Filing and paying taxes can be daunting, especially if you’re an expat. So we’ve prepared this guide to help make this task a little less arduous. This guide will focus on income tax for individuals.

It’s important to know that all tax residents and non-residents of Malaysia (this includes every person in the country regardless of nationality) will be taxed on all income earned within Malaysia if they are liable. Foreign income earned is not taxable.

1. Determine your tax residency status

Tax Residents

You are considered a resident for tax purposes if:

• You reside in Malaysia for a period of more than 182 days in an assessment year (usually 1st Jan to 31st Dec)
• You earn at least RM34,000 a year after EPF deductions.

Non-Resident

You are considered a non-resident for tax purposes if you stay in the country for a period of less than 182 days in a year. All expats must notify the Non-Resident branch of the Inland Revenue Board of Malaysia (IRBM) of your chargeability within two months of arriving in Malaysia.

You will not have to pay income tax if you are:

• Employed in Malaysia for less than 60 days
• Employed on board a Malaysian ship
• Aged 55 years old and receiving pension from Malaysian employment
• Receiving interest from banks
• Receiving tax exempt dividends

*You can read the Income Tax Act (ITA) 1967 section on determining residence status for individuals here for a more detailed explanation.

Certificate of Resident (COR)

This certificate is issued to confirm the tax residency status of a taxpayer. Malaysia has treaties with various countries on Double Taxation Agreement (DTA), so the COR will enable you to claim the tax benefit under the DTA and to avoid being taxed twice on the same income if you are also paying taxes in your home country.

To apply for a COR you, must complete the STM1 form and include:

• Passport, original and photocopies; and
• List of movement in/out Malaysia for the year of assessment applied.

Residents must submit their application to:

Headquarters of Inland Revenue Board of Malaysia, Department of International Taxation Menara Hasil Level 12, Persiaran Rimba Permai Cyber 8, 63000, Cyberjaya, Selangor
Tel: 03-83138888 (Ext. 21218/ 21231/ 21232)
Fax: 03-83137848/ 03-83137849

Non-residents must submit their application to:

Inland Revenue Board of Malaysia, Non Resident Branch, 3rd Floor, 6 – 8 Blok 8, Kompleks Bangunan KerajaaJalan Duta, 50600, Kuala Lumpur
Tel: 03-62091000
Fax: 03-62019745

2. Register your income tax file

You should register an income tax file with the Inland Revenue Board if you:

• Have income that is liable to tax
• Have a business income
• Are subject to Schedular Tax Deduction
• Are a company with new business
• Wish to claim tax credit payment for deduction against dividend income

To register for an Income Tax File, please refer to this guide by the Inland Revenue Board on the documents required as well as the process.

Income tax rates

For tax residents in assessment year 2016:

For non-residents:

You can find out more on the Inland Revenue Board of Malaysia website.

Double Taxation Agreement (DTA)

If you are a tax resident of two countries, you might end up having to pay taxes in both countries on the same income you’ve earned. Essentially, you will be taxed twice in one year. However, Malaysia is party to Double Taxation Agreements with over 70 countries around the world to avoid taxing a person twice.

You can view a list of countries that have DTAs with Malaysia here. The site also provides links to each individual DTAs and the provisions agreed upon by both countries.

See also:

Tips for tax season and assistance with your 1040 for US expats in Malaysia

Tax guide for Australian expats living in Malaysia