Regard to 183 days for tax residence in Malaysia

Hi,

I'm currently working in Malaysia from August 1st 2017 untill now and to be continue working in next year(2018) also.

But that time I had single entry visa and entered to Malaysia on 24th June 2017 . Then I spent 1 month for waiting my company to apply multiple visa working and only started working from August 1st 2017.

Kindly help me to clarify how to calculate for 183 days as resident in Malaysia? Should be calculated from 24th June 2017 (the day I entered Malaysia) or August 1st 2017 (the day I started working and paid for tax) ?

Thanks in Advance.

Date of the EP is the relevant date (1st August 2017), but of course you cannot be TR in tax year 2017 but will still need to qualify in tax year Jan-Dec 2018. Do remember leisure absences of more than 14 days stop the qualifying period, restarting on first day of return thereafter. Therefore, be mindful to link tax year 2017 and 2018 for maximum, retroactive TR benefit.

I will be from 1 st aug 2017 now in April you do you IT returns and based on your stay in malaysia they will calculate the tax and if stayed more than 182 days in current financial year they will refund your amount which employer deducted @ 28 %

While filling income tax online if you have declared any investment or etc, its better to visit in person and fill income tax so they can collect all the proof mentioned will filling IT return so they can process your refund fast.

Thanks so much for ur quick reply! Can u help me to clarify 3 more issues below?

1. Just want to confirm that, I need to stay in Malaysia more 182 days  in 2018 for qualifying resident. Is it correct?

2. And for leisure absences of more than 14 days, it means every period I cannot be outside of Malaysia more than 14 days OR the total absence of all trips cannot be 14 days.

For example: from 1st Jan 2018 to 31st July 2018, I have 2 times travelling and let say each trip lasts for 10days. So it will not stop the qualifying period because it will not exceeds 14 days. Am I right?

3. From 1st August 2017 to 31st Dec 2017, I tried to count and not enough 182 days. So means in April 2018, I still cannot get refund of amount which employer deducted @ 28 %. But can let me know when I get back this tax refund, after July 2018 ( when I finish 182days in 2018) or I need to wait until April 2019?

1. Yes
2. 14 consecutive days will break the qualifying count of days present
3. After July 2018 or April 2019

In relation to the 28%, do they continue to collect that amount until I qualify in 2018? I have contract for the entire year,  and if so, it would seem I would have nearly enough withheld to cover 2018 taxes by July.

Tax years are dealt with separately. Qualifying is therefore on an annual basis.*

After the 183 days the rate reverts to the tax resident rates. Any overpayment is refunded when a tax assessment form is completed. This is usually done in Feb/Mar 2019 (i.e. after the tax year is complete) but I believe can be submitted earlier or if leaving the country. But tax by law has to continue to be deducted each month by the employer.

*Page 6 (connecting tax years) https://www.pwc.com/my/en/assets/public … ooklet.pdf

Someone can help me some questions?
- 182 days counting for a tax resident will be restarted each year, right? If I work in Malaysia from April 2018 to March 2019, I will qualify 182 days for 2018 but not enough for 2019 if it is counted days again by each year. That means I have to pay 28% for 3 months of 2019?
- in my situation, I understand that i will refund income tax of 2018 by January 2019, right? But all will be refunded in the same time or by each month? And who will be responsibility for it, company where I work or tax office?

Page 6 explains how to link years to remain tax resident in 2019.
https://www.pwc.com/my/en/assets/public … ooklet.pdf

The tax office LHDN adjudicates tax refunds. At the end of the contact the company completes a "Leavers" form to advise LHDN. Sometimes a company will withhold the last months salary pending report from LHDN and adjust the last salary payment accordingly. Otherwise the overpayment is repaid by the tax office.

For year of assessment 2018, you need to complete a tax return and any over payment of tax returned in about March/April. In your case probably do it at the leavers stage. I am not sure if it is still possible to get the overpayment paid out once the 182 period is completed i.e. July/August 2018 - worth checking this. But tax deductions continue to be made after qualifying as tax resident, ONLY NOW USING the graduated rates.

Just to make it clear any refund is just the difference between the flat rate 28% non-tax resident deduction and what would have been deducted if on the graduated steps and allowances for a tax resident.

Hi,

How do you calculate time taken for a resident conversion after 182 days? Does it start from the day I enter Malaysia or the day I start working?

Thanks.

From 1st working day i.e. when taxable earnings begin.

@gravitas, I will start my job from end of this month. I will enter with ref visa. So How to calculate my 182 days???  From date of my 1st working day?? or From 1st day of taxable year?

From when you start being paid a taxable salary.

I think July 2nd is the cut off date for 2018 for being able to become tax-resident i.e. in Malaysia for 182 days https://www.epochconverter.com/days/2018

Tax Years are January to December.

Thanks for quick response. I hv one more que.

What if I will get ep in next month? So my taxable salary will start from Aug. So How to count 182 days in this situation? Bcz 182 days is completing in 2019.

As I am entering malaysia with ref visa. EP will take some time, So may be I will get EP in AUG.

Check with your employer for latest rules. It used to be that employment could only start   once the EP was in the passport, but with the VDR system and VAL (visa approval) process changing, the start date of employment should have been agreed.

The 182 day count does not transfer to the next year.

Tax residency is based on the number of days in one particular tax year - Jan-Dec

If a person is in Malaysia less than 182 days in a tax year, Malaysia has a system whereby tax years can be linked. http://lampiran1.hasil.gov.my/pdf/pdfam/individual.pdf

So that means, If 182 days complete in 2019, then I need to again complete 182 days?

Read the link provided. Or more easily described on P6 of this https://www.pwc.com/my/en/publications/ … oklet.html

If 182 days is not possible in 2018, then it is advisable to qualify (as per the requirements described) during the first 182 days* in 2019 in order to fully benefit from tax residency rules.

* the rules state that a maximum of 14 days (cumulative) personal absences from Malaysia can be taken which will not disrupt the TR qualification. However, those days are added to 182 to find the qualifying date for TR (e.g. 182 + 14 = 196th day)

Yes, but I will not be absence in 182 days, but still 182 days will completed in 2019. bcz EP will start from Aug.

Hi Gravitas,

Greeting of the day!!

Yesterday i read a lot of post written by you. just have one small doubt in tax for residence and non residence. Please clarify.

I am travelling to KL in 15 oct 2018 for one year contract. my return date is 14 oct 2019.

My doubt is until i do not become residence my tax will be deducted flat 28% till july 2019 until l do not  get residence status. I guess i will get residence status in July.

as i understand from your replies that next year from Jan 19 to till my contract end. if i get residence status then my tax will be deducted as per residence chart. but tax for financial year 18 from 15 oct 2018 to 31 dec 18. Tax will be deducted flat 28%. So if i become residence in july 19 then will i get my extra deducted tax of period 15 oct 18 to 31 dec 18 and when?

I guess for period 1st jan 19 to 14 oct 19. i will get refund.

Please clarify...

1. Yes, You will pay 28% tax from October-December 2018. You will also pay 28% tax from January-July 2019.

2. However, as long as you don't take more than 14 days (in total) of personal leave outside Malaysia from January 2019 until you become tax resident (182 days + any absences), then 2018 tax year can be LINKED to 2019 tax year

3. If you successfully LINK 2018, you will get a refund of the difference between 28% and resident rates for 2018

4. As you are leaving during tax year 2019, any overpayment of tax for 2018 and 2019 will be calculated in your Leaving process in October 2019 and reimbursed.

5. You will need to do a tax return for 2018 in April 2019. This will be important at the time you leave.

If more than 14 days personal absences are taken the effect is:

1. Tax year 2018 cannot be linked
2. Tax due for 2018 will remain at 28%

There is no effect on tax residency for 2019:

1. It is still possible to be in Malaysia for a total of 182 days
2. A retroactive recalculation of income tax is carried out if tax residency is proved

Hi everyone

Please guide me in this matter.

1. The 182 days restriction, is it for every year or only for first time?

2. Is it possible to claim tax in April 2019 if I started work from 3rd September 2018?

Looking forward to you.

1. EVERY YEAR but possible to link years via 14 day rule

2. NO because you need to be in Malaysia for 182 days in 2019 and become tax resident before you can link tax years

so when i can claim my tax of 2018?

There are three answers to this.

When you file your 2019 annual tax return (i.e. April 2020)
When you leave Malaysia permanently
When you get your Residents Certificate

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