Expatriate Guide to Tax and Banking in Malaysia

Malaysia is a very popular expatriate destination for Oil and Gas consultants due to its culture, lifestyle and world-renowned national oil company, Petronas. However, each new country comes with its own set of rules and regulations. These can be tricky to understand and can entail mountains of paperwork that are often associated with tax and banking.

We at Leap29 have worked with significant international oil and gas companies in Malaysia for a many years, and because of this, have written this brief guide to Tax and Banking in Malaysia to provide you with an overview of what to expect when starting a new position in Malaysia.

Tax in Malaysia for Expats

The tax year in Malaysia runs from 1st January to 31st of December. As an expatriate working in Malaysia, you will still 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 government agency that is responsible for tax in Malaysia is the Inland Revenue Board of Malaysia (IRBM).

When beginning work in Malaysia you 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).

You can collect an application form to register your income tax number from the IRBM; alternatively, the forms are also available online at http://www.hasil.gov.my/

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 (not necessarily consecutive) 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 preceding years.

Tax for Non-Residents is a flat 25%, whereas, tax for residents tax is on a sliding scale from 0% to 25% dependent on which income grouping you fall into. Typically, residence tax is set at 14%.

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 6 months in Malaysia and be liable to pay 25% tax from your first day of work.

Work Permit Requirements

As an expat before you can begin work in Malaysia you will be required to secure a work permit, also known as an employment pass. Any work permits need to have a local company in Malaysia to sponsor them.

The documents that will be required to apply for a work permit in Malaysia are:

  • Latest copy of your passport, with all pages.
  • Two passport sized photographs with a blue background.
  • Copy of your latest CV.
  • Copy of your educational / training certificates.
  • Job Description.

This information will be used to validate your work permit and will be added onto the documents that is affixed to you passport.

Types of Work Permit

There are three types of Work Permits for expats in Malaysia to hold. These depend on the purpose and the nature of your stay in Malaysia. The three work permits are:

  • Long term – this applies to people who want to work in Malaysia and who have specific skills, generally in technical or managerial positions. They are usually issued for a minimum period of two years but can also be for 10+ years if criteria are met.
  • Multiple entry – this kind of work permit is usually valid for one year, but each visit must be no longer than 30 days. Normally issued for business purposes. Expats are only permitted a multiple-entry visa if they have:
    1. Sufficient funds for the duration of the intended stay.
    2. A return ticket.
  • Visitor visa – visitors to Malaysia do not usually need a visa, whether they are on business or leisure. Those from developed countries will usually receive permission to stay for up to 3 months when they arrive in the country. An individual who is visiting Malaysia on a visit visa is NOT authorised to work.

The main difference between a Business visa / Professional Visit Pass and a work permit are:

  • A Business visa is for people who are traveling to Malaysia for business reasons but are not undertaking any form of work. This could include attending:
    • Business Meetings
    • Client presentations
    • Investigating business opportunities and new ventures.
  • A work permit / employment pass is issued to people who would be undertaking services that would be considered employment in the form of a job or labour. Examples would include:
  • Working under a contract.
  • Obtaining full-time or part-time employment.

Work Permit Timescale- From application to approval

Taking into account the collecting of relevant documents, the application process and liaising with the relevant government agencies in Malaysia, the process of application to approval can take roughly between 1 and 2 months.

Furthermore, if your work requires you to travel within Malaysia you may need to apply for more than one work permit. There are four main work permit regions in Malaysia, these are Peninsular / West Malaysia (i.e. Kuala Lumpur), Labuan, Sabah and Sarawak.

Banking and setting up a bank account in Malaysia

As an expat in Malaysia, once you have successfully got a job and secured a work permit your next priority will be to consider where your salary is being paid in to. The currency of Malaysia is the Malaysian Ringgit which the symbol is RM and has the currency abbreviation of MYR.

Dependent upon the work you undertake and the employer you are working for, you will be paid in either a local or international currency. This could be in Malaysian Ringgits or international currency i.e. USD or GBP.

The banking system in Malaysia is very similar to most other countries and has many local and international branches. Opening a bank account is a straightforward process providing that you have the correct documentation.  

Local or Global?

The most popular local Malaysian banks include Malayan Banking Berhad (Maybank), CIMB Bank Berhad and Alliance Bank Malaysia Berhad. If you are paid in Malaysian Ringgit for your consultancy work in Malaysia then a local bank will probably offer you the easiest route to saving and accessing your money while in Malaysia.

However, if you are an expat working in Malaysia and your salary is in an international currency i.e. USD, then you may prefer to use an international bank such as HSBC, which has a presence in many international locations and offers accounts specifically tailored to expats working abroad.

There are restrictions on in country payments in currency other than MYR. Therefore, if you receive payment for your work in Malaysia in USD and you hold an MYR bank account, these will require central bank authorisation. Please contact Leap29 or your accountant for further information about the best set up for your contract.

Opening a Bank Account

For an expat, looking to open a new account you will require the following documents:

  • A Valid Work Permit
  • Proof of Identity i.e. Passport including photocopies
  • Evidence of residency (work visa) or letter of employment from agency or employer
  • Additionally a supporting letter from a bank or recent bank statements can also assist the process 

These will then need to be taken to the branch which you are opening your chosen account.

At Leap29, we utilise our local partner in Malaysia to ensure all consultants working with our agency are assisted through this process by collecting the necessary documents and liaising with the local bank branches directly.

Transferring Money

If you open a Malaysian bank account, you may at some point need to transfer money internationally. As with any international transaction this process is the same, be aware you will incur additional fees for sending and receiving funds, which can vary between banks. A typical transfer can take between 5-7 working days. There are companies that allow your transfer to happen faster, however expect to pay a premium for this service.

To perform an international transfer of funds you will need to provide the following details:

  • The name of the receiving bank
  • Account number
  • Account holders name
  • SWIFT code
  • IBAN number

It is useful to note that monetary transfers over a set limit must first be approved by Malaysia’s central bank before the transfer can take place.

What Makes Leap29 the best choice when considering work in Malaysia?

So that the consultants working with us can make the most of their time working in Malaysia, Leap29 and our local Malaysian partner handle all Legal, Tax, Work Permits/Visas, Payroll, Expenses and Insurance. These services do not come at a cost to the consultant, as is the case with many other agencies, and we ensure that if any problems or questions arise, our dedicated teams liaise with the relevant local or international agencies to resolve issues quickly and effectively.

For further information about living or working in Malaysia please visit www.leap29.com or phone +44 1625 537 555