Filing taxes in Malaysia? Your 2017-2018 expat guide

16.01.18
7 minute read
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There are a lot of great things to look forward to at the start of any new year. But one thing that holds a lot of people back is the intimidating task of filing taxes. Are you an expat living in Malaysia or a Malaysian citizen living abroad? Wondering if you need to pay taxes this year? This article is for you. Read on to find out more about who is required to pay taxes in Malaysia and how to file.

Malaysia income tax meaning: What is it?

In Malaysia, tax must be paid on income earned in, derived from, or sent back as remittance to, Malaysia. An individual is taxed on their total income minus expenses derived from salaries, business profits, dividend profits, interest, rental income, royalties, pensions and annuities. Income tax is managed by the Inland Revenue Board of Malaysia, which determines how much tax is paid on one’s income. For residents, tax is paid on a sliding scale - so the more you earn, the more tax you pay - but there’s a cap of 28 percent. All non-residents are taxed at a flat rate of 28 percent.

(Source 1 Source 2 22 Dec 2017)

What is the Malaysian tax year? When is the deadline for submitting a tax return in Malaysia?

The Malaysian tax year runs from January 1st - December 31st. The deadline for filing your tax return depends on where your income comes from. If you’re self-employed for instance, then the deadline is June 30th. However, if you derive income from employment then you have to file your taxes before April 30th.

(Source 1 Source 2 22 Dec 2017)

Do I have to file a tax return in Malaysia?

Malaysia taxes for residents

For the purposes of taxes, residency is determined by how long a person spends in Malaysia during the year. Put simply, if you spend at least 182 days of the year in Malaysia you’re considered a resident. However, there’s some additional fine print to that rule that may qualify you in other ways. For example, you’re also considered a resident if:

  • You were in Malaysia for less than 182 days in the first year (basis year), but that period is linked with another period of 182 or more consecutive days in the current year, and you weren't out of the country for more than 14 days in total during that period
  • You were in Malaysia for 90 days in the basis year, and in Malaysia for at least 90 days in the last three out of four preceding years
  • You were a resident the preceding three years and will be a resident the following year.

(Source 22 Dec 2017)

Malaysia taxes for non-residents

If you don’t meet the residency requirements (see above), but you’ve been working in Malaysia for more than 60 days, then you’ll be filing as a non-resident. While residents are taxed on a progressive sliding scale according to the amount of their income, non-residents are taxed at a flat rate of 28 percent and are not eligible for any deductions. It should be noted that if you haven’t worked in Malaysia for 60 days in the calendar year, you’re exempt from filing.

Source 1, Source 2, 22 Dec 2017)

Malaysian people living abroad

If you spend less than 182 days out of the year in Malaysia you’ll be classed as a non-resident. Non-residents are taxed differently than residents, but you’ll still be liable to file a tax return. Do make sure to also check the tax rules in the other country or countries you’ve been living, you might be considered a resident there, and perhaps you have to pay taxes there too.

(Source 22 Dec 2017)

Expats living in Malaysia

If you’re an expat living in Malaysia you’ll have to file a tax return in Malaysia if you’ve been working there for more than 60 days. The only thing you’ll need to figure out is whether or not you should file as a resident or a non-resident, which is explained above. However, regardless of your residency status in Malaysia, you may still be required to file taxes in your home country. Rules vary from country to country. Check with the government tax agency in your home nation to see what you’re expected to do and if there’s a double taxation agreement in place with Malaysia. It might also be a good idea to get help from a professional tax consultant, they can look into your specific situation and advise you on the steps to take.

(Source 22 Dec 2017)

Income tax for students in Malaysia

If you’re studying abroad in Malaysia and have been working while studying during at least 60 days in the year, then you’ll need to file a tax return either as a resident or non-resident, depending on your residency situation. Working for fewer than 60 days of the year exempts you from filing taxes.

If you qualify as a resident taxpayer then there might be some personal deductions that apply to you. You can, for instance, deduct education fees up to 7,000 MYR, purchases of publications that help enhance your knowledge, or a personal computer. Please make sure to check beforehand that these do actually apply to your situation, by getting advice from a professional for instance, and if they do apply to you then make sure to keep the receipts and invoices as proof.

(Source 1, Source 2, 22 Dec 2017)

Income tax for self-employed in Malaysia

Those who are self-employed in Malaysia and meet the residency requirements will need to file as an individual carrying on a business, and fill out Tax Return Form B. You have to file your tax return on 30th of June, at the latest.

(Source 22 Dec 2017)

Double Taxation Avoidance Agreements in Malaysia

Double taxation agreements (DTAs) are agreements or treaties between countries which specify which country has taxing rights over individuals or which country’s taxing rules take precedence in the case of expatriates living abroad. Malaysia has DTA’s with 79 countries and Taiwan, plus a Tax Information Exchange Agreement with Bermuda. If you’re from one of these countries you should read up on the specific agreement to help you understand how to pay your taxes:

Albania Argentina (limited agreement)
Australia Austria
Bahrain Bangladesh
Belgium Bosnia & Herzegovina
Brunei Canada
China Chile
Croatia Czech Republic
Denmark Egypt
Fiji Finland
France Germany
Hong Kong Hungary
India Indonesia
Iran Ireland
Italy Japan
Jordan Kazakhstan
Korea Republic Kyrgyz Republic
Kuwait Laos
Lebanon Luxembourg
Malta Mauritius
Morocco Mongolia
Myanmar Namibia
Netherlands New Zealand
Norway Pakistan
Papua New Guinea Philippines
Poland Qatar
Romania Russian Federation
San Marino Saudi Arabia
Senegal Seychelles Republic
Singapore Slovakia
South Africa Spain
Sri Lanka Sudan
Sweden Switzerland
Syria Thailand
Turkey Turkmenistan
United Arab Emirates United Kingdom
United States (limited agreement) Uzbekistan
Venezuela Vietnam
Zimbabwe

(Source 10 January 2018)

How do I pay taxes in Malaysia?

Wondering how to actually file your taxes in Malaysia? The first step you need to take is to assess your situation so you know which Tax Return Form (TRF) to fill out - are you a resident or non-resident? Residents fill out a form B or BE, depending on whether or not they’re carrying on a business (i.e. self-employed). Non-residents fill out the M form. Your TRF can be mailed to the Inland Revenue Board of Malaysia. However, it may be easiest for you - especially if you’re not currently in Malaysia - to use their online filing system, ezHasil.

Whether you’re using the ezHasil online system or filing manually, you’ll need to pay your tax return or receive your tax refund in Malaysian ringgits. This can get complicated for expats who still bank in their home currency. But this is where TransferWise can help. With TransferWise, you can send and receive money across borders at the actual mid-market exchange rate. This can save the average 4-5% markup rate that banks and traditional international money transfers charge customers.

If the Inland Revenue Board of Malaysia accepts third party transfers you’ll be able to pay your taxes directly through TransferWise online. Otherwise, TransferWise can easily be used to transfer money from abroad to a local Malaysian bank account at a fraction of the cost of traditional international money transfers. If you don’t have your own bank account in Malaysia yet, you can transfer the money to a family member or friend that you trust, instead.

Filing taxes can be tough in any country. But when you’re an expat living abroad or a non-resident splitting your life between multiple countries, it can be daunting to try and keep track of international tax rules. While Malaysian tax rules are pretty straightforward for residents and non-residents, paying your returns can be tricky if you’re banking in multiple currencies. Next time you’re paying your international tax return, keep TransferWise in mind to help you simplify the process.

This publication is provided for general information purposes only and is not intended to cover every aspect of the topics which it deals. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content in this publication. The information in this publication does not constitute legal, tax or other professional advice from TransferWise Limited or its affiliates. Prior results do not guarantee a similar outcome. We make no representations, warranties or guarantees, whether express or implied, that the content is the publication is accurate, complete or up to date.

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