Tax Basics for Expats in Malaysia

A 2011 World Bank report stated that the number of skilled Malaysians living abroad rose 300 per cent in the last two decades. Going by these numbers, one can only imagine the rate at which the Malaysian population is growing abroad. While pursuing career prospects in a faraway land opens up a world of opportunities, being a Malaysian expat abroad has its own challenges. One of the biggest challenges faced by Malaysians abroad is juggling with tax laws of two countries. We totally empathise with you. So, to make your life easier, we decided to come up with an all-you-need-to-know-guide that will sort out your tax woes in no time. The Malaysian tax year is the same as the calendar year, beginning on January 1 and ending on December 31. Hence, all tax returns must be filed before April 30 of the following year.

In Malaysia, personal income taxes are some of the lowest compared to the rest of the ASEAN countries. Even for an individual working in Malaysia, the maximum rate of personal income tax is only 27%. Besides, other taxes like federal tax, taxes on annual wealth and accumulated earnings, etc. are not charged in Malaysia.

Residency Status And Taxation In Malaysia

Malaysian citizens are not the only ones who have to pay income tax. Anyone who fulfills the following criteria must file income returns:

• People who have resided in the country for 182 days in a tax year.
• People who have lived in Malaysia for less than 182 days in a financial year, but have lived for consecutive 182 days linked to the year immediately preceding or following that tax year.
• People who have resided in Malaysia for at least 90 days in the current financial year and have resided for at least 90 days in three or four preceding years.
• People who have resided in Malaysia for three years preceding the year being taxed and are going to remain in Malaysia the following year.

Who Is A Resident Malaysian?

Any person who fulfills any one of the following criteria is considered a resident of Malaysia:

• The person has stayed in Malaysia for at least 182 days in a calendar year
• The person has stayed in Malaysia for less than 182 days in a calendar year (say 2017), but stays for another 182 days or more in the next year (i.e., 2018)

Who Is A Non-Resident Malaysian?

Anyone who has spent less than 182 days in a year in Malaysia is classified as a non-resident. Non-resident Malaysians are subject to a different set of tax rules and regulations.

What Is The MM2H Visa & How Is It Helpful For Expatriates?

The MM2H visa is the most popular among expats. With this visa you need not pay income tax as long as the income is being remitted from outside Malaysia. Interest earned on the incomes stowed away in a Malaysian bank accounts come under this too. The cash rates as of now are 3% while the five-year deposit rates are at 5%. Expats can open a bank account anywhere in Malaysia and transfer their money without paying any tax on the transferred money.

However, any income earned in Malaysia will be taxed. The MM2H visa allows you to run a company in Malaysia provided you are not an employee of a company earning a regular salary. Director’s fee and dividends are exempted from taxation, as long as the amount is below RM 34,000, i.e., under USD 8000 per annum. A Malaysian expat will have to declare the income if this remuneration crosses the above threshold.

The MM2H visa also allows people above the age of 50 to work for only 20 hours a week through an application. The success of an application depends upon the industry that you work in. MM2H visa agents prove valuable in such circumstances.

What Are Malaysian Taxation Rates for Expatriates and Non-Residents?

The latest tax rates are as follows:

• You are exempt from any taxes if your stay in Malaysia concludes within 60 days.
• The non-residents are taxed at flat 28%. They will not get any tax incentives.
• The residents are taxed from 0% to 25% depending upon their income. They, however, enjoy tax incentives which bring down the net taxable income.
• People working aboard a Malaysian ship are exempted from income tax.

What Are The Exceptions to the Malaysian Tax Laws For Expatriates and Non-Residents?

If you have to travel out of Malaysia within the 182-day period, then the days you have been outside the country will be added to the 182-day period as if you never left the country provided you meet any of the following criteria:

• Attending a seminar, meeting or conference that is strictly related to your job.
• Seeking medical help for self or your family member.
• Paying a social visit of not more than two weeks.

Who Are Exempted From Income Tax in Malaysia?

Those who have retired and are above 55 years of age are exempt from paying income tax. People receiving and living off their Malaysian bank interests, pensioners of a Malaysian employment, and people having less than 60 days of employment in a tax year in Malaysia do not need to pay income tax.

Is There Any Taxation on Remittance From Malaysia?

If you plan to remit from Malaysia, unfortunately there’s application of 10% GST (Goods and Service Tax) on the remittance fees. The good news is, at InstaReM, we absorb this fee for you so you’re all set to send money from Malaysia at the good rates and have great savings!

Check out MYR to SGD exchange rate now.

Tax Basics for Expats in Malaysia was originally published in InstaReM on Medium, where people are continuing the conversation by highlighting and responding to this story.