Working in Kuala Lumpur?
Work Permits and Taxes in Kuala Lumpur
The Expat Committee
Certain regulations apply to the employment of expats in Malaysia. This means that companies wishing to employ foreigners must request government approval first. The first instance in this process is the Expat Committee (EC).
Expats who have officially been granted expat status by the EC can then apply for a work permit. Two conditions must be fulfilled in order for your EC application to be successful: You must earn at least 5,000 MYR per month during your expat assignment in Kuala Lumpur, and your contract should envisage a two-year period of employment.
There are three categories of expat postings — ideally, your job should fall into one of them:
- Key post: You occupy a top managerial position in the company in question.
- Executive post: You hold a middle management post and have relevant professional experience and academic qualifications.
- Non-executive post: You are highly skilled thanks to your technical know-how and are thus indispensable for the company.
Prior to submitting the application to the Expat Committee, the company wishing to employ an expat must obtain approval from the authorized agency responsible for the “core business” area of that company.
A list of all authorized agencies and their areas of responsibility can be found in the online portal of the Malaysian Immigration Department. Once the company has been approved, the application will be considered by the Expat Committee and evaluated along the following criteria:
- the company’s equity and activities
- relevance of the post to the company’s activities
- local human resources
- income, age and professional experience of the future expat employee
If you need a visa in order to enter Malaysia due to your nationality, you should apply for one at this stage. Once you have been granted expat status by the EC, you should also apply for your work permit, referred to as the Employment Pass, or in rare cases, a Visit Pass (Temporary Employment) for shorter assignments. Close family members may accompany you on a Dependant Pass (i.e. Long-Term Social Visit Pass).
Paying Income Tax
Only income from Malaysian sources is taxable in Malaysia. As an expat, you may be profit from a special expat tax regime exempting you from all income tax if you don’t count as a fiscal resident and if your period of employment in Malaysia does not exceed 60 days per calendar year. On the other hand, if you are a non-resident for tax purposes but your period of employment exceeds 60 days, you will be taxed at a flat rate of 26% on all your income from Malaysian sources.
As a rule of thumb, foreigners who are physically present in the country for more than 182 days per year qualify as residents for tax purposes. This means that income tax is withheld from your salary and settled at the end of the financial year upon filing of your tax return.
Malaysia has signed full Double Taxation Agreements with 70 countries worldwide in order to facilitate international economic cooperation, including the employment of foreigners. For a list of all DTAs and further information on taxation in Malaysia in general, please consult the official website of the Malaysian Investment Development Authority.
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