Tax residency status for first job after being on Dependent's Pass?

Member since 02 March 2018

xippyMember02 March 2018 10:13:24

Hello,

I've been living in Malaysia for over 2.5 years on a Dependent's Pass. I've recently landed my first job in Malaysia and now wondering what my tax residency status will be. The documentation I've read doesn't clarify if physical presence in Malaysia is determined by working or non-working status.

I haven't been outside of Malaysia for more than 14 days total in the past 12 months.
I expect to start my new job in April, but will be outside of the country for about 4 weeks in July/August.

So, my questions are:
1. Does my physical presence in Malaysia as a dependent (prior to starting my first job here) have any bearing on my tax status?
2. Will my 4 week absence in July/August force me to pay the non-resident rate of 28% for the next 12 months?

Regards,

xippy

Gravitas ViP

Member since 02 March 2011

GravitasViP02 March 2018 16:09:40

9040

Your tax residency status begins after you have been earning a salary in Malaysia for 182 days. So you will pay 28% tax from day 1 to day 182 of your new job.

In other words, tax residency is based on employment and not on presence in Malaysia.

KhaiTran Member

Member since 03 March 2018

KhaiTranMember03 March 2018 14:20:25

Dear Ms Gravitas,

I intend to get a job in Malaysia, but the income tax is kinda frustrating to me

I read your answer about all kind of tax questions all this forum already, so I really hope you will help me with my questions also

1/ I know that I need to be in Malaysia for 182 days in order to be recognized as a tax resident. But according to what I read, the counting process is from January to December, right?

2/ I intend to travel to Malaysia in August, but then I cannot reach the target of 182 days. Does it mean the 28% tax I pay during the period of 8->12/2018 will be lost forever?

Thank you

Gravitas ViP

Member since 02 March 2011

GravitasViP03 March 2018 16:15:05

9040

1/ I know that I need to be in Malaysia for 182 days in order to be recognized as a tax resident. But according to what I read, the counting process is from January to December, right?

Yes - each calendar year (which is also the tax year) a person is tax resident if they are in Malaysia for 182 days on an employment,MM2H or other pass (i.e. not as a tourist)

2/ I intend to travel to Malaysia in August, but then I cannot reach the target of 182 days. Does it mean the 28% tax I pay during the period of 8->12/2018 will be lost forever?

Correct, you can't become tax resident in 2018 because of lack of days. However, it is possible to link two tax years, as long as from January until 182 days is passed in 2019, you don't leave the country for more than 14 days i.e. take a holiday. The tax years 2018 and 2019 are the linked and 2018 is retroactively viewed as being tax resident.

This is explained on Page 6 https://www.pwc.com/my/en/assets/public … ooklet.pdf

The difference between 28% flat rate and the tax-resident deductions (after personal allowances are taken into consideration) will be repaid for 2018 and 2019 when doing tax filing in 2020.

Tax filing has to be done every year.

xippy Member

Member since 02 March 2018

xippyMember06 March 2018 07:38:23

Gravitas, thanks for your answer.

One more question: Is it correct to say that my days in Malaysia will be 'reset' to zero after I'm absent for 4 weeks in July/August this year? Or is the 182 day rule cumulative?

Regards,

xippy