Establishing Tax Residency After Time Out of Malaysia on Sick Leave

You could discuss with the tax office when you get your Residence Certificate after being in Malaysia for 182 days in 2018.

YOu should do your 2017 tax return immediately although a late submission. Under 60 days is tax free. See guide for non-residents at LHDN mentioned below.

In any event these types of situation would ordinarily be finalised by the 2018 annual tax return. Your absence doesn't do anything other than delay your qualifying date.

Your 2017 return should use the M form.
http://www.hasil.gov.my/bt_goindex.php? … mit=Search

Hi Gravitas

Thanks for the reply. Hoping you could just clarify a couple of points for me.

I was here for fewer than 60 days in 2017 but was paying income tax at emergency rate. Is that not correct? Should I have not paid any tax then?

Doesn't my two month absence potentially break the link between 2017 and 2018, meaning I won't be able to reclaim the emergency tax I paid in 2017?

Also: I did complete my tax return in April. I went to the tax office to do it and submitted M form. Does this change anything you wrote in your reply?

Regards

P

The tax must be deducted according to the regulations, Employers are mandated to deduct tax and LHDN controls refunds.

Linking years is irrelevant in your case, as you were in Malaysia for under 60 days in 2017. So you will pay 0% tax in 2017 (see the Notes for Form M - link above)

You will become tax resident after 182 days in 2018 in the normal way. When you do your 2018 tax return any overpayment for 2018 will be refunded.

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Gravitas, thanks once again for your reply.

I did fill form M out and I did pay tax for November/December 2017, even though I was here less than 60 days. Has my employer made a mistake? They said I have to pay tax for 2017 as I was non resident. How can I get the tax I paid back? I am assuming I don't have to wait until next year to get refunded for 2017...

Many thanks

P

To repeat. Employers are mandated to deduct tax.

The tax office will look at your tax return for 2017 and refund overpayment of tax.

For tax year 2018 only, you will have to wait until next April* for a refund of overpayment related to 2018.

*unless you leave Malaysia permanently during 2018, in which case tax clearance is carried out as part of the leaving procedures

Ok, thanks very much.

With regards to the 14 day rule. I called the tax office this morning and they said that as I spent more than 14 days outside of Malaysia in 2018 I will not be able to become resident for tax year 2018.

Is this correct? (if so, I can not afford to work here much longer).

If spending more than 14 days out is such an issue can I show that I was off work sick?

As long as you are in Malaysia for 182 days in a tax year you can become tax resident if holding a valid long term visa such as employment pass, MM2H etc.

Your absence just delays the day count. As you were outside for two months you need to qualify any time before 31st December 2018 which is feasible.

The 14 day rule is ONLY relevant to linking tax years.

This link explains
https://www.pwc.com/my/en/publications/ … oklet.html