Am I a Tax Resident in Malaysia?

Once again, it is the season of filing our taxes for income earned in 2022. So, for those who work as an employee and do not own a business, the deadline to file income tax is set on 30 April 2023. Meanwhile, if you run a business, you would need to file in your income tax by 30 June 2023. 

Here, let’s talk about tax residency in Malaysia. 

For most Malaysians, there is no issue with tax residency status. If we had lived, worked and hung around in Malaysia for most parts of 2022 (> 182 days), in our case, we are automatically Malaysian tax residents. But as you read, what if you are an expatriate (different nationalities)? Well, if you are a foreigner, who lived and worked in Malaysia for more than 182 days in 2022, you would be qualified as a Malaysian tax resident. 

Such a status will entitle you to: 

1. Lower income tax as it is on a scale rate (0%-30%), not a flat rate of 30%. 

2. Tax reliefs and exemptions.

Do note this. Tax residency status is not the same as nationality. For instance, in the case of KC Lau, he is a Malaysian citizen but not a Malaysian tax resident. As I write, such status is common as the society is more globalised. Closer to home here, there are many Malaysians today who live and work in Singapore. Thus, in their cases, they are Malaysian citizens but are tax residents in Singapore. 

Now, what if you (Malaysian or foreigner) didn’t stay and work in Malaysia for a period of more than 182 days?

Does it mean that you are not a Malaysian tax resident? 

Not really. There are 3 more ways that you might qualify as a tax resident. Here, I’ll explain them in brief and they are as follows:

1. The Link Year

There are 2 scenarios. 

First, you are a Malaysian tax resident in 2021. But in 2022, you’ve left Malaysia and moved into a new country for work. So in your passport, you have stayed in Malaysia for, let’s say, 60 days. In his case, as long as his days in Malaysia for the year 2022 can be linked to at least 182 days in 2021, he is a tax resident in 2022 in Malaysia.

Second, you’d arrived in Malaysia at the end-2022. You’d worked in Malaysia for more than 182 days in 2023. Hence, you’ll be a tax resident in 2022 and 2023 in Malaysia as the days in 2022 can be linked to the 182 days in 2023. 

Next, the question is: ‘What if your days in 2022 could not be linked to both last and following year?’ If that is your case, let’s move onto: 

2. The 90-Day Rule

This is applicable to you (Malaysian or foreigner) if you stayed in Malaysia for at least 90 days and are a Malaysian tax resident in 3 out of 4 years (2018-2021). 

Now, the question is: ‘What if I’m totally not in Malaysia throughout 2022?’. Am I officially not a tax resident in Malaysia? Well, the answer is not quite. Here as I write, there is still one more way that you could be a tax resident in Malaysia. 

3. The Missing Year

If you are a tax resident in 2019-2021 and in 2023, even if you are physically not present at all in Malaysia throughout 2022, you’re still a Malaysian tax resident. 

Conclusion: 

There are many tax privileges to be enjoyed as a Malaysian tax resident. Thus, if you (Malaysian or foreigner) had stayed not more than 182 days in Malaysia for the year 2022, it does not mean that you are not a tax resident in Malaysia. You could qualify as a tax resident in Malaysia by fulfilling any one of the 3 criteria. 

So, if your residency status is more complicated, it is ideal to engage a qualified, experienced, and licensed tax advisor to assist you with your tax matters.