When handling the tax affairs of expatriates in Malaysia, the first thing to note is that people are classified differently based on the length of time they have worked in the country.
It is also important to be aware that all non-residents of, and tax residents in, Malaysia are taxed on all of the income they earn within the country, if they are liable. However, any foreign income they have earned is not taxable.
Foreign workers fall into the ‘resident’ category if they meet one of the following criteria:
- They have been in Malaysia for at least 182 days during the current calendar year;
- If their stay has been for less than 182 days during this calendar year but it continues into the next calendar year and lasts for another 182 days or more.
It is not necessary for expats to pay income tax if they are:
- Employed in Malaysia for less than 60 days;
- Employed on board a Malaysian ship;
- Aged 55 years old or more and receive a pension from former employment in Malaysia;
- Receiving interest from a bank;
- Receiving tax-exempt dividends.
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2018 PERSONAL TAX RATE FOR A RESIDENT OF MALAYSIA
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If an expat is a tax resident of two countries, they may end up having to pay taxes on the same income in both countries. In other words, they will be taxed twice in one year. It is worth noting that Malaysia is party to double taxation agreements with more than 70 countries around the world though.
While profits sourced elsewhere are not subject to personal income tax in Malaysia, there are some exceptions. For instance, foreign workers may benefit from a special tax regime exemption on their income if:
- They are not defined as a fiscal resident;
- Their period of employment in Malaysia does not exceed 60 days per calendar year.
In the case of income derived from specific industries, including air transport and banking, Malaysia employs an international rather than local approach to taxation.
For an expat to file their income tax return, employers will need to obtain a tax number from the Inland Revenue Board of Malaysia (IRB). Alternatively, foreign workers can register for a number at the nearest IRB office.
Should an expat file an incorrect tax return by either omitting or understating their income, the IRB could fine them 100% of the sum involved. If the submission is filed late, it may result in a disciplinary fee of up to 10% of the tax payable.
Manish Mehta is co-founder and business director of Propay Partners, where he heads the design, compliance and HR outsourcing solutions wing. With more than 20 years of experience in the BPO industry, Manish is a well-established HR outsourcing expert within the ASEAN region. He holds a degree from the National University of Malaysia, where he specialised in in Business Administration.
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When handling the tax affairs of expatriates in Malaysia, the first thing to note is that people are classified differently based on the length of time they have worked in the country.
It is also important to be aware that all non-residents of, and tax residents in, Malaysia are taxed on all of the income they earn within the country, if they are liable. However, any foreign income they have earned is not taxable.
Foreign workers fall into the ‘resident’ category if they meet one of the following criteria:
- They have been in Malaysia for at least 182 days during the current calendar year;
- If their stay has been for less than 182 days during this calendar year but it continues into the next calendar year and lasts for another 182 days or more.
It is not necessary for expats to pay income tax if they are:
- Employed in Malaysia for less than 60 days;
- Employed on board a Malaysian ship;
- Aged 55 years old or more and receive a pension from former employment in Malaysia;
- Receiving interest from a bank;
- Receiving tax-exempt dividends.
|
2018 PERSONAL TAX RATE FOR A RESIDENT OF MALAYSIA
|
If an expat is a tax resident of two countries, they may end up having to pay taxes on the same income in both countries. In other words, they will be taxed twice in one year. It is worth noting that Malaysia is party to double taxation agreements with more than 70 countries around the world though.
While profits sourced elsewhere are not subject to personal income tax in Malaysia, there are some exceptions. For instance, foreign workers may benefit from a special tax regime exemption on their income if:
- They are not defined as a fiscal resident;
- Their period of employment in Malaysia does not exceed 60 days per calendar year.
In the case of income derived from specific industries, including air transport and banking, Malaysia employs an international rather than local approach to taxation.
For an expat to file their income tax return, employers will need to obtain a tax number from the Inland Revenue Board of Malaysia (IRB). Alternatively, foreign workers can register for a number at the nearest IRB office.
Should an expat file an incorrect tax return by either omitting or understating their income, the IRB could fine them 100% of the sum involved. If the submission is filed late, it may result in a disciplinary fee of up to 10% of the tax payable.
Manish Mehta is co-founder and business director of Propay Partners, where he heads the design, compliance and HR outsourcing solutions wing. With more than 20 years of experience in the BPO industry, Manish is a well-established HR outsourcing expert within the ASEAN region. He holds a degree from the National University of Malaysia, where he specialised in in Business Administration.
OTHER ARTICLES THAT MAY INTEREST YOU
Malaysia to introduce sector-based minimum wage policy
Understanding payroll in Malaysia
A quick guide to doing business in Thailand
