May 10, 2018
The first thing that should be noted is that in Malaysia and most other countries there are different ways that expats are classified based on the time they worked in the country.
You are considered as a non-resident under the Malaysian tax law if you stay less than 182 days within Malaysia within a calendar year, regardless of your citizenship or nationality. So, for those that fall under the non-resident tax rate here we have overview of all the tax rates.
|Types Of Income||Rate (%)|
|Business, trade or profession
(With Effect from Year Assessment 2016)
|Payments for services in connection with the use of property or installation, operation of any plant or machinery purchased from a non-resident|
|Payments for technical advice, assistance or services rendered in connection with technical management or administration of any scientific, industrial or commercial undertaking, venture, project or scheme|
|Rent or other payments for the use of any movable property|
You will not be taxable if
If taxable, you are required to fill in M Form .
Foreigners with the non-resident status are subjected to a flat taxation rate of 28%, this means that the tax percentage will remain the same no matter the amount of income. As a non-resident you’re are also not eligible for any tax deductions.
If you are a foreigner that has stayed and worked in Malaysia for more than 182 days during the calendar year, you have a resident status and you will fall under the normal Malaysian tax laws that are also applicable to the native population, check out all information on this taxing system in this article
Expatriates that have been working in Malaysia for longer than 182 days in a year are considered ‘tax resident’. Expatriates that are seen as ‘residents’ for tax purposes will pay the progressive tax rates and are also eligible for the tax deductions.
To file your income tax, the expatriate will need to obtain a tax number from the Inland Revenue Board of Malaysia (IRB). Normally, companies will obtain the income tax numbers for their foreign workers. However, if the company has failed to obtain one, the worker can register for an income tax number at the nearest IRB office. If you make a incorrect tax return as an expatriate either by omitting or understating your income, the IRB is fully in their right to fine 100% of the undercharged tax. If the income tax submission is filed late, it may result in a disciplinary fee up to 10% of the tax payable.
If you have to leave Malaysia, it has to be for one of the following reasons;
The Certificate of Residence is issued by the LHDN to confirm your residence status for Malaysian tax purposes. With the COR, you can start claiming tax benefits and avoid being taxed twice on the same income due to the Double Taxation Agreement that Malaysia has with multiple countries.
You can apply manually by going to any of the LHDN branches. There are some documents you will need to bring;
A list showing your movements in/out of Malaysia for the year of assessment.
If all documents and information are complete and in order, it should be ready within three working days. If this is not the case please contact the LHDN branch.
Both application and Issuance of the COR are FREE