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Malaysia adopts a territorial approach to income tax. As a general rule, anyone earning a salary in Malaysia is required to pay income tax – unless they fall into one of the exceptions.
For the most part, foreigners working in Malaysia are divided into two categories:
Resident – stays in Malaysia for more than 182 days in a calendar year.
Non-resident – stays in Malaysia for less than 182 days and is employed for at least 60 days in a calendar year.
Foreigners who qualify as tax-residents follow the same tax guidelines (progressive tax rate and relief) as Malaysians and are required to file income tax under Form B.
Non-residents are taxed a flat rate based on their types of income.
| Types Of Income | Rate (%) |
|---|---|
Business, trade or profession Employment Dividends Rents | 30 (from year of assessment 2020) |
Public Entertainer Interest | |
Royalty | |
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 |
How to file your income tax
Non-residents filing for income tax can do so using the same method as residents. However, you will be required to use the Form M/MT (Borang M/MT) instead of the Form B/BE.
For ease of filing, you can use ezHasil to file your taxes online.
What tax exemption or deductions are foreigners entitled to?
Foreigners who are tax-residents are eligible for the same tax relief and deductions enjoyed by Malaysian citizens.
Find out more about tax exemptions, deductions and reliefs you can claim if you qualify as a tax-resident.
Who is not taxed?
Not every foreign national is taxed in Malaysia. The following is a list of those that are exempt from income tax:
- Foreign national employed on board a Malaysian ship
- Above the age of 55-years old and receiving pension from Malaysian employment
- Receiving interest from banks
- Receiving tax exempt dividends
Additionally, Malaysia also has Double Tax Avoidance agreements with countries that tax their citizens residing in foreign lands. If you are from one of these countries, then you are exempt from paying income tax to the Malaysian government.
Finally, only income that has its source in Malaysia is taxable. This exempts income that comes from overseas like rental of property or freelance work, and also remote working employees of companies that are not based in the country.
