Malaysia’s overseas income tax is implemented, and the economy is declining? People affected?
Malaysian Finance Minister Tengku Zafrru announced that in 2022, a special income remittance programme (PKPP) will be launched, which will no longer be exempted from overseas income tax, and will be valid for six months from 1st January 2022 to 30th June 2022, with a tax rate of only 3%. If the company or individual remits overseas income to Malaysia from 1st July 2022 to 31st December 2022, the tax rate will be levied according to the way that Malaysian companies or tax residents declare income tax. The Customs Bureau will not audit, investigate or fine the income brought in during the special period.
What is a tax resident?
Tax residents include individuals or companies. According to Chapter VII of the Tax Law, individual tax residents are not necessarily Malaysians, but they belong to individual tax residents as long as they meet one of the following conditions, and do not need to be judged according to their nationality or citizenship.
Example:
- In a tax year, a person who stays in Malaysia for 182 days or more is an individual tax resident.
- In a tax year, the accumulated stay in Malaysia is less than 182 days, but in the previous year, there were accumulated stays of 182 days or more (200 days in 2019 and 30 days in 2020, both of which are regarded as individual tax residents).
- Of the four tax years, there are three tax years in which the total stay in Malaysia is 90 days or more (in 2017, 2018 and 2019, the stay is more than 90 days, and the stay in 2020 is less than 90 days, and all of them are counted as individual tax residents from 2016 to 2019).
- In the first three years of the tax year, he was a tax resident (in 2016, 2017 and 2018, he was an individual tax resident; in 2019, he did not live in Malaysia; in 2020, he was an individual tax resident; then in 2019, he was also an individual tax resident).
The scope of capital gains in tax law is divided into principal and income. Only income is taxable, not principal. If you need to bring foreign money back to Malaysia, you must have documents to prove that it belongs to the principal, otherwise it will be taxed as income. Tax residents with provident fund accounts in Singapore are also required to pay taxes if they want to bring the provident fund back to Malaysia. What is the principal and income? For example, if you buy property abroad with your own savings, the rent you receive is income. As for capital gains, it has yet to be determined.
No double taxable
During the period from 1st July 2022 to 31st December 2022, if a company or individual has paid taxes abroad, the tax relief can be deducted and the tax paid abroad can be offset when filing tax returns in Malaysia, and only the difference between them can be paid. Individuals or companies need to keep documentary evidence, such as tax returns, in order to obtain double tax relief.
For example, Singapore and Malaysia have signed a tax agreement. Malaysian tax residents working in Singapore, if they have already filed tax returns with the Singapore government, and the tax rate in Singapore is lower than that in Malaysia, only need to pay the difference tax rate when filing tax returns in Malaysia.
Taxpayers must declare the holiday plan at least 30 days before the end of the special plan. Taxpayers must pay taxes according to the general payment arrangements set in the tax return year of 2022 or 2023.
Example:
1) A Malaysian resident who works in a Singapore company travels between Singapore and Malaysia every day. When he remits Singapore’s income to Malaysia, he will be taxed.
2) The income earned by buying foreign stocks on Malaysia’s website is not overseas income, because it is a local transaction. On the contrary, if you buy stocks overseas, the income you earn will have to pay the tax of the country, and the tax difference will be paid when you remit it to Malaysia.
Malaysia implemented a similar policy before 2004, but it was abolished after 2004. Now, the purpose of re-implementation is to understand people’s income and avoid tax evasion. The most important thing is that this policy can increase the government’s income. If, according to the review, it is found that there is undeclared overseas income, the authorities will conduct additional tax assessment and impose fines according to the Income Tax Act of 1967.
The following are fines and penalties for illegal tax returns in Malaysia.
| Illegal activities | Penalize |
| 1）No income tax return has been submitted. | RM200 to maximum RM20,000 or imprisonment for not more than 6 months or both. |
| 2）Underreporting or underreporting income | RM1,000 to maximum RM20,000 or not more than 6 months imprisonment or both. |
| 3）Tax evasion intentionally or intentionally | RM1,000 to the maximum RM20,000 or not more than three years’ imprisonment or both, and three times the tax underpaid. |
| 4） Overdue tax returns | 10% of tax paid |
Whether it is personal income tax or corporate income tax, it is very complicated. Therefore, if you are unfamiliar with the tax system, you can contact us if you have any questions. We have professional accountants to help you know more about income tax and help you file your tax returns.
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Source:
2)https://www.orientaldaily.com.my/news/nation/2021/10/31/447207
5)https://www.hasil.gov.my/bt_goindex.php?bt_kump=5&bt_skum=1&bt_posi=2&bt_unit=5000&bt_sequ=11
6)http://www.chinatax.gov.cn/download/ssxxjhzt/x61.pdf7)https://www.propertyguru.com.my/property-guides/%E9%A9%AC%E6%9D%A5%E8%A5%BF%E4%BA%9A%E4%BA%A7%E4%B8%9A%E7%9B%88%E5%88%A9%E7%A8%8Erpgt%E6%9C%80%E6%96%B0%E8%B5%84%E8%AE%AF-cn-46719