). The rapid development of the country makes it attractive to many who want to work, study & live in Malaysia. In 2017 there were 2.7 million immigrants in the country. And the numbers just keep rising. The residents are well looked after by the country. One may wonder what makes Malaysia attractive. To begin with, the country’s political and economic stability is sound. It is a multi-cultural country which comprises of a majority of Muslims. Chinese, Indians make up the minority race. It’s a vibrant melting pot of cultures all contributing to the country’s development.

The government takes measures to ensure the financial growth in the country. For this reason, the country invites foreign investment. And the government have privatized many publicly held companies. Hence the country offers highest paid jobs and the cost of living in the country is low.

The country also has good infrastructure in place. Malaysia has a world-class airport, sturdy highways and financial institutions. The country offers MM2H (Malaysia My Second Home) program to expatriates.

Under this scheme foreigners can enjoy a 10-year renewable visa. They can accommodate their spouses and kids as well. Healthcare in the country is commendable. Malaysia offer world-class healthcare affordable than their peers.

For all these reasons, Malaysia is the perfect country for you to start a career and live your life! You may either work for a company or even invest in a business in the country. The choice is yours. But whether you are a businessman or you work for a company, you will need to pay a percentage of your earning as Income Tax.

The percentage of the income tax differs from a Tax resident to a Non- resident.

An individual who has been in Malaysia for 182 days or more is a Tax resident of the country. If the days are lesser then they are considered as Non-residents. During this period, an Individual is considered to be physically present the whole day even if he/she is present for a few hours!

Citizens and Permanent residents of Malaysia do not fall into this category.

Income Tax for Non-Resident

An Individual in Malaysia for less than 182 days is a non-resident according to the Malaysian Law. This is regardless your citizenship or nationality. With effect from 2016, Income tax for non-resident is a flat rate of 28%.

But Income Tax does not apply to you under these circumstances.

  • if you are in Malaysia for less than 60 days
  • If you are employed on board a Malaysian ship
  • You are 55 years old receiving pension from Malaysian company
  • You are receiving bank interests
  • you are receiving tax exempt from dividends

Income Tax for Resident

If you are a foreigner who is in Malaysia for 182 days or more you are considered a Tax Resident of the country.

There are four main categories determining whether a person is a tax resident in Malaysia. This is based on the year of assessment.

  • The individual is in Malaysia for 182 days or more during a basis year
  • The individual is in Malaysia for less than 182 days during a basis year
  • The individual is in Malaysia for more than 90 days during a basis year
  • The individual is in or not in Malaysia for a period of 90 days or less during a basis year

Here is the breakdown of how charges applicable for a Tax Resident:

  • 5,000 – 20,000 RM          -              1%
  • 20,001 – 35,000 RM        -              3%
  • 35,001 – 50,000 RM        -              8%
  • 50,001 – 70,000 RM        -              14%
  • 70,001 – 100,000 RM     -              21%
  • 100,001 – 250,000 RM   -              24%
  • 250,001 – 400,000 RM   -              24.5%
  • 400,001 – 600,000 RM   -              25%
  • 600,001 – 1,000,000RM -              26%
  • 1,000,000 RM                    -              28%

Frequently Asked Questions

Who are exempted from Income Tax?

There are special circumstances in which the income tax is not applicable.

If an Individual holds dual citizenship he/she will be taxed only in one country. Malaysia has signed many Double Taxation Avoidance Agreements with other countries. This is also known as DTAs. According to the DTA, an individual has the ability of being double taxed. As per the agreement, it allows the significant other country to deduct income tax from money generated by Malaysian Tax Residents. If the individual is proven to be not a fiscal resident then he/she may benefit a tax exemption.

Also, if the employment period does not exceed 60 days the individual will not be taxed. Malaysia practices a worldwide basis of taxation for specific industries. These may include air port & banking industries. In these situations, the government does not apply the local taxation policy.

What if you have to travel out of the country within the 182-day perioEven so, you will be taxed as though you were present throughout that period. Some special instances that you are able to leave the country is as follows:

  • To attend job related meetings, seminars, conferences or exhibitions
  • To attend to family emergencies or self-health matters
  • Social visits that are no longer than 14 days

The COR (Certificate of Residence) is an important document when filing Income Tax. It is proof of your residence in Malaysia. You will be able to enjoy benefits of the DTA by submitting the COR.

Application for the COR can be submitted to the Inland Revenue Board of Malaysia or the Department of International Taxation (DIT). 

We know that you are looking forward to a better life and excited about having a fruitful career in Malaysia. All the hassle of taxation should not be a burden on you. Hence, we at S & F consulting are here to assist you and help you out. All you need to do is contact us. We are here for you.

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