Income Tax for MM2H Participants

Recently, we received many inquiries on Malaysia tax issues from foreigners who intend to join MM2H program and clients already joined MM2H program! We are pleased to publish Income Tax for MM2H participants article, hope you will find it useful!

Interested to Start Your International Business in Malaysia To Enjoy Low Tax?

So what’s Malaysia Income Tax for MM2H participants and foreigners?

While all funds remitted into Malaysia is tax-free, however, any income earned in Malaysia by any individual will be subjected to tax by the Malaysia Inland Revenue authority. This is applicable to all Malaysians as well as foreigners including MM2H participants.

The common types of income subject to Malaysia personal tax are as follows:

A. Business partnership income distribution, directors fee
B. Consultancy/ professional services fee
C. Employment (Not applicable to MM2H participants)
D. Dividend, interest and discounts
E. Rent receivable
F. Royalties – 10%
G. Special classes of income (e.g., technical advice, assistance or
management/administration of any scientific, technical/commercial undertaking, venture
or schemes) – 10%)

For items A to D, the tax rate depends on the individual’s resident status.

Income Tax for MM2H participants- How to determine your resident status in Malaysia?

The resident status of an individual, for tax purposes, is determined not by nationality but by the length of physical stay in Malaysia. This status is determined for each calendar
year. For example, the individual will be considered as a tax resident of Malaysia if he/she stays and fulfils any of the 4 (four) categories below:

A. In a year, amounted to 182 days or more in Malaysia

or

B. If less than 182 days in a year, but that period is linked to another period and results
in more than 182 consecutive days

e.g.
From 1/3/2010 to 31/12/2010 = 273 days
From 1/1/2011 to 31/1/2011 = 31 days
Total: 304 days
Therefore, he/she is the resident for both years of assessment (2010 and 2011)

or

C. If 90 days or more in a year and stayed more than 90 days or more/ is a resident for 3
out of 4 years preceding the years of assessment

e.g. 2008, 2009, 2010 – stayed more than 90 days
2011 – stayed 90 days or more. Therefore, he is considered a resident for 2011
year assessment.

or

D. If stayed less than 90 days or did not stay in Malaysia at all in a year, but stayed as
a resident for three preceding years and the following year:

Year 2008, 2009, 2010 – resident
2011 – did not stay at all or stayed less than 90 days
2012 – resident
Therefore he/she is a resident for the year 2011

Personal Tax Rate for Resident and Non-Resident

Once your tax resident is defined, you will submit your personal tax annually by 30th April to Inland Revenue Board. For the resident tax for foreigners (same as Malaysians), the rate varies from 0 – 28%. For the non-resident individual, he/she will be taxed at a flat rate of 28%. [Read: All foreigners personal tax is defined here!]

Malaysia has Double Tax Treaty with more than 70 countries, here is the link.. 

Who are Malaysia Treaty Partners?

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