Tax in Malaysia for Expats

An Expatriate Guide to Working as a Consultant in Malaysia

In the second part of our guide to working as an expat consultant in Malaysia, we look at how you may be taxed whilst working out there. 

Tax in Malaysia for Expats

The tax year in Malaysia runs from 1st January to 31st December. Tax for Non-Residents is a flat 28% (2016-17), whereas tax for residents is on a sliding scale from 0% to 28% depending on which income grouping you fall into. Typically, residence tax is set at 14%.

It is always worth getting clarification on who is responsible for paying your taxes when working as a consultant – some companies will pay the tax on your behalf, whereas for others you will need to submit this payment yourself. If you are unsure, you will need to speed to the tax or Personal Income Tax (PIT) department of the company.

When beginning work in Malaysia, your employer should register you with a tax number. If you need to register for a tax number independently, you will require an application form and the following documents;

  • Copy of the latest salary statement (EA/EC) or latest salary slip
  • Copy of identification documents
  • Copy of marriage certification (if applicable)

The HR department of your new company can assist you with this.

As an expatriate working in Malaysia, you will be required to file an Income Tax Return each year reporting the income you have received. Tax returns must be filed before 30th April of the following year. The governing agency that is responsible for tax in Malaysia is the Inland Revenue Board of Malaysia (IRBM).

It is your responsibility to complete your tax filings, not your employer/work permit sponsor, and you may be fined if it is not complete. You can complete your tax returns online or you can appoint a tax agent to complete your tax returns. To do this you will need;

  • Your Income Tax Number
  • Copy of the latest salary statement (EA/EC) or latest salary slip
  • PIN for online system (if this is your first time paying taxes in Malaysia, you will need to register with the IRB and obtain a Pin Number)

Residency Tax

As a consultant rotating in and out of Malaysia, it is still possible to qualify for a residency tax rate providing you fit into one of the following criteria:

  • If you have been in Malaysia for 182 days per calendar year.
  • If you have been in Malaysia for less than 182 days in a calendar year, but have still been in the country for 182 consecutive days, linked to days from the year immediately preceding that calendar year.
  • If you have been in Malaysia for at least 90 days in a calendar year for three of the four proceeding years

Once you are classed as a resident, if you are employed in Malaysia for fewer than 60 days per year, you are not liable to pay income tax. People who would be exempt from income tax include retired people over the age of 55, those receiving a pension from their employment in Malaysia and those who are living off bank interest.

A common myth many contractors believe is that they can benefit from this by qualifying as a resident from day one. However, you will automatically be classed as non-resident for your first six months in Malaysia and be liable to pay 28% tax from your first day of work.

For more information on your next career move, contact the Leap29 team today.

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