The rules regarding income tax in Malaysia are clear, as anyone earning a taxable amount in Malaysia is bound to pay income tax. However, if you wonder whether foreigners pay income tax in Malaysia, this article can provide a possible answer. Our income tax Malaysia for Foreigners 2023 guide offers relevant and authentic information.
For a better understanding of how Malaysia taxes its non-residents, please continue reading.
Who is a Foreigner According to Malaysian Tax Law
According to LHDN, a person is referred to as a non-resident or foreigner if he/she stays in Malaysia for less than 182 days/year. This rule applies irrespective of the nationality or citizenship of such a person. The rate of income tax Malaysia for foreigner is different.
A foreigner is taxed based on the income earned or received in Malaysia. There are two categories for the foreigners working in Malaysia:
- Resident: You are a resident if you stay in Malaysia for over 182 days in a year.
- Non-resident: You are considered a non-resident if your stay in Malaysia is less than 182 and you have been employed in Malaysia for 60 days (at least) in a year.
Tax Rate for Foreigners
Generally, there is a misconception that foreigners or non-residents aren’t liable to pay taxes in Malaysia. On the contrary, foreigners are taxed based on a flat tax rate. In addition, there are specific rules regarding income tax for non residents in Malaysia.
So, foreigners are bound to pay tax on the income derived in Malaysia. The type of income could include the following:
- Rent Royalties
- Consultancy Services
Foreigners who become Malaysian tax residents need to follow similar tax guidelines as residents. Hence, they need to file the Form B. Unlike the residents, non-residents are taxed based on a flat rate. This rate depends on the type of income earned by the foreigners.
The table below indicates the respective tax rates for foreigners earning a particular type of earning:
|Type of Income||Tax Rate|
|Employment, Business, Trade or Profession||30%|
|Payments for Services
Rent of Movable Property
Tax Exemptions for Foreigners in Malaysia
There are certain foreign nationals who are not taxed in Malaysia. Listed below are the exemptions regarding income tax for foreigner in Malaysia:
- A person exceeding the age of 55 years and receiving a pension in Malaysia
- An employee who is a foreign national boards a Malaysian ship
- A foreign individual receiving interest from banks
- A person receiving dividends that are tax-exempt
Apart from this, Malaysia has signed a Double Tax Avoidance Agreement with different countries that tax their citizens living abroad. So, if a foreign national belongs to one of these countries, they are exempted from income tax in Malaysia.
Besides, the income that comes from a source outside Malaysia isn’t taxable. For instance, an income that comes from renting a property outside Malaysia. Talking about income tax for foreign workers in Malaysia, remote-working employees of overseas companies are also exempted from income tax.
How a Foreigner Files Income Tax in Malaysia
When it comes to income tax in Malaysia for foreigners, the rules are somewhat similar. The income tax you will pay depends on the type of income a foreigner earns. Besides, you also need to file a specific tax form.
For instance, resident individuals earning income from a business must file a B form. Resident individuals who don’t run a business need to file the BE form. On the contrary, a foreigner (non-resident) will file the M form.
For a hassle-free tax filing experience, foreign taxpayers can take advantage of eHasil (Online tax filing service). Foreigners with a tax-resident status are eligible for the same tax deductions and reliefs that are available to Malaysian citizens.
To make this income tax Malaysia for foreigners 2023 guide more helpful, we have listed the key steps to follow when filing income tax:
- Registering on e-Daftar
- Accessing e-Filing
- Filling up your ITRF
Step 1: Registering on e-Daftar
If you are filing income tax returns in Malaysia for the first time, it is advised to choose the online portal called e-Daftar. This involves receiving your income tax number. Apart from this, you also need to get your one-time PIN to register for e-filing.
Once you have been registered on e-Daftar as a taxpayer, you can get your income tax number. You can also receive your PIN by visiting the nearest LHDN branch.
Step 2: Accessing e-Filing
Existing taxpayers can skip the initial step and visit the MyTax website. This platform allows you to file your income tax returns online. In fact, MyTax serves as a one-stop portal to meet all your tax-related needs.
Step 3: Filling Out the ITRF
Once you have successfully logged in to the MyTax portal, it’s time to start filling out the Income Tax Return Form (IRTF). To fill this form smoothly, make sure to keep all the documents organized beforehand. This will help you fill in the relevant information by looking at the relevant document.
Usually, an online income tax return form covers the following aspects:
- Particulars of individual
- Declaration of the Income
- Claiming tax exemptions, deductions, and reliefs
- Submitting the tax returns
The rules regarding income tax in Malaysia for foreigners are quite difficult to understand. However, in the content provided above, we have tried to offer necessary information in an easy-to-understand way. So, you won’t find it difficult to learn about the basics of income tax rules for foreigners.
We hope this income tax Malaysia for foreigners 2023 guide answers the question you were looking for. Here, we have tried to offer only the most relevant and authentic information. So, it won’t be difficult for you to understand the rules regarding income tax foreigner Malaysia.
If you have queries in mind or want to consult us for your tax status in Malaysia, please feel free to contact us.